Ecuador’s long delayed mobile wallet – Bimo for short – will be available to the public in September but some financial experts question whether it will accomplish its original objective of providing banking services to the “unbanked.”
The banking app, to be managed by private banks, will allow those with cell phones to make cashless purchases and ATM withdrawals but comes with fees and strict limits on transaction amounts. It will function from special accounts set up at banks and credit unions or can be linked to existing checking and savings accounts.
According to the rules established by the Monetary and Financial Policy and Regulation Board, users will be limited to transactions of no more the $394 a day or $788 a month, amounts based on Ecuador’s minimum wage.
Popular in other countries, plans for the mobile or digital wallet began during the administration of former president Rafael Correa. In addition of providing banking services to those without traditional banks accounts, the system aimed to take $800 million of hard currency out of circulation. Under the plan announced by the financial regulation board, that objective has been eliminated as has the plan to operate the system publicly, from Ecuador’s Central Bank.
Another change from the original plan is the imposition of transaction charges. Purchases through Bimo will cost 9 cents each while ATM withdrawals will be charged 31 cents. According to the Association of Private Banks, the fees are required to cover operational costs. The association says it will make no money from managing the app.
Vicente Albornoz, a Quito economics professor sees little point in Bimo under the new plan. “I doubt the system will attract many users because of the limits on financial transactions and because many people already have access to these services through their bank accounts,” he says. “If we want to include those without bank accounts in the financial system we need to reduce obstacles in the private banking system and make it easier to obtain credit.”
Carlos de la Torre, former finance minister, agrees and says operating the system through private banks destroys its original intent. “The transaction fees are also a problem that weren’t part of the plan announced in 2014. This will also discourage use by those who already have bank accounts since the fees are higher than what they currently pay.”