Taking digital payments to the far-flung reaches of Chile

Any national strategy to boost financial inclusion and digital payments involves more than simply making it easier to set up a bank account and get a debit card.

Just as important is developing the local digital payments infrastructure so that a larger proportion of cardholders can actually use their plastic for purchases.

A key pillar in this strategy is boosting POS technology penetration, particularly in the micro enterprise and SME segments.

Among those advancing along this highway is Chilean state lender BancoEstado, which on Thursday officially launched Compraquí. Aimed at small business owners and freelancers, it is the first mobile POS service available in Chile without any fixed costs.

For 29,900 pesos (US$42), a merchant receives a mobile POS unit with built-in card reader that connects wirelessly with their smartphone.

For each transaction, the vendor is charged a fixed commission of 2.90% plus VAT, a rate that the bank envisages will fall as the user base expands.

BancoEstado developed the service in partnership with European mobile payments company SumUp. The Compraquí device accepts Visa and Mastercard credit cards as well as debit cards issued by banks in Chile. Both BancoEstado clients and non-clients can obtain the device.

During an event held in capital Santiago, to mark the end of a pilot run and the national launch of the service, officials said the goal for this year was expanding the ecosystem to 50,000 users, from around 27,000 currently.

The payment acquisition market is currently dominated by bank-owned player Transbank, which provides a mobile POS service for a monthly fee. About 900,000 merchants are outside Transbank’s sphere of traditional services.

Finance minister Felipe Larraín said: “This network [Compraquí] is especially geared to micro and small enterprises, with a focus on those in isolated localities, with a low volume of transactions and small transaction amounts, and because of this, alternative electronic payment methods that exist in Chile are out of their reach.”

Chile is a regional trailblazer in the area of financial inclusion. In 2007 BancoEstado launched Cuenta RUT, a basic savings/debit card account available to all Chilean residents, even those on credit bureau blacklists.

More than 10mn Cuenta RUT debit cards – which are being upgraded to chip-equipped Visa variants – are in circulation and the bank aims to boost this to 12mn by the end of the year.

“Chile has advanced in the area of modernization of payment methods, but challenges remain,” BancoEstado chairman Arturo Tagle said. He added that greater adoption of digital payments helps further formalize the economy, while combating tax fraud and the likes of robberies.

Tagle said: “With Cuenta RUT, [neighborhood correspondent banking service] Caja Vecina and Compraquí we’re making major efforts to contribute to the modernization of the payment system across all of Chile. We hope that Compraquí transforms rapidly into a very important player in the payments market…”

Compraquí CEO Carlos Schaaf said many merchants are left out of the current digital payments system, owing chiefly to costs, and that the bank was focusing on building strong relationships with Compraquí users and keeping pace with change.

“Today we offer a card-reader but this industry is going to change a lot in the next two, three, five years," Schaaf said. "Maybe tomorrow the card-reader no longer exists, they migrate to something else, maybe it gets absorbed into a phone.”

Banking watchdog Sbif chief Mario Farren said that, as digital payments expand in Chile, a sharp focus must be kept cybersecurity.

BancoEstado launches Compraquí as the payment acquisition market in Chile undergoes major changes. Rumblings began last year when Santander said it was selling its stake in Transbank.

In April, authorities said they would begin executing a plan to implement a so-called four-part model. Under this scheme, the roles of acquirer, issuer, merchant and cardholder are separate. Currently, banks authorize Transbank to use their payment acquisition licenses and negotiate with merchants on their behalf.

Other players in the payments acquisition space are Multicaja which, like Compraquí, still uses part of the Transbank system.

Santander, meanwhile, is entering the arena and plans to launch its own acquisition network in 1Q20. Santander said it was also focusing on the likes of small business owners and freelancers, and would distribute its own POS devices.

Tagle said he hoped greater competition would lead to more innovation and lower costs. He added that a central goal was not being tied to Transbank's acquisition network.