In Payments

To explain the success of Yape, a P2P app used by 15% of the population in Peru, its Tribe Leader Rufino Arribas used the example of WhatsApp, comparing it to a lesser-known competitor: Line. “It’s rather simple,” he said. “If you are an individual working in Latin America, you can’t conduct business without having a WhatsApp account.” With 2 billion active users world-wide, the Facebook-owned company is used by a quarter of the world’s total population.[1] In Latin America, WhatsApp penetration rises to over 40%. [2]

In contrast, Line, a messaging app similar to WhatsApp but with improved functionalities, is unknown to most Latin Americans. Despite its extra gadgets and better interface in comparison to its peer, it failed to reach the ubiquity level that makes the tool useful. Mr. Arribas went on to explain that it was not the functionalities that allowed WhatsApp to succeed, but rather, its simplicity, specific use case solutions, and growing user base. Without a similar level of ubiquity, no messaging app—nor any P2P payment app, for that matter—can survive.

While P2P is a commonly-offered function of neobanks and wallets in the region, standalone P2P apps, akin to Venmo in the U.S., have struggled to achieve ubiquity thus far in Latin America. This is due to several reasons, the top one being the region’s strong preference for cash. It is also because, with a few exceptions, banks in the region have not taken on P2P, under the belief that it is not a viable business. Banco de Crédito de Perú (BCP) is changing this paradigm.

Case Study: BCP’s Yape Is Used by 21% of the Banked Population in Peru

BCP is Peru’s largest bank, accounting for 32% of the country’s total bank deposits, and has become a regional leader in P2P payments.[3] With its sights on the 16 million unbanked people in Peru, BCP launched Yape in 2017, a P2P app functioning over debit card rails. Its aim is to become the go-to payment tool among consumers, replacing cash, which by some estimates represent 80% of retail transactions.[4]

Yape, which means “Let’s do it” in local slang, reached 4.5 million users three years after being launched. This represents 21% of the country’s banked population, a higher penetration than any other P2P app offered in Latin America.[5] One fifth of Yape’s userbase (nearly one million people) log in to the app every day, and 50% are active on a monthly basis. This represents engagement levels more similar to a social media platform than a bank app. And during COVID-19, Yape new users grew from 200k to 350k per month, almost doubling its growth rate.

Three strategic decisions have contributed to Yape’s success in gaining ubiquity, all of which are tantamount to increasing the app’s usability and solving for specific use cases:

The first was in 2018, when Yape became open to non-BCP accountholders to receive Yape P2P transfers. This effectively expanded Yape’s network and attracted customers from competing banks to BCP.

The second milestone occurred in 2019, when Yape become available for merchant purchases using a QR code. Today, 500k businesses accept Yape as a payment method, mostly small merchants like coffee shops and taxi drivers. Its usage demonstrates Peruvians’ willingness to forgo cash for an electronic payment method, especially during COVID-19, when consumers sought to limit physical contact with others in public spaces. This capability gave consumers even more reason to engage with the app on a regular basis, moving the Yape network toward the ubiquity level that network-based companies seek across the globe.

Its most recent add-on has been the Yapecard, launched in June 2020, a Visa virtual prepaid card that has brought in 600k new users, 50% of which were not previously connected to BCP and the majority of which were unbanked. This was a particularly timely launch—released at the height of COVID-19 quarantine—which in Peru was among the most severe in Latin America—making e-commerce a necessity rather than a luxury. The Yapecard enabled previously unbanked Peruvians to buy online for the first time, which will launch them firmly into the digital economy and look to the Yape app to solve their future financial needs.

Yape’s success strategy has been to initially focus on a specific niche—18-35-year-olds with bank accounts—and then to grow that user base from the inside-out. Arribas explains that if Yape had directly targeted the unbanked population, like many failed P2P apps have done, it would have likely stalled out and gone belly up. As Mr. Arribas said, “you can’t have people who watch cable TV suddenly start watching Netflix on their smartphones overnight. You need to take it one step at a time.”

Nowadays, Peruvians say “Yapéame” just as often as Americans say “Venmo me” in the United States. In fact, Yape has become so successful that it is beginning to resemble a neobank and a competitor for BCP. After becoming a viral P2P offering, it naturally expanded into P2M and card issuance. Now, it is introducing payroll accounts for salaries and cellphone top-ups for users seeking to avoid a trip to a small corner store. As Yape spreads its wings, rumors are floating that Yape might spinoff from BCP, giving it the necessary nimbleness and flexibility that a fintech needs to flourish.

Copying the Yape System: Similar P2P Offerings among Traditional Banks in the Region

Yape represents a successful foray into digital banking by a traditional bank—something many other traditional banks in the region have struggled to do. Some digital banking spinoffs like Superdigital (Santander), Next (Bradesco), Iti (Itau) and Hey Bango (Banregio) have been around longer but have not reached the numbers achieved by Yape. Superdigital’s 1.9 million accounts in Brazil and Chile represent just over 1% of the banked population, a far cry from Yape’s 21% penetration.[6] This is in part because digital banks launched in Brazil and Mexico face much greater competition from fintechs, whereas in Peru, Yape represented the only P2P or digital banking option available in the market.

In the past, P2P apps in other markets have also had to compete with bank money transfer services, namely TEDs and DOCs in Brazil and SPEI in Mexico. With the launch of real time payment schemes (CoDi in Mexico, launched in 2019), and the impending launch of Pix in Brazil, combined with the potential launch of P2P payments over WhatsApp, banks face even greater competition in developing a viable P2P solution. Finally, P2P apps in other markets are gaining some traction, including Nequi (wallet owned by Bancolombia), which saw a 111% increase in new users during the pandemic, reaching 3.2 million users. [7] Daviplata, launched a few years prior by Davivienda, recently crossed the 10 million user threshold. [8] These apps rely on a stored balance, which users need to fund by making a cash-in transaction or bank transfer.

What Are the Lessons?

This begs the question, which P2P model is most viable? P2P that operates over debit card rails, as in the case of Yape, real-time bank transfer schemes, like Pix and CoDi, or closed-loop app-based transfers, similar to Mercado Pago, Nequi and Daviplata?

Based on the success experience of Yape, the answer is that the key to scale does not depend on the underlying payment rails but rather the user experience and network effect—essentially, the app’s ability to create ubiquity. In the case of Yape, this was driven by three things:

  1. BCP’s pre-existing large market share
  2. The simplicity of the Yape app and the incremental addition of use cases
  3. The growth strategy based around focusing on a single consumer segment and building incrementally from there

The most powerful lessons from the Yape experience are for issuers in markets that share similar characteristics to that of Peru: markets that find themselves in the early stages of digital transformation, have few banks, and low competition from fintechs. Ecuador, Uruguay, Paraguay, Central American and Caribbean markets come to mind. By pursuing a similar P2P strategy, issuers in these markets can protect against eventual competition from fintechs and big tech that will eventually reach them.

What is certain is that traditional banks must continue to make themselves relevant by leveraging their strengths, namely their large user base, name recognition and extensive resources. If they can also improve the digital user-experience rather than weigh it down through layers of corporate bureaucracy and obsolete systems, they will position themselves to follow in BCP’s footsteps. Simplifying the onboarding process and reducing fees are some effective solutions. For legacy banks to capitalize in the transition towards a digital economy, they must start with a simple offering designed to reach mass usage. Only when they reach a level of ubiquity, where their offering becomes a common tool for people to interact, will they truly be successful.

[1] WhatsApp, 2020. “Two Billion Users — Connecting the World Privately.”

[2] AMI Analysis

[3] BCP, 2019. “Reporte Annual 2019.”

[4] Cámara de Comercio de la Libertad, 2019. “El 80% de las transacciones se realizan en efectivo.”

[5] AMI Analysis

[6] Superdigital, 2020. “Uma Conta Para Todos.”

[7] Valor Analitik, 2020. “Nequi logró un crecimiento de 111 % en nuevos usuarios durante la pandemia.

[8] La República, 2020. “La utilidad de Davivienda cayó 54% en el segundo semestre, pero superó 16 millones de clientes.”

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