One of the things that always surprises me in Uruguay is how monetised the economy is. Basically, cash is king. Without going into an analysis of retail banking penetration (let me recommend you some recent research by BBVA here), just by talking to people, you can see that not many have personal bank accounts (except for professionals, for example).
One cable TV company at the moment even gives you 50% discount for four months if you sign up and pay by direct debit, for example, which shows it is clearly not the norm. On the 1st of the month, queues at ATMs are huge: many of those who get paid into bank accounts withdraw all their money at once. And many still get paid cash-in-hand (pensioners being quite an important group here).
Utilities and other bills (from your football club subscription to your ambulance service) get paid at the bank or at special points, so queues can be impossibly long. For some, you get a “cobrador”, a person knocking on your door every month to collect payment.
For someone used to banking (preferably online) in Britain, the queues, the waiting, the amount of paper involved – and the risk of being mugged with your full monthly salary in your pocket – seems hugely inefficient and a total waste of time.
But hang on…
Let’s look at it from a different perspective. First of all, to open a bank account is not at all easy. I have been searching for 3 weeks for a bank that doesn’t require the story of my life on paper to open a plain account with no overdraft (how can the bank possibly lose?) and no credit card attached. I was told that I had to either be employed (and show plenty of evidence of it) or I had to prove my “patrimonio”, my “estate” (and this involves the intervention of a notary public). And, of course, it involves queues, long queues. You can’t just “click and go”.
Problem number two: banking is very expensive. Except for a handful of accounts at very specific banks, it costs around 300 pesos a month to run an account (approx £10). Now, what for? It doesn’t give you any benefits at all. But it gets worse. To transfer money outside the bank costs anything from 10 pesos (if online with Citi, I was told) to USD 20 (as Santander quoted me to transfer my rent to the national bank, BROU). And the recipient might be charged to receive it.
And there’s the banks that to run a plain and simple current account ask you for an extortionate balance of over USD 2,000. Yeah, right.
If to these practicalities you add the psychological trauma of a banking system that failed the country and its neighbours many a time, with people losing their lifetime savings in a default that feels still way too recent (2002), then you can see why queues and mountains of paperwork start appearing just a bit less inefficient… and the cash under the mattress just slightly safer than you thought…
There are other issues, of course, related to how people transact. In a country where conversation is more important than refined processes, a bank is way too impersonal, cold and confusing. And there’s other issues around numeracy and literacy, too.
If you are trading with South Americans, particularly business-to-consumer, this is the sort of information you need: how people really behave and why. Then you can tailor your offering to the way in which people behave, which might be, in the most day-to-day aspects, quite different from your home market. The same applies to credit card payments, but let’s leave that for another blog… keep coming back!