There are lots of things you can make, or services you can provide, that U.S. companies could make money with in China or India, the number one and two most populous countries in the world. But when it comes to mobile phones, something unique has happened. Mobile phones are the first true consumer products that have a rapid, short life span, that can be distributed globally within months, and that consumers are hungry for — especially with new features such as mobile payments.
But sometimes I think people forget that it’s not just about putting the technology into a market. Because mobile payments is really less about technology, and more about increased,-accelerated,-value-added purchasing, there’s a problem: neither China nor India are spending societies. For the most part, both India and China are savers. (Oddly enough, this has become a problem in China, and the government is trying desperately to do something about it so that people will increase home grown commerce.)
So what if I told you that Latin America is the next best place for pushing mobile payments, after Western Europe and the US? I know that the combined nations of Latin America are only about half that of China or India, at about 600 million, but these consumers are consumers! They shop and they shop big time! (I’d bet the average female in Latin America has 10 times the clothes that a woman in India or China.) Plus, the region has a combined GDP of around $6 trillion dollars.
Don’t get me wrong: they save in Latin America, but not like India and China. And they are now aggressively moving into credit for loans on cars and homes. This has made them more willing to make purchases with credit cards. And even though Latin America is made up of 20 countries, they are more akin to the multiple provinces in China, and have defined commercial and banking treaties that let them more easily implement new payment methods. Plus they are aggressive cell phone users. They may not buy a service plan with data, but they will go out and buy a Blackberry simply for the status.
I always consider purchasing as being made up of four parts of weekly consumption: clothing, food, services and “accessories.” In this case, “accessories” means everything from a couch to earrings. The Latin American culture promotes flamboyance. They buy based on brands. They are more comfortable with the concept of debt compared to India and China. They have a marketing culture more akin to the U.S. than a developing nation.
Mobile payments could be implemented in India and China, but the cultures just would not drive as many transactions. They certainly like to spend and buy and collect, and they are wonderful nations. They stand on the global stage in science, philosophy, and so much more. I’m not bashing China or India. I’m just saying that from a commercial standpoint, Latin American consumers like to spend more than consumers in China and India. Why push mobile payments on a population of 1.3 billion, who spend probably a third of 600 million Latin Americans? It’s not always about how many people you have to sell a service to; mobile payments is about transactions. You should go to a place where purchasing is not simply a necessity, but something ingrained into a culture.
No matter how many excuses you make, from politics to economics to whatever, every issue in Latin America can eventually be resolved. But when it comes to changing a society’s “mentality,” it’s going to be a tougher road to promote mobile payments and increased transactions in China or India compared to solving Latin America’s issues. You should always focus on the place where transactions are higher versus places where consumers save more and spend less.
For mobile payments outside the U.S. and Europe, as a strategic move, I’d bet the farm on Latin America to be the best choice to drive products like the Google Wallet because they spend. Comparatively speaking, China and India don’t. Oddly enough, it’s probably not a good thing that they are so comfortable spending almost as much as Americans! But mobile payments succeed only if transactions increase. I’m not writing about the right and wrong of credit and purchasing, I’m just saying you’re likely to make more money from mobile payments in Latin America.
Einar Rosenberg is a recognized expert in mobile payments who has written multiple papers and spoken internationally on the topics of NFC, RFID, location-based services and Bluetooth. Mr. Rosenberg is currently the CTO of Narian Technologies.