Brazil’s mobile payment market is growing, and the pool of companies and startups in the mix is getting crowded. Given fast-increasing mobile penetration rates and the take-off of Brazil’s economy, nothing less should be expected. And while there are certainly a lot of newbies on the scene, there are also some vets. One of them is Pagtel, which has been in the game for a decade.
Founded in 2003, Pagtel was one of the first mobile payment companies in Brazil. And when it got its start, let’s just say the landscape was a bit different. Felipe Lessa, Marketing and Communications Director at Pagtel, explained:
There weren’t smartphones or mobile internet, just very simple mobile phones. Brazil was different as well – the country was just starting the kind of ‘economic miracle’ that we are living today.
Initially, Pagtel developed a democratic technology that virtually all Brazilian mobile phone users would be able to access – the ARU (Automatic Response Unit). While the technology wasn’t innovative in itself, an ARU that accepted payments in Brazil was. Pagtel went on to create a service for mobile operators to sell their rechargeable products (airtime, SMS packages, etc.), onboarding corporations like Vivo, Nextel ad TIM. The result: a reach of 25 million customers.
Off on the right path, the Pagtel team didn’t take long to see that things were about to change. Lessa elaborated, “A few years ago, we realized that the game was changing at a fast pace. With the widespread use of technology and the internet (mobile or not), people are staying connected all of the time, through smartphones, computers, tablets or whatever. This movement is transforming everything: the way we connect with each other, the way we learn, our work, and also our consumption.
Thus, Pagtel set out to build a portfolio of services that combine the convenience of mobile life with advanced payment technology, focused on both convenience and safety. It has developed methods for all types of mobile devices, working in the line of a multiplatform concept. “We are where our client’s customer is,” affirmed Lessa.
Security a Major Separator
From the get go, Pagtel was focused on ensuring that its technologies were completely secure. It was one of the first companies in Brazil to achieve Payment Card Industry Data Security Standards (PCI DSS) compliance, having just renewed its approval for the third time.
Pagtel also assigns users credit scores as part of its anti-fraud system – something that seems to be working. Its fraud rate is just 0.8% of all transactions, well below the market standard of 1.5%. Lessa noted, “This is very important, because we work with remote credit card payments, which in e-commerce is the riskiest type of transaction. It’s not enough to have a good technology system, with PCI DSS or a high standard database. We created an intelligence to manage fraud risk.”
In fact, for Lessa, security is what will decide who comes out ahead in the mobile payments race. He explained, “The main factor will always be security. To achieve PCI DSS, adapting our structure and hiring top security consultants, we invested almost US$2 million. We also have three professionals fully dedicated to our security system. It’s a huge investment, but it will be decisive in providing a high quality service and having a good image in the market.”
This will likely weed out many startups – especially those that are underfunded. “Most new m-payment companies in Brazil are startups, and the majority of them cannot afford PCI, for instance. So I think that in the future, all companies will have a minimum standard to operate in this market, and it’s going to determine who wins and who doesn’t. Payment is not a sector like internet, where you can release a startup with very little investment.”
A Segmented Approach
“Pagtel is a mid-sized company in a fast-growing market of a booming country, so we don’t have enough structure (mainly manpower) to take advantage of all the opportunities that m-payment offers,” Lessa said. Thus, the company examined the market and selected three main sectors to enter: general solutions, delivery and taxis.
The first, Pagtel SmartPay, is a B2B-focused solution and multiplatform payment gateway. It is designed for big companies with consolidated strategies for mobile and innovation, catering to clients like Vivo and Algar Telecom.
Both Pagtel Taxi and Pagtel Delivery are concentrated on B2C and middle-market companies, which are largely new to the mobile payment game and require some education. “While we’re discussing how we can make a mobile payment system work at a pizzeria or in a pet shop, we’re also having meetings about how to grow sales through ARU and app channels on weekends and developing a mobile marketing strategy,” Lessa remarked.
Delving into mobile payments for delivery has been especially interesting and challenging for Pagtel, which has faced cultural barriers from both sides. Businesses – restaurants, flower shops, cafes, etc. – have to change the way they sell their products. Consumers, on the other hand, aren’t always familiar with mobile payment. “We have to show them the convenience of the service. It’s all about marketing,” affirmed Lessa. So far, so good – Pagtel Delivery is responsible for almost 50% of credit card sales for many of its clients.
A Final Note
“I think that technology is best when it’s almost invisible in the consumer’s daily life. If you create a payment system that is harder to use than a POS, for instance, you probably won’t succeed,” Lessa reflected. “Mobile payment is about changing culture, so we have to create systems that are totally consumer focused. Otherwise, we’ll just end up with innovation for mobile, and not something that’s good (or profitable) for business.”