MasterCard and Telefónica have launched a joint venture to lead the development of mobile financial services in 12 countries in Latin America where the carrier’s Movistar brand operates.

The payments and telecommunications companies are partnering to create a new company focused on integrating the convenience and accessibility provided by mobile phones with a set of financial services that will work with existing electronic payment systems.

“The MasterCard-Telefónica JV is aligned with MasterCard’s corporate strategy to grow our core business, diversify our revenue streams and build new business,” said Max Chion, senior vice president of products and solutions for Latin America and the Caribbean at MasterCard Worldwide, Miami.

“At MasterCard, we are placing a heightened focus on innovating in the payments space through ecommerce, mobile, contactless and inControl, among others,” he said. “Sustaining innovation and forging new relationships are key to advancing electronic payments and winning the war on cash.

“Also, of great importance to both MasterCard and Telefónica is expanding financial inclusion.”

Telefónica has a presence in 25 countries and a customer base of 282 million accesses worldwide.

Global payments company MasterCard Worldwide serves as a franchisor, processor and advisor to the payments industry and provides an economic link between financial institutions, governments, businesses, merchants and cardholders.

Masterstar? MoviCard?
The new company, managed independently, will have a 50/50 ownership participation and will leverage banking relationships of both companies, Telefónica’s telecommunications assets and MasterCard’s payments expertise.

The joint venture will have an open model to ensure interoperability among the banked and unbanked segments, and serve as a bridge between the financial and telecommunications sectors.

The new company will seek to provide the 87 million current Movistar subscribers, as well as prepaid and potential customers, with mobile payment services that will be linked to a mobile wallet or prepaid account.

The partners will enable money transfers, mobile airtime reload, bill payment and retail purchases, among other financial services.

In addition, some of these services such as receiving remittances could potentially extend to 200 million Movistar and non-Movistar mobile subscribers in the 12 Latin America markets included in the joint venture.

This initiative is a step toward achieving financial inclusion for the underserved in Latin America.

“Since the mobile financial solutions industry is relatively new in Latin America, the levels of maturity among the markets are very similar,” Mr. Chion said. “The opportunity to expand financial inclusion through electronic payments is significant.

“Today 35 percent of the population is banked, but mobile penetration is above 80 percent in all the markets of the JV,” he said.

Through this initiative, it is expected that acceptance of electronic payments will be expanded to enable what are today predominantly cash-based merchant locations and micro-businesses such as taxis and street vendors, among others, to accept mobile payments.

As part of its objectives, the joint venture will seek to promote the financial inclusion of a high percentage of the Latin American population with difficult or no access to traditional banking systems for reasons such as low income or living in remote areas.

Market research and customer surveys report that by 2014 mobile financial transactions will reach approximately $63 billion in Latin America.

“The new company will leverage the existing MasterCard acceptance network,” Mr. Chion said. “As the number of consumers using the services increase, we expect the acceptance footprint to expand.

“The new company will be independently managed and responsible for promoting, selling and marketing its services,” he said.

Final Take
Mobile MasterCard MoneySend