Once considered the next great growth engine for the smartphone industry, Brazil is on the decline. With its economy shrinking and unemployment on the rise, many Brazilians are making do with dumb phones. They find the cost of an Internet-connected device prohibitive, particularly when they factor in mobile data fees.
One possible solution borrows from a technical breakthrough made by AT&T half a century ago. The Brazilian government is working with local companies and Qualcomm, the world’s largest mobile phone chipmaker, on a modern version of toll-free calling. A new 1-800 system for mobile data allows Brazilians to access their bank accounts for free on smartphones without incurring data costs. The government of São Paulo plans to extend free data services to some official websites by the end of the year.
Banco Bradesco, one of the country’s biggest banks, began exploring a free data program after observing that many customers had stopped using the company’s app and were switching back to such traditional banking services as phone calls and visits to the teller. A survey of those customers found that they couldn’t afford data plans and didn’t have access to Wi-Fi during work hours, when banks are open. Bradesco teamed up with technology giant Qualcomm, and together they spent a year negotiating with Brazil’s four main phone-service providers. The bank purchased data packages wholesale and started rolling out the program in 2014. Bradesco customers can check account balances, transfer money, and pay bills without buying a data plan. “The response was excellent,” says Mauricio Minas, a vice president at the bank.
Bradesco has signed up almost 7 million of its 26 million checking account customers to the company’s mobile services, Minas says; it had 4 million at the end of 2014. The number of mobile transactions in the first half of 2015 doubled, compared with the same period last year, and the bank expects volumes to keep doubling each year. About 35 percent of all transactions will be initiated on phones by the end of 2015, and that number should rise to 40 percent next year, Minas estimates.
Sponsored data has been tested in other emerging markets, with some success. Internet.org, a pet project of Facebook Chief Executive Officer Mark Zuckerberg, provides free access to a limited group of websites—Facebook being one—in Colombia, Kenya, Tanzania, and Zambia. Two of China’s largest mobile operators began offering one-day free access to Alibaba’s Taobao Marketplace in 2013 to get people hooked on the shopping site and to encourage data use.
Bradesco’s service in Brazil isn’t a philanthropic endeavor. Besides creating an incentive to attract new customers, it’s cheaper than hiring additional bank and call center staff. Each visit to a teller costs the bank more than $4, whereas an online transaction costs pennies, according to a study commissioned by Qualcomm. “This solution easily pays for itself,” says Minas.
Qualcomm, which sponsored a report about the program in Brazil that is expected to be published on Aug. 18, is developing similar free-data software that the government will roll out to citizens. Qualcomm is banking on emerging markets to drive future demand for smartphones, most of which rely on the company’s chips. While Brazil, at 282 million mobile subscribers, has more phone lines than people, some 75 percent are on prepaid plans with little to no data. Smartphone sales growth in the country dropped 15 percent last quarter after a 56 percent jump during the same period in 2014, according to market research firm IDC.
Qualcomm is encouraged by the results of its program. “If you apply the same concept that you have with 1-800 calls to data, you can revolutionize the industry,” says Christiano Amon, co-head of Qualcomm’s chip unit. “I believe it has the potential to get adopted in many, many places.”
One place Qualcomm isn’t expected to go after is the U.S. While Amazon.com successfully introduced a similar, albeit limited, program with free access to its e-bookstore on Kindles in 2007, Americans have resisted the concept of corporate-sponsored Web access. Proponents of net neutrality set their sights on Internet.org in May, saying it’s a vehicle to lock people into Facebook. Past proposals for sponsored data in the U.S. have “caused a bit of an uproar,” says Courtney Munroe, an analyst at IDC. While such services may not work in developed markets, “it makes a lot of sense where data is still relatively expensive,” he says.
Brazilians happy to avoid standing in line at the bank may soon get relief from a second common inconvenience: getting a driver’s license. The state government in São Paulo is developing an app called Poupatempo, meaning “save time,” that aims to speed up the process of applying for a license or identity card. Sao Paulo will spend at least 30 million reais ($9 million) a year to build out the service, and it wants to make sure people are using it. “Most don't access the service online because of the cost associated with data,” says Aldo Garda, an information technology coordinator for the state government.
São Paulo is talking to the four biggest telecoms in Brazil about buying data on behalf of residents. The government hopes to save itself some money by converting people from more expensive call centers to online services, Garda says. He expects a 50 percent reduction in visits to government offices within two years, if the app is successful. Given the recent economic troubles throughout the country and cuts on government spending that impend, Brazil could use any savings it can get.