Em Conversa looks to uncover the secrets in Latin America (LatAm) that have caused the fintech market to boom, from being worth less than $50million in 2016, to $2.1billion in 2022. This week we spoke to Mikael Lijtenstein, the CEO of AstroPay, to learn about the development of alternative payments in LatAm.
Despite the growth of alternative payments, cash is still a very popular payment method in developing regions. LatAm is no different. But despite the complexities associated with the region, especially when it comes to the variety of currencies, organisations still want to enter the market. But why?
AstroPay is an online payment service that enables users to purchase online on international sites. We spoke to the company’s CEO to learn more about why LatAm has become such an interesting opportunity for paytechs:
Can you tell me a bit about yourself and the company?
I am Mikael Lijtenstein, the CEO of AstroPay, a fintech company founded in 2009. Its first mission was to help consumers in Brazil purchase online internationally, especially those without access to traditional banking services. AstroPay is the pioneer of digital payment in Latin America and in 13 years, it has expanded into new markets and become the payment solution of choice for millions of customers in Asia, Africa, the UK and LatAm, connecting merchants with users at speed, convenience and ease.
Prior to becoming the CEO, I was chief operating officer, leading the company’s sales and operations,. This including management of AstroPay’s product development, innovation, sales activities, and services in multiple markets. I have a background in engineering and years of experience in providing cross-border payments as well as connecting global merchants to emerging markets through digital solutions.
Having acquired a great deal of experience operating in emerging markets, the business has grown exponentially with the number of consumers and merchants using our service having increased significantly, along with the payment methods made available in our digital wallet for users to use. Having established a firm foothold in Latin America, the business has expanded into Asia, Africa and the UK, and continues to do so as part of our international growth plans.
What are some big trends we are seeing in the LatAm fintech market?
We are seeing a gradual shift away from cash-based payments and a greater traction towards alternative payment methods (APMs) and digital wallets. Cards are still the region’s favoured online payment method with around 70 per cent of e-commerce payments made through cards but digital wallets have grown and with the youthful population, e-commerce is still a nascent market with significant room to grow.
E-commerce is expected to grow 30 per cent every year through to 2025, with a rise in the emergence of new payment methods, allowing access to the digital market as well as the financial system. We are particularly seeing a rise in local digital payment methods such as PIX in Brazil. AstroPay started offering this earlier in the year. There is also a growing trend of social commerce, with a significant number of Latin Americans saying they prefer to shop through social media.
How has the digital payments scene developed in LatAm?
Digital payments in Latin America continue to thrive and drive financial inclusion and economic growth across countries in the region. An example is PIX, which is launched by the Brazilian Central Bank in 2020 to enable peer-to-peer transactions similar to other products around the world such as Venmo. Brazilians consumers without credit cards are the ones who have been using it. It’s very popular with consumers and merchants due to its convenience and security.
During the pandemic, consumers in Latin America have become more open to using digital payments and e-commerce from home. The option is available for everyone, even the unbanked. AstroPay is one of the pioneers of digital payments in the region with partners from global merchants who want to expand to Latin America. Most recent example is our partnership with Huobi Global.
Another example is in Uruguay where we have seen an acceleration in the digitisation of payments since 2014, when the Uruguayan government launched the Financial Inclusion Law. It encourages digital payments, and has proven to be hugely positive thanks to tax incentives.
Overall, digital payments in Latin America are becoming more customer-centric and consumers are aware of the type of journey and experience they want to have when it comes to paying and purchasing goods/services online. With this in mind, successful fintechs are the ones who truly understand and provide an easy, frictionless and simple payments.
The rise in mobile wallet and the fintech companies [in Latam] are driving an explosion of e-commerce domestically. It brings opportunities for accelerated digital transformation.
How is AstroPay supporting unbanked people in emerging markets? Is there a timeline to get everyone access to financial services?
Part of AstroPay’s success in emerging markets is that we get to know the local needs, culture and customs. This is in addition to learning their pain points so that we may offer them a bespoke and tailored payment experience. It also required in-depth research work to understand consumers’ preferences and the most popular methods and providers.
We’ve also discovered that a seamless payment experience has been proven to increase the conversion rate at the checkout point. In order to provide users with a smooth user experience, it is crucial to ensure that we are creating a journey where pain points are avoided, with single-click experiences and automatic payment fulfilment. Timing is also imperative when introducing a new payment method in order to stay ahead of consumer demand and keep pace with the latest trend and developments in innovation and regulations.
At AstroPay we have an entrepreneurial spirit and unwavering commitment to finding new solutions to meet the everyday financial needs for our global community, developing products according to their needs. We offer a prepaid voucher to pay online on hundreds of international sites, and this year we have launched Visa and Mastercard debit cards to shop online or at any store that accepts them. This move expands the reach of our user base while simultaneously providing our customers with more benefits.
How would the AstroPay offering vary in a developed country? Would this come with any unique challenges?
When we enter a new market, the biggest challenge is to understand the complexity and particularities of the payment landscape in the region. This includes the ecosystem players, payment system, regulations, local and international payment methods, etc. When we entered the UK last year, this was the initial challenge, but it was not something new to us.
Our extensive experience of working on developing local solutions by getting to know and understand our users, what they fully want, had allowed us to be well-equipped to take on the challenge. We are able to offer exactly what our clients need by respecting the social and cultural differences of each individual user.
Have there been any noticeable similarities or differences between the LatAm and MEA markets?
Cash is a dominant payment method across the Middle East and Africa, and Latin America, but the trend is declining as mobile and digital payment methods are evolving and quickly gaining steam in these regions. But even with the rapid adoption of technology, there are still many people who don’t have access to the internet or don’t have a bank account.
Latin America is on the same digital journey as other emerging markets in Africa and the Middle East, as well as countries in Europe and Asia. The rise in mobile wallet and the fintech companies are driving an explosion of e-commerce domestically. It brings opportunities for accelerated digital transformation. Countries in these regions are attracting many international companies, fuelling yet more cross-border transaction flows. AstroPay is proud to play a part in this journey and to help transform peoples’ lives.