Smartphone, cross-border payments for the unbanked

A new company called Unipagos is helping the unbanked Spanish-speaking population on both sides of the U.S.-Mexican border make payments on their smartphones. It's a fertile, greenfield market, according to Paul Coppinger, the U.S. payments industry veteran who created the Mexico City-based enterprise. About 75 percent of Mexico's 100 million consumers don't have bank accounts, but 50 percent of the country's residents wield smartphones, Coppinger noted.

Bringing electronic payments to that segment of Mexico's population and to their friends and relatives across the border in the Southwest United States presents a lucrative opportunity for American ISOs, he said. And although he's spending most of his time in Mexico City and polishing his Spanish-language skills, ISOs don't need a crash course in another tongue or a change of address to succeed in signing up merchants for Unipagos, he added.

The Unipagos system combines what Coppinger learned in 15 years as president of Apriva, a Scottsdale, Ariz.-based wireless transactions technology provider, with the lessons he gained before that while working in U.S. government projects. The system provides banking functions without the need for a bank account, Coppinger said.

Merchant, government buy-in

Consumers can put funds on their phones without paying a fee at Mexican bank branches and at Mexican ATMs. They can also top off their phones for a fee at some larger Mexican stores. Wire transfers also carry a fee. They can spend the funds in participating brick-and-mortar stores. Merchants can accept the payments on nearly any smartphone made in the last five years because near field communication isn't required.

Online, Unipagos users can make purchases by dialing a phone number and providing a PIN. The smartphone connects with the website. To provide those services Unipagos began signing up merchants to accept payments in late 2014, and it now has 14 million retail locations. "We're just getting started," Coppinger said of the quest to bring merchants aboard, citing the nearly countless retailers on both sides of the border.

The Mexican government wants to make payments more electronic and is adopting the Unipagos system to help consumers pay utility bills, he said. No longer will consumers there have to stand in lines carrying wads of cash to pay for electrical, gas, water, phone or Internet services.

Cryptology in action

Unipagos has concentrated so far on enlisting merchants and soliciting the Mexican government's cooperation. The other side of the equation – consumers – will come later, Coppinger said. For now, most of the users have joined after seeing signs for the system in the stores where they shop, he noted.

The technology underlying the system is based on elliptic curve cryptology, which comprises an approach to public-key cryptography. Everyone who uses the system is issued a "certificate" that gives them access to the system, proves their identity and authorizes purchases.

The certificate is associated with just one person, so breaches would not allow access to the entire system. That makes hacking unprofitable because data thieves are seeking to compromise thousands of cards. "Stealing just one person's personal information only makes sense if it's Bill Gates or Warren Buffet," Coppinger pointed out.

Putting together the technology has required a team that now numbers 40 people and is growing rapidly, Coppinger said. He has hired tech workers in eight time zones, including some in Mexico, Germany, Italy, Pakistan, India and the United States, to keep the software development churning 24 hours a day.

When the workday ends, an employee can hand off a project to a colleague whose shift is just beginning. That results in a tag-team or relay-race approach to programming. Otherwise, developing Unipagos could have taken years, he said.

Coppinger has also enjoyed rediscovering his roots as a technology guy. "I'm writing code again," he said. "Sometimes I strap on a tie and go to meetings, but other days I wear a T-shirt and jeans and do programming."

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