When Peruvian President Martín Vizcarra authorized the state-owned Banco de la Nación to open digital deposit accounts to support the government's COVID-19-related aid payments, he argued it would help prevent additional virus spread.
But in a country where less than half of adults have any kind of bank account, the move could serve to substantially boost financial inclusion, and in turn open up a whole new client segment to banks in the region.
Vizcarra's decision, announced Aug. 20, will create so-called Cuenta DNI accounts for adult citizens who have not previously received government subsidies into a bank account. Banco Nación will not need prior consent to open these accounts on recipients' behalf, meaning more than 4 million accounts could be created in short order.
The government hopes the effort will eliminate the need for a huge portion of Peru's population to gather and wait in long lines to collect their aid in cash, especially in the middle of a pandemic that has hit the country hard. Peru currently has the world's fifth highest total of coronavirus cases — more than 700,000 — and the second highest number of COVID-19 deaths per million inhabitants.
For many of these citizens, however, the accounts also will mark their first introduction to the formal banking system. Just 43.7% of Peruvian adults had some type of formal financial product as of March 31, and only 42.2% had a deposit account, according to data compiled by Peru's banking association, ASBANC.
That could provide a long-term boon to Peru's entire financial industry.
The opening of Cuenta DNIs "means that almost every Peruvian will have a bank account, implying a real possibility for them to access financial products," said Luis Alfonso Carreras, CEO of Yape, a money wire and QR payments app owned by Banco de Crédito del Perú SA
"This opens infinite opportunities for other banks, because many of these people will become acquainted with the experience of having an account, and if they need a wider array of options in the future, they could migrate to another bank."
Yape is already working with Banco Nación to enable pairing of Cuenta DNI accounts with its own, Carreras said.
Accelerating the trend
To be sure, Peru has been expanding financial inclusion for years — in 2015, the percentage of adults with at least one financial product was barely above 35%. The pandemic itself also may have helped to drive greater adoption, particularly with digital banking. ASBANC data shows that Peruvians have shifted massively to virtual transactions since the pandemic took hold in March, as the closure of physical locations forced both businesses and consumers online.
At Yape, for instance, average new daily accounts has tripled from pre-pandemic levels, while average monthly transactions have increased more than five-fold. About half of the firm's new customers didn't report a pre-existing bank account.
"The pandemic has forced people and businesses who were not familiarized with digital channels to learn about them; and adoption has grown massively," Carreras said.
"Cash remains king when a digital payments ecosystem is absent, and the pandemic has led to a shock in the implementation of the latter," said Sergio Urday, head of economic and financial system information at ASBANC. Urday expects second-quarter data to show "an important qualitative and quantitative increase in financial inclusion."
The new Cuenta DNI accounts could accelerate that trend even more. The government hopes to have the accounts in place in time for its second round of Bono Familiar Universal, a 760-sol emergency relief payment that will reach an estimated 8.6 million poorer families. That payment is set to go out this month.
"At the risk of being conservative, if current trends continue, the percentage of the adult population with at least one financial product could end the year above 50%," Urday said. Such an increase would represent greater progress for financial inclusion in Peru than in the prior four years combined.
The risk of disuse
But while Cuenta DNI accounts may bring a new population into the financial system, there is still uncertainty as to whether consumers will be swayed to use it, or any other financial product, in their day-to-day lives.
"We must make sure this isn't a one-off effort, and that these accounts don't fall into disuse," Yape's Carreras said. To do that, he argued, financial players need to redouble their financial education efforts and expand connectivity infrastructure in Peru's numerous rural areas.
ASBANC's Urday echoed that sentiment, but noted that banks also need to provide more free and low-cost products that appeal to a wider segment of the population. Much of Peru's unbanked population cite high fees as a reason they do not have an account.
Amid the pandemic, he said, banks have started to show greater interest in meeting that challenge.
"We are seeing a mea culpa from the financial system regarding inclusion: we cannot allow ourselves to go into another pandemic with so many people outside of the system," Urday said. "I believe they will capitalize on this increased preference for formal payment methods."
But ultimately, broader use of Cuenta DNI accounts will depend on "the financial system's effort to educate and promote the use of these instruments," he said.
"The pandemic is certainly driving people to learn how to use them."
As of Sept. 11, US$1 was equivalent to 3.57 Peruvian soles.