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News Article

Smartphones: Key to Untapped Potential

Thu, 05/09/2019 - 16:45

Smartphones gave customers access to countless digital platforms and the arrival of 5G will only increase the impact of these devices in people’s lives. According to Alfredo Alfaro, Managing Partner of Northgate Capital and moderator of the first panel of Mexico Business Forum 2019 held at the Marquis Reforma hotel in Mexico City, beyond technology, disruption will impact customers’ habits of interaction and consumption.

“We are moving from an industrial to a digital age. Networks will be essential to enable this transformation, using data as their fuel,” said Carlos Morales, CEO of Telefónica Movistar México. Some companies are already taking advantage of this transformation, updating or creating new business models to make everyday operations more efficient. The opportunities that digitalization and mobility bring are such that, according to Federico Ranero, Country Manager of Uber Mexico, the opportunity for collaboration and dependability between companies is incredible. “Companies now have the role of understanding local needs and adapting them to the existing technological offering. We are both technology developers and preachers of new ideas among our customers,” he said.

Panelists agreed that Mexico is an attractive market for digital business models in terms of smartphone penetration. Yet, there are technological, social and cultural challenges that hinder the potential growth of disruptive platforms. Among those, Ranero referred to the country’s banking penetration rate, highlighting that 56 percent of the population does not have access to a bank account, while 92 percent prefer to pay by cash. “Developing solutions to open the door to this segment of the population helps us preach about the benefits of digitalization and promote the use of digital and noncash payments,” he said.

According to Emmanuel Got, Head of Business Development at Banco Sabadell Mexico, the bank realized the opportunity that existed in the country, which was only accentuated by the rise of fintech players that he considers a force to be reckoned with. “Mexico is already the second-most important market for Sabadell behind Brazil and the future looks bright for the country,” he said. “The industry is still deciding whether fintechs are friends or foes but for us, they are strategic allies that can help innovate in such a traditional sector.”

Connectivity and telecommunications are also revolutionizing mobility and the role it plays in customers’ lives. In Mexico Automotive Review 2018, former Minister of Planning at SEMOVI Laura Ballesteros highlighted that mobility is a gateway to rights like education and quality of life and for Anasofía Sánchez, Director General of Waze in Mexico, the use of digital platforms and the incorporation of advanced technologies of Big Data and machine learning are key for platforms like Waze or Uber to help fix the mobility issues plaguing megacities like Mexico City. “At the moment, Mexico’s car occupancy rate is 1.2,” she said. “Using the data provided by our own users, we can learn how people move around and implement new solutions like carpooling to improve the country’s car occupancy rate.”

The sky is the limit when it comes to technology implementation but opportunities are grounded by the country’s current state in terms of telecommunications. Morales said 5G is a completely different animal. Today, Mexico operates 2G, 3G and 4G networks simultaneously and Morales said that due to data density, 5G will require a 5:1 or 10:1 ratio of antennas to properly operate. “New devices such as autonomous vehicles demand extremely narrow latency rates, which is only achievable through higher data transmission,” he said. Added to that is the issue of profitability, which is limited by the competition conditions in the country and the outdated regulations in terms of spectrum use related to price. “Telecommunications prices have dropped over 50 percent in the past three years. Yet, spectrum costs are still on the rise, normally following inflation rates.”

There is still a long way to go but the country is moving forward in adapting its regulations to new market conditions. Got said one key example is the CoDi initiative the country is working to implement to transform the financial ecosystem and reduce the use of cash as a payment option. “Talking about new technologies, just for the sake of it, is irrelevant. Technology must serve the client and help make processes more efficient,” he said.