Making payments and transferring money will soon be as easy as sending a text message. According to a report recently published in Diario Extra, the Central Bank (BCCR) and ICE are working together to develop a simple solution that will enable Ticos to transfer funds via SMS. Carlos Melegatti, BBCR’s Director of Financial Services, explained that the Central Bank is studying SMS payment methods already in use by the Dominican Republic and Kenya. The plan, which is in its initial stages, seeks to take advantage of the existing National System for Electronic Payments (SINPE) and the fact that 70 percent of Ticos already have a cell phone.

Although Ticos are no stranger to mobile banking, the plan being considered by BCCR and ICE is revolutionary in the sense that it will empower people who don’t have access to banking services. This includes residents of remote rural areas and others who engage in simple entrepreneurial activities such as landscaping, peddling fruits and vegetables, selling home cooked meals, and others. The system currently used in Kenya is called M-PESA, and it is extensively used to conduct urban-to-rural remittances. It is essentially an electronic cash service that extends some of the benefits of banking without the bureaucracy.

Mobile Banking

The proposed Electronic Wallet will be a stripped-down version of the many mobile banking options currently available to Ticos. Many banks in Costa Rica already offer different levels of mobile banking to their account holders, but many of them require a wireless mobile broadband connection, on top of an existing bank account. BCCR’s vision is for Ticos to send and receive money without having to worry about visiting a branch or having a 3G wireless Internet connection. The SMS money transfer system could enlist the collaboration of retailers and merchants who keep cash on hand to serve as intermediaries.

Popular radio journalist Amelia Rueda recently reported on iBAC, the new mobile banking app released by BAC San José for the iPhone and Android smartphones. Whereas the iBAC app is highly sophisticated, the SMS Electronic Wallet is a far less ambitious project.

Many banks in Costa Rica, including BAC, already extend SMS banking functionality to their customers. In early 2010, the number of Ticos using mobile banking services was approximately 125,000, according to an analysis which appeared in El Financiero that year. Back then, Banco Nacional reported that the average amount of each banking transaction was 130,000 colones. The popularity of mobile banking in Costa Rica is attracting companies such as GBM and Sybase. Back in August, the business magazine Summa reported that GBM was interested in bringing some of the SMS functionality seen in Europe, where train passengers can pay for their tickets and coffee with their cell phone, to Costa Rica.