Payments in Latin America remain largely a problem to be solved. The pieces of the puzzle are largely in place – credit card penetration is rising, e-commerce is growing, and more and more of the population is being included into the financial system. However, a number of gaps remain. What seems to be the problem?
“Many global solutions are used in Latin American markets; however, they fall short in terms of acceptance rates, providing poor support for local credit and debit cards. Also, there are few local solutions that exist to tackle fraud in LatAm, which for many sectors is a greater challenge for merchants here,” explained Cristina Randall, co-founder of Mexico-based payment solutions provider Conekta. “Credit card penetration rates are still growing. To provide a complete payment solution, the merchant needs offline ‘cash’ alternatives as well as interbank transfers, as there is a large market that still opts to use these methods as opposed to credit. From our experience talking to merchants, none of the existing players have been able to address these needs adequately and be the ‘one-stop shop’ for local payment needs.”
That doesn’t mean no one’s trying. A number of solutions, startups and applications have emerged throughout Latin America promising to address the payment question. Mango launched this year in Argentina and has a number of products in the works to address electronic and mobile transactions. Conekta is working on it in Mexico, PagPop in Brazil, and YellowPepper and SumUp are acting regionally.
The payment issue is certainly a complex one – hence the number of parties involved in tackling it. Randall gave us her take on the scenario in Mexico and Latin America, discussing facets related to mobile, security and fraud.
Emily Stewart: Are security concerns still a major obstacle? How do you address consumers and businesses differently on that front?
Cristina Randall: Many consumers in Mexico still feel uncomfortable using their credit card information online. For example, consumers might try the service first, then with more confidence in the service, the second time they pay with credit card. This is a behavior change and will progress over time. With regards to the merchant, it is important that they understand best practices with regard with managing sensitive customer data. For example, with our service, the merchant does not need to ever worry about handling credit card data or being PCI Compliant. They way that they integrate with our service is secure, using a token instead of ever handling credit card information. Even connecting directly to banks, there are not as stringent standards for PCI as you would expect. With our service, however, security is taken very seriously, and if a merchant is found abusing the service, the case is addressed immediately.
ES: In terms of mobile payments, how close do you think the region is to them being a reality? Are penetration rates there? Technologies?
CR: We have mobile applications that are doing very well, making use of the “one-click” purchase which is a fast and easy experience for the customer. Smartphones are becoming one of the most connected devices in Mexico, and with current penetration rates, we are just seeing the tip of the iceberg. For whatever reason, though, there are few development studios in Mexico that focus strictly on mobile. However, as more people become comfortable with purchasing on the phone, businesses will likely follow and view mobile as a more viable option to monetize. In Conekta, we keep a close eye on this trend and are quick to support mobile projects. With the new projects that we see, we expect to see more interesting applications from booking hotels to ordering food this year.
ES: In an interview with Uber’s Rodrigo Arevalo, he told us banks provide very little support for e-commerce entities, especially when it comes to fraud. What has your experience been there?
CR: With regard to the support banks provide, if a merchant integrates directly with a bank to process payments, they are not provided with an anti-fraud system or with any training or procedures to deal with chargebacks. As a result, many merchants are hesitant to start transacting online with credit and debit card in a meaningful way. Coupled with the difficult legislation towards merchants in the case of chargebacks, some merchants continue using 3DSecure / Verified by VISA, which can reduce sales up 70%. As a result, they never see their sales take off and lose hope in growing their sales online. On the other hand, we have seen success cases of merchants taking responsibility into their own hands and educating themselves about the processes involved in chargebacks and how to protect themselves. For example, one mechanism that can protect a merchant in the case of fraud is a document called a Pagaré, which is signed by the final customer as proof of their purchase. A Pagaré is recommended in sectors such as travel and tourism, where fraud rates are higher than average and where the average ticket size is high. Because of these challenges that exist for merchants, part of our core focus as a company is fraud detection and providing mechanisms for prevention.
ES: You seem to offer a wide range of solutions. How big of a team do you need to implement them? How much of your process can be automated?
CR: We provide offline (cash payments) and online payment options. In that sense, we provide a wide range of solutions. However, we build the product to be as simple as possible to use, and we maintain a strong engineering team. The process of integration should be dead simple for a developer. We provide tutorials and libraries so the service is self-serve in this sense and does not require a lot of personnel in terms of onboarding new customers. On the other hand, one of the strongest values that we have as a company is customer service, so each new customer implies more hours in terms of customer support. As we grow, a large focus will be growing this customer service team to support a larger customer base.