AMÍLCAR PEREA – CEO OF IN SWITCH
The Company offers solutions to telecommunication and financial enterprises in 44 countries -mostly within America- and expects its mobile wallet to ‘explode’ within two years.
(Foto: Marcelo Bonjour)
Antonio Larronda | firstname.lastname@example.org | 27 may 2016.
ENGLISH VERSION of interview to IN SWITCH CEO -Amílcar Perea– published on May 27th 2016 by ‘El País,’ the newspaper with the largest circulation of Uruguay (http://www.elpais.com.uy/el-empresario/tecnologia-cambia-se-dinero.html).
He is 52 years old and lives in Montevideo. After graduating as a Systems Analyst, he worked both as a Professor and member of a U.S. consultancy company, with which he travelled to almost every country in Latin America. When he came back to Uruguay, he directed the technological restructuring of “Banco República” (Uruguayan national bank) and then joined the consultancy company ‘ITC’, which teamed up with Antel. As from 2009, he is the CEO of IN Switch, a corporation renowned for being the first one to launch an electronic wallet for the unbanked sector allowing international transfers from mobile phones. Its solutions for the telecommunications and financial sectors have already reached 44 countries and Mr. Perea expects the electronic mobile wallet to represent the 70% of the firm’s business within 2 years. He is married, has 3 children and enjoys spending time with his family.
How did you arrive at IN Switch?
I got here in 2009. I believe my past gave me the necessary knowledge to fulfil my current job in three major sectors: finance, telecommunications and government. I worked at an American consultancy company for 9 years with which I travelled to several countries in Latin America. Thus, I was able to watch how transformations are carried out within both public and private organizations. Later on, between 1995 and 2000, I directed the technological restructuring of ‘Banco República’. Then, I joined ITC (Antel’s provider), first as senior consultant and finally as Manager.
What are IN Switch’s main lines of business?
One is related to all the support that we provide to telecommunications companies, electronic top ups, customer service, sale of packs, mobile bandwidth. Mainly, what we do is collection and value added services. We started with small enterprises but we have already worked with all the operators of the region now. The other sector is the mobile financial services, which includes our mobile wallet. Nowadays, the former represents 70% of our billing and the latter 30%; but within 2 years this will reverse and mobile financial services shall constitute the 70%.
Your electronic wallet stands out because you do not need to have a bank account to use it, how does it work then?
The electronic money is backed by a financial trust and, when a transaction is made, it automatically goes from one user to the other. Wallets can be charged with a bank account or else like any mobile phone -and at the same places-. Another characteristic is that they are ‘viral’. For instance, money can be sent to a person who does not own an electronic wallet nor a bank account. When someone makes a transfer from the electronic wallet, he/she indicates the amount and the recipient’s ID and cell phone numbers. The latter gets an SMS stating that a specific mobile phone just transferred him/her a sum of money, together with a transaction code. Thus, the recipient can go and cash out the transfer at any top up spot, just by showing his/her ID and the relevant transaction code. Alternatively, the recipient could also register with the system at the moment he/she gets the SMS and, after following a series of questions and steps, get his/her own mobile wallet.
What are the differences between this and other similar options?
The difference is that ours is a multi-channel wallet. One can have several wallets and allocate funds to each of them -without association to other means of payment- and it works on any cell phone -even without Internet access or credit/balance-. This is possible because we use the Unstructured Supplementary Service Data (‘USSD’) network. For instance, a user who’s at the supermarket may take all the items he’s buying to the cashier as usual and -at the time of paying- let the cashier know that he’ll use the electronic wallet. The cashier will then request the phone number and insert the corresponding amount into the system. As a result of this, the user will automatically receive a “push USSD” message requiring confirmation, insert a password and that’s it. It’s quicker than using a credit or debit card.
The first client of your electronic wallet was Tigo in Paraguay, how is that market?
We implemented the first electronic wallet of Latin America together with Tigo in 2009. Afterwards, two other operators hired us and right now we are concluding the negotiations with the fourth. Thus, 100% of Paraguayan cell phones shall soon have our electronic wallet solution. Last December, more than 1.7 Million accounts were enabled for money transfers. According to the Banking Superintendence of Paraguay (SIB for its acronym in Spanish), transactions were made through the platform for around US$ 570 Million, which means that 10% of all payments are made through mobile media.
If you work with all the companies, how do you handle exclusivity or privacy?
We do not grant exclusivity but non-compete agreements, for 6 or 12 months. Since we work on and provide general -yet core- solutions, and since we are in permanent evolution, if the players want to be up-to-date they must implement technology. Many times our very same clients are the ones who refer us to their competitors; thus, they are able to work together for the creation of policies –e.g. policies for usage, policies for the public’s progressive familiarization with the new technology-. This may even help implement country-wide policies, like with the electronic wallet. There are times to differentiate and times to work together. They never request us total exclusivity because sooner or later the competition will do it, either with us or some other way.
Last year you implemented the wallet with Ecuador’s Government, what did that project represent for the company?
It is the first time a Government says it shall use the technology to give a uniform solution to the whole population, including the unbanked. Now, all operators must provide the relevant communication so that it works for free at any company and through any cell phone, any shop and any bank. But it is not a scenario that can be imitated in every country. The project has had its problems and, in order to increase usage, the government has decided to reduce the VAT from 14% to 10% for payments performed this way. This year we registered a monthly growth of 40%. Currently, cooperatives and microfinance are joining.
How could these financial solutions be implemented massively?
This kind of technological solutions for the financial sector are something that the countries need to define through public policies, because they allow to increase financial inclusion, lower the costs of financial intermediation and increase people’s safety.
Today technology is changing the way financial needs and money are handled. Until now, governments had been reluctant to lead this kind of projects, allowing the financial players to only provide the portion of the population that was attractive to them. Our firm has worked together with the financial and the telecommunications sectors to learn from both, innovate and thus support and help the governments implement those changes through their public policies.
How is the company’s innovation process?
At the beginning we were rather recipients of requests, but after nurturing from our clients, now we also suggest ideas and solutions to the problems. Our great innovation is electronic money. We implemented the first electronic wallet for the unbanked sector, which allowed the international transfer of money from mobile phones. For instance, someone in a city may transfer money to his/her family in another city no matter the amount. We do also use big data, a lot -analytical and predictive-, so that we can know what is going on, who the clients are and what to offer to them. For example, we have a feature called ‘overdraft’ in electronic payments. If, at the time of paying, the credit rating is positive, we offer the user an overdraft just by clicking OK. And in telecommunications, for example, if someone runs out of balance while surfing the Internet, we make him/her an offer of a data pack –and we know, by his/her behaviour- which is the pack that such user needs-.
Why haven’t you developed the electronic wallet in Uruguay?
Because there’s still a lot of work to do. One important topic is interoperability; the different payment instruments need to be able to transfer electronic money between each other, between them and the bank accounts. They must also be accepted by shops and businesses. Uruguay solved the transfers between bank accounts but there is still a long way to go. For example, guarantee neutrality of the networks (i.e. that any electronic wallet authorized by the Central Bank of Uruguay can be used in the POS networks and cash machines and access the different technologies of the telecommunications operators. In particular, the POS network is now a must thanks to the Financial Inclusion Law (as a result, electronic money instruments cannot be rejected). Neutrality of the telecommunications networks is also yet to be defined; nowadays the telecommunication companies may deny access to an electronic payment technology of another company. And there’s also the “non-discrimination” topic to be considered and guaranteed. On the other hand, it is difficult for us to be on both sides; i.e. to be the banks’ technological implementers and to also compete with them. So we prefer to only be their implementers and technological partners.
How many people work at the company?
We are around 100; we have offices in 8 countries besides Uruguay (U.S., Brazil, Paraguay, Costa Rica, El Salvador, Guatemala, Colombia and Ecuador) with local people providing commercial –and sometimes technical- assistance. All the development and support for our clients in 44 countries is performed from Montevideo. 99% are from Latin America and the Caribbean. We have 2 in Africa (Ghana and Tanzania) where we arrived through our multinational clients.
Are you considering expanding your market?
We have businesses in Brazil and opening an office in Sao Paolo to develop business opportunities in every area. The country is more mature on telecommunications solutions and our plans include the electronic wallet.
What is the perspective of the local entrepreneurial sector?
‘Much ado about nothing’. There is an entrepreneurial market that puts things together only in order to sell them and what I like is when a project is put together to really make it work; the latter is more valuable as it creates jobs and promotes long-term development.
All Paraguayan cell phone users shall use your electronic wallet, what advantages does this have?
It’s important, because when there’s a uniform technological solution in the whole country other solutions can be implemented based on that same technology; such as the payment of transport without the need for cash. Banks alone cannot reach all citizens, especially the unbanked. The tools to accomplish this are not simple. A good intention is not necessarily a good solution. All the standpoints of the members of an ecosystem must be taken into account. In Uruguay -for example- there have been very significant steps forward, such as the fact that all salaries are now paid through a bank account. Thanks to this, there is one cardholder in every household -but maybe the rest of the family isn’t-. With the mobile wallet, everyone can be given money and the corresponding balance can be monitored instantly. What is going on today in those countries fostering this system is that the cost of financial intermediation is dropping. We need to understand that, if we want to replace cash, cell phones must be part of the plan.