Brazil's mobile payments market comes into focus after regulations (mobilepaymentstoday.com)

Brazil at the moment is putting its best foot forward to showcase the country during the FIFA World Cup, but it is also showing the rest of the globe how regulations can make a positive impact on the payments industry. Yes, you read that right. 

In fall 2013, Brazilian President Dilma Rousseff signed into law legislation meant to clarify expectations from different mobile payments players for that emerging market.

At the center of the new law is an emphasis (though not a mandate yet) on interoperability between mobile network operators, bank card issuers, acquirers and the card brands. The result of this should spur more consumer adoption, especially among the 65 million unbanked adults the Brazilian government wants to include in the financial mainstream.

While NFC pilots in Brazil are in their infancy, there is an ongoing concentrated effort behind the scenes between different players to bring the entire mobile payments infrastructure to a larger scale for consumers.

"This is a silent revolution," Percival Jatobá, Visa’s vice president of product development for Brazil, told Mobile Payments Today in an interview. "We’re not scaling commercially just yet, but it will happen. The needed infrastructure is already in place. It makes it a lot easier to scale and go commercial."

Visa at the moment is involved in an NFC pilot with MNO Oi and FI Banco do Brasil. Consumers involved in the pilot can link a Visa-branded Banco do Brasil card to the contactless SIM card in their smartphone via an Oi app. Users can then make NFC-enabled mobile payments at the 1.4 million contactless terminals scattered throughout the country.

The contactless infrastructure is important to keep in mind as NFC pilots and rollouts emerge going forward, Jatobá said.

When Brazil started the transition to EMV chip-and-PIN technology in 2003, the acquirers and banks there made sure the terminals also featured contactless capabilities to accept cards, and eventually phones.

"[The contactless infrastructure] gave issuers the confidence to start issuing not only contactless cards, but they also started playing with NFC," Jatobá said.

Hybrid approach to mobile payments

To get a better understanding of the potential for widespread mobile payments in Brazil, a glance at some numbers helps put things in perspective.

Brazil has 273 million active mobiles lines, according to industry estimates. Some 100 million (37 percent) of those lines are smartphones. Out of those 100 million, roughly 15 percent (15 million) are NFC-enabled smartphones.

"The affluent consumers are using these devices and driving payments on them," Jatobá said. "Banks are taking advantage of this and launching programs for these types of consumers."

But Brazil is not too concerned with how the affluent consumer is using mobile payments. The government wants the 65 million unbanked adults in the country to have a place at the table as well. That’s where the interoperability portion of the government’s efforts comes into play.