CoDi platform promises to revolutionize finance in Mexico
The Bank of Mexico launched a new digital payment option called Cobro Digital (CoDi), which seeks to accelerate the change to a cashless ecosystem or cashless economy, one of the objectives of the current government.
Mexicans still prefer to pay with cash for transportation, rent, water, electricity, cable, telephone, and even fines and taxes. According to the National Financial Inclusion Survey (ENIF) 2018, between 87 and 95 percent of these operations are solved with notes and coins.
A minority are those who actually use credit and debit cards, use prepaid plastic or direct debit their payments to an account. The rest do not because they prefer cash, they are not customers of the financial system or because they do not trust the services offered by the institutions.
"In Latin America, cash is king, more so in countries like Mexico and Peru," says Americas Market Intelligence's study The State of Contactless Payments in Latin America.
In addition, 47 percent of Mexicans describe their relationship with their banks as failing and a quarter talk of high commissions and hidden charges, said Rafael de la Parra, CEO of financial technology Enso.
However, with the technological revolution, these forms of payment seem to be a thing of the past. New financial products have emerged in the world that allows you to buy a coffee, pay for a movie or make a supermarket, among other things, in an easier way and without the need to bring cash or cards in your wallet.
These are contactless payments, which include digital cards or accounts, mobile phones, and wearables, such as bracelets and watches. These operate in a very similar way to the Metro or Metrobus cards in some cities of the country, since they only approach the Point of Sale Terminal (POS) or payment recipient and without the need to make physical contact the transaction is made.
"The challenge is to turn CoDi into a reality of widely used payments, accessible to all Mexicans, and a technological platform that promotes greater financial inclusion and greater development opportunities for the population," said the governor of Banxico, Alejandro Diaz de Leon, in the framework of the seminar "Payment systems and new technologies".
CoDi is a platform that allows the purchase and sale of goods or payment of services for up to $8,000 pesos, 24 hours a day, seven days a week, and without commissions.
This tool operates with the help of a mobile device, such as a cell phone or tablet, through the application of the user's bank that will give access to CoDi, with a technology called QR (rapid response barcode) or NFC approximation (Near-field communication).
All individuals and businesses will be able to join CoDi, which will allow small shops, aestheticians, veterinarians, and restaurants, among other businesses, to charge for their services or the sale of their products with the help of the applications of the 32 banks that are required to use CoDi and other apps that they develop in a future Banxico or third party companies.
Among the institutions participating in the initiative are the main financial institutions in the country and the way it works is really simple. The collection operation is always initiated by the seller through a message via a mobile device with the internet, which the buyer receives, also on their mobile and, where appropriate, accepts.
There are three cases for requesting payment. For over-the-counter sales, the seller generates a message on his device by QR or NFC, which is received by the buyer, who, if he agrees, approves it and immediately notifies both parties of the closing of the operation.
For e-commerce transactions, the seller sends the collection message over the Internet to the buyer's cell phone for eventual acceptance. Service providers also send collection requests over the network. The only difference is that it will be periodic.
The requirements for using CoDi are as follows: a seller must have a mobile device with the application of one of the participating banks. In the case of e-commerce operations, the user must register through the Banco de México website, where the accounts where the resources will be received will also be verified. A buyer must have an app, an internet device and a bank account.
CoDi helps improve financial inclusion and bank penetration - currently at 37 percent of Gross Domestic Product (GDP), according to the World Bank, said Laura Cruz, the new director of Mastercard Mexico.
According to the Bank of Mexico, users will be able to make quick, efficient and secure operations, because the risks are limited to the maximum, since a collection transaction must be approved by the buyer, which will avoid unrecognized charges. In addition, it will promote competition in the payment system and fight corruption by reducing the use of cash, the institution says.
"It is a platform with many expectations; once users feel familiar, it will have important benefits for people, the economy and even public finances," said Jesús Sánchez Arciniega, a UNAM researcher.
According to the professor, this tool will allow the Tax Administration Service (SAT) to have greater control of taxpayers' operations, which facilitates the collection of taxes.
Currently, at least 114 countries use contactless payments in nearly nine million businesses. These include the United States, Australia, the United Kingdom, Hong Kong, Canada, and Brazil, according to the British consulting firm Juniper Research.
Mexico joined this technology more intensively in 2018, said Mario Di Costanzo, former president of the National Commission for the Protection and Defense of Users of Financial Services (Condusef).
"There are advances, but Mexico is still in its infancy in this payment system and its total penetration will take between five and six years," said the former official.
For Di Costanzo, it is a more secure payment method than a credit or debit card, but it is not infallible: "the ideal is to reach biometrics, they are less vulnerable".
The biggest challenge will be to break the culture of cash use: "more than half of the adult population uses their debit card five times a quarter, which reflects that they do not pay with it, but only use it to get the money," said the former legislator.
Another challenge is the issue of connectivity. Currently, according to the Federal Institute of Telecommunications, about 500 municipalities in the country do not have access to the network. A few months ago, the president of the Association of Banks of Mexico, Luis Niño de Rivera, said that among the goals of the government to improve financial inclusion is to provide connectivity to the entire country in this administration.
Contactless payments also face people's distrust of new technologies, especially when we often hear of fraud and identity theft, said Carlos Valderrama, CEO of HyperBlock, a consulting company that creates synergies between entrepreneurs, investors and authorities in the country.
In Mexico there are already several technological options to leave cash or cards at home, the challenge is to change the chip of the population to move towards what they call the payment system of the future. CoDi will mark a watershed in that sense and will be, perhaps, the beginning of a change in the way to pay for pet food or the dentist's office.
"The cashless trend is a growing phenomenon, but traditional cash payments are still a central part of the economy. For the money to really be eliminated, the whole economy needs to change, but it won't be instantaneous, it's something we're all working on," said Francisco Gutiérrez, executive director of Hoteles Xcaret, which has been using the contactless system since 2017.
Companies and financial institutions are betting on joining this technological wave and anticipating what the future will be in the payment system.
BBVA Mexico, for example, launched the digital account in 2016, which works like any bank account, but with the advantage that it is not necessary to go to a branch to process it, as it can be contracted through the application BBVA Móvil. The bank already has more than two million records in this product.
With the platform, users can receive deposits, withdraw cash at almost 13,000 ATMs in the country without the need for a plastic; make transfers and payments for services and buy online with the BBVA Wallet app, according to the area of Accounts and Means of Payment of the institution.
The classic digital account allows receiving deposits for up to 18,800 pesos per month or the equivalent of 3,000 investment units (Udis), while the advanced account, launched in April, for up to 180,000 pesos.
NFC on your cell phone
Samsung was another of the first companies to give way to contactless payments in the country. In January 2018 it launched Samsung Pay. 23 months after launching this tool, it has already registered 550,000 users, according to Francisco Martinez, senior manager of Value Added Services of the company in Mexico. To use this service you need a branded cell phone, although not all are functional. To verify all models, you can consult the company's page.
Subsequently, the user registers and registers a credit or debit card. This system does not charge commissions and the maximum amounts of operation are subject to the limits of financing of the registered banking plastics. The banks that participate with Samsung Pay are American Express, Banorte, Banregio, Citibanamex, HSBC, Santander, and Scotiabank, with the support of Visa and Mastercard.
Samsung's digital wallet works with NFC technology, which allows you to pay for coffee or pizza just by bringing your mobile closer to the POS.
"It is a totally secure system, because the payment is validated with biometrics and the mobile does not store sensitive data from the cards, but a token to make transactions," Martinez said.
In an interview, he said it is a tool that gives ease and convenience: "we can forget everything when we go out, except the cell phone. You can send mail, take a photo, send messages and pay for what you buy".
Another mechanism used as a means of payment is the digital bracelet or cashless. It is a bracelet that can be used as a card or as cash to purchase various goods or pay for services. Just like Samsung Pay, it is enough to bring it closer to the POS or to the device that functions as a receiver to make the transaction, and for what was previously programmed.
Grupo Xcaret is one of the companies that use this technology. With the application that comes with the bracelet, hotel guests can open their rooms, access the company's parks and use the photography systems they have at the resort and at the attractions. Once they arrive in their room, with the same bracelet they can select the photographs they will acquire on the screen of their room.
But that's not all, the great advantage they have, according to Francisco Gutierrez, executive director of Hoteles Xcaret, is that visitors, at check-in, can leave their account open with a card to make purchases in all the consumption centers that the group has. Xcaret has been using this technology since 2017 and each year it uses 144 thousand bracelets, on average.
The Vive Latino music festival also uses bracelets to make attendees pay for food, beer, and the event's t-shirt through this mechanism. Consumers recharge their wristbands with cash or a debit card, and then pay with it.
HOW CODI WORKS
From your smartphone
With the Cobro Digital, you will be able to make transactions in seconds.
- Generate payment request: QR/NFC or internet.
- In the app of your bank identifies the account and the amount.
- Accept and send instructions of the transfer.
- Validates the transfer.
- Receive notification of payment.
With Samsung Pay?
1. Slide up the cell phone screen in the application and select the card you will pay with.
2. Place your fingerprint on the phone reader.
3. Move the smartphone one centimeter away from the terminal.
4. If the terminal requests a security code, you will find it in the app below the selected card.
5. The transaction is validated with fingerprint, PIN or iris scanner.