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Following the modernisation of its payment system earlier this year, Peru’s private clearing house has now revealed plans to launch a payment solution similar to Brazil’s popular Pix.
Peru’s Electronic Clearing House (CCE) is working on an instant payment platform that will allow Peruvians to send and receive payments based on their phone numbers, following the example of Brazil’s successful Pix model, CCE chief executive Martín Santa María said at an event last week.
The announcement follows the migration of CCE’s existing infrastructure in May to a new real-time system with a particular focus on creating a payment rail for fintechs to support the goal of greater financial inclusion.
“We are looking for a solution that, instead of the user having to enter numerous digits for the interbank code, they could make transfers simply with their cell phone number and have an experience very similar to that of a digital wallet,” Santa María explained in another interview.
The new service uses ACI Worldwide’s API integration solution and is provided across Mastercard’s Instant Payment Service (IPS) platform, which the payments network provides as a managed service.
According to the CCE chief, in addition to facilitating interoperability and increasing financial inclusion, CCE aims to develop use cases for better user experience.
First, the clearing house will work to improve the user experience in peer-to-peer (P2P) payments and make the use of instant transfers more similar to the digital wallet payment experience.
In the coming months, the CCE will circulate a document with further details about the functional design, the user experience and the development of the economic model.
Following an implementation phase of five to six months, Santa María expects the new functions to start operating early next year.
Afterwards, the CCE is planning to develop a person-to-merchant (P2M) use case that would allow consumers to pay by transfer at the point of sale.
Later on, it will work on solutions for government-to-citizen (G2C) and business-to-business (B2B) payments.
Although the launch and development of a mobile payments solution has been on the roadmap for the CCE since it partnered with Mastercard on its modernisation journey, it will be hoping to emulate the success of Brazil’s Pix instant payment system, which launched at the tail end of 2020 and has been a beacon for many Latin American markets.
According to Brazil's central bank, there were 268m Pix consumer user accounts at the end of March, more than one per person in Brazil, as well as 12m registered companies. In terms of individuals, around two thirds of Brazilian adults use Pix.
Financial inclusion is one of the main goals of Peru’s payment modernisation plans too.
Around 80 percent of the country’s population favours the use of cash in their transactions and 46.6 percent of Peruvians remain outside the financial system.
“As with all countries in Latin America, they are actively looking at ways to modernise their payment systems,” said David Schwartz, president and CEO of the Financial and International Business Association (FIBA).
This is particularly the case in Peru, which is one of the countries with the lowest level of banking penetration in the region, with only Mexico counting smaller figures.
Financial inclusion has always been challenged in Peru and will continue to be, Schwartz stressed.
Design failures in the way of financial inclusion
There are a couple of reasons why many Peruvians are struggling to get into the formal financial system.
One of the main hindrances is the lack of key market infrastructure outside the district of the capital Lima, which makes it very difficult for people in rural areas to access financial services.
With a relatively high penetration of smartphones in Peruvian households, the new mobile proxy solution could have the potential to serve as an ideal solution for addressing this issue.
There is also a question of whether digital systems in themselves are sufficient to encourage adoption.
“People need to be educated, they need to understand the advantages of being in the system and of conducting their transactions this way,” Schwartz noted.
Based on the latest figures, Peruvians have a very low level of financial education. A 2019 government report estimates that only 37 percent of adults have an adequate level of financial knowledge.
The success of adoption “takes a certain level of education, understanding and sophistication”, Schwartz stressed, adding that “this really needs to be part of the plan”.
Last but not least, many of the design elements and characteristics of the existing payment methods fail in promoting inclusion, the country’s central bank pointed out in May.
Money transfers are often too costly, electronic money acceptance is still low in Peru and digital wallets are closed and do not interoperate with each other.
For example, Yape, the largest digital wallet in the country, is interoperable with only 20 percent of other financial system participants, while its closest competitor, Plin, can interoperate with 15 percent only.
In addition, e-money accounts are rarely interoperable with deposit accounts.
These typically mean higher costs for the users and less efficiency in the payment system, according to the central bank.
One of the key goals of the new CCE system is to address this challenge.
With this new platform, the clearing house aims to become the facilitator of full interoperability among all of Peru’s payment systems and financial services, including banks and fintechs, and create a more level playing field within Peru’s financial ecosystem.
