Latin America’s Growing Mobile Market

Latin America is the world’s second fastest-growing market for mobile subscribers, after Sub-Saharan Africa. In a region of approximately 640 million people, there are already 415 million mobile phone users, over half of which (more than 200 million) are smartphone users. By 2020, predictions say that 63% of Latin America’s population will have access to the mobile Internet.  

This news is crucial for both large global mobile providers and local tech companies. Latin America has proven to be extremely adaptable, adopting new technologies quickly and leapfrogging over older systems, such as landlines, entirely.

Brazil and Mexico already rank 3rd and 5th in the world for the most Facebook subscribers. In the Dominican Republic and Bolivia, mobile app usage is growing at 116% and 155%, respectively. As a whole, Latin America’s immense mobile growth presents a huge opportunity for businesses targeting the mobile market.

Why is Latin America experiencing so much mobile growth?

In 2015, Wharton published an article pegging Latin America as “the next big mobile battleground,” back when only 32% of Latin Americans had a smartphone. That article predicted that up to 50% of the region would be accessing the Internet via mobile devices by 2020. However, it is only 2018, and already more than 50% of Latin America’s mobile users are using smartphones to access the Internet.

In 2011, broadband connections surpassed fixed line connections, and Latin America never looked back. Due to a series of government privatizations during the 1990s, combined with strong economic growth and decreased regulations, the Latin American telecom industry has boomed.

The past 20 years have brought fierce competition between giant international service providers and local telecom companies, though local providers are still dominating the market. However, this competition has pushed companies to improve their services and update infrastructure to make 4G and LTE connections available to more people. In many cases, companies have paired up with governments to expand these services, since increased cell connections have had a positive effect on economic growth and regional integration.

More than anything, the boom in mobile penetration, especially smartphone use, is the result of the dropping price of smartphones. Companies like Samsung and Huawei have driven the price of smartphones down to just $30 or $40 for a low-end model, fully “democratizing” access to the smartphone. Samsung is the largest provider of smartphones in Latin America, capturing between one-fourth to one-third of the market in the six most prominent mobile markets – Brazil, Mexico, Chile, Argentina, Colombia, and Peru.

As a result of this growth, Latin America’s mobile market is one of the most lucrative in the world. In 2016, the mobile industry contributed US$260B or 5% of the regional GDP. By comparison, the mobile industry only provides 2% of yearly GDP in the United States.

Brazil and Mexico are the mobile industry leaders

Latin America’s two largest economies contain 55% of the region’s mobile app users. Up to 34% of mobile app sessions in Latin America come from Brazil. After Mexico and Brazil, Argentina contains just 8% of app sessions, Colombia comes in at 6%, and Chile at 4%.

However, Mexico still trails behind the region in mobile penetration. Despite being Latin America’s second largest mobile market, just 90.3% of Mexico’s population has access to mobile broadband connections, making it the only major economy in Latin America with a mobile connection penetration totaling less than 100% of the population.

This lag is mainly due to regulations that have lowered competition in the telecom services market, allowing America Movil’s Telcel to dominate almost 70% of the market. Until recently, lack of competition made mobile services too expensive for most consumers.

Recent improvements in Mexico have made it a prime market for mobile investment, but Argentina is also an active contender. With less competition than Mexico or Brazil, but with a large population to bolster sales, Argentina is well-placed for a mobile boom.

Latin America presents a huge opportunity for mobile apps

More and more Latin Americans own smartphones and are using them to connect to high-speed Internet networks that crisscross the region. Although Latin American smartphone users have quickly adopted global apps like Uber and Facebook – Brazil and Mexico both make up their top five strongest markets – tech companies have not managed to tap into the region’s potential fully.

The most significant factor holding back app makers is that Latin America remains mostly unbanked. While Latin America’s fintech market shows promise for regional financial inclusion, the reality is that the majority of Latin Americans are still not using credit cards. As a result, app providers have not been able to monetize apps in the same way as they did in the United States. Business Insider suggests developers should partner with mobile providers to include app subscriptions in monthly billing, allowing customers to pay in cash.

Similarly, mobile banking services that have targeted Latin America’s unbanked populations have struggled to take hold. While startups like Nubank, Clip, and Latin Fintech are gaining traction, most mobile money efforts in Latin America have fallen flat. In 2016, only 15 million adults were registered on mobile money platforms, and less than half of them logged on every 90 days.

However, until recently, the majority of mobile money platforms were designed for feature phones, not for smartphones, under the assumption that unbanked populations could not afford smartphones. This is demonstrably not the case in Latin America. Smartphone penetration has grown at 12% per year, while the banked population sits at a mere 2% yearly growth. The demographics of Latin America’s unbanked have changed, and there is now a large population of unbanked, tech-savvy Millennials that are armed with smartphones.

Noteworthy mobile apps in Latin America

With so many smartphones circulating, Latin America has quickly adopted mobile apps that are popular worldwide. The most-used apps in Latin America tend to align closely with popular apps in the United States. Facebook, Instagram, Snapchat, and Whatsapp all top the list.

While there are dozens of software development companies building apps in Latin America, fewer companies are developing apps that specifically serve a Latin American audience. Here are a few standout Latin American companies that are building apps for Latin America’s smartphone users:

Rappi: A Colombian delivery app that promises to deliver consumers almost anything. Rappi has broken through in Colombia and Mexico by allowing its customers to pay cash on arrival, avoiding the need for mobile credit cards payments.

Cornershop: A Chilean grocery delivery app that is breaking into the m-commerce market across Latin America.

Etermax: An Argentine mobile gaming company that developed TriviaCrack, which went viral in 2015 – 2016.

Movile: A Brazilian mobile market leader that owns and manages several apps spanning the food, delivery, ticketing, and games industries. I recently interviewed Fabricio Bloisi, Movile’s CEO, on my Crossing Borders Podcast.

Latin America’s mobile sector has already taken off and is poised to grow exponentially over the next decade. Brazil and Mexico are at the forefront of mobile growth, but Argentina and Colombia will be players to watch over the coming years.

With a growing portion of the population accessing the Internet through smartphones, Latin America has become a region of interest for many mobile companies. However, mobile app services for Latin Americans lag behind the massive growth in mobile users, leaving open a significant opportunity for investors and entrepreneurs looking to break into the Latin American market. Finding a way to serve Latin America’s young, tech-savvy, but mostly unbanked, smartphone users is a challenge and an opportunity waiting to be solved.