The pandemic acted as a catalyst for a worldwide consumer shift from offline to online services and eCommerce has become a crucial factor that every merchant should consider. This is particularly true for merchants looking to expand across borders into high-growth markets, such as Latin America.
Andre Boesing joined emerchantpay in 2018 and is currently VP of international business development and head of LATAM. In his career, Boesing’s expertise has been in the setting up phase of payment companies, including both, Acceptance (payment service provider and card acquiring) and issuing (eWallet and prepaid cards) throughout Europe and Emerging markets. Boesing started his payment’s career at Bibit Global Payments in Holland in 2000, then moved to Spain to set-up Bibit (RBS) in the Iberia / LATAM region. After that, Boesing joined CQR Payments in Austria in 2007, now Kalixa Group, to support the team do deliver a full-service payment provider, a card acquirer, a prepaid-card issuer for the European region.
Here, Boesing explains how cross border growth can be achieved in Latin America:
Latin America’s growth can partly be attributed to growing mobile penetration rates. Experts expect that by 2025, 64 per cent of the population will have access to mobile services – this will be a major driver for the continued innovation of financial services. It’s clear that digital solutions have and will continue to be a significant accelerator to eCommerce growth. In fact, Latin America is expected to have 260.2 million digital shoppers by the end of 2022.
In 2019, it was estimated that 45 million of the Latin American population were unbanked. Demand for alternative payment methods (APM) therefore, already existed prior to the pandemic. The pandemic, however, accelerated its development as online services became more prevalent. This demand is gradually being met with the unbanked population already decreasing to 40 million in September 2020. This number will continue to drop as innovations in the fintech industry on the whole create more opportunities for financial inclusion.
The eCommerce boom and the region’s growing consumer market create the perfect storm for merchants to tap into billions of potential digital-savvy consumers.
Issues facing merchants looking to expand
Consumers expect payments to be efficient, seamless and personalised. Despite this, there are still several points of friction when it comes to cross-border payments, which can negatively impact the customer experience.
The use of unstructured data that must be analysed by systems or people is one major source of contention for many businesses. eCommerce is quickly developing, however many businesses are still reliant on legacy payment systems. With varying regulations across countries, businesses need innovative payment solutions that will enable better understanding and adaptation to local protocols and regulatory requirements.
Merchants can partner with a local payment service provider (PSP) that have pre-existing and strong relationships with local players. For example, a PSP that has a strong foothold in the Latin American payment landscape, is more likely to offer more competitive transaction fees for local payment methods, including APMs, thanks to its position as a trusted, established player in the region. In this case, this particular PSP can negotiate better prices based on its knowledge of the popular payment methods, and even its processing volumes.
Without this expertise, merchants may face:
- High fees – Many APMs and legacy processes in Latin America come with high fees for cross-border transactions. Merchants would do well in partnering with a payments provider that can reduce the cost of processing fees through local capabilities, partnerships and expertise in each country’s unique regulatory requirements and payment protocols.
- Settlement issues – Consumers making domestic payments in the UK now expect transactions to be made in a matter of seconds or minutes, although card payments may take a little longer. Cross-border payments however, can take days to be settled due to the necessary routing required through several financial institutions providers in different time zones.
Leveraging this market can be an extremely complex mission as a result of market intricacies. Merchants who wish to expand internationally will require digital capabilities that will enable them to keep up with the changing payment landscape.
In today’s landscape, merchants have the responsibility to be more flexible and offer payment methods and checkout experiences that will enable consumers across the globe to purchase in their method and currency of choice.
Leveraging experts to alleviate stress
PSPs can offer unparalleled assistance when it comes to expanding across borders. Finding the right payment partner with local capabilities can be a critical component of growing into new markets.
Merchants must carefully evaluate a payment partner’s cross-border knowledge and capacity to provide innovative technology and payment solutions. This will enable them to avoid overhauling their operations while still catering for the preferences of customers in Latin American markets. For example, merchants who are looking to expand into the region should consider a payment partner that enables them to process payments in the customer’s local methods, while settling in the merchant’s preferred currency. In this example, both parties are able to have frictionless transactions, facilitated by technology developed with a global marketplace in mind.
Additionally, partnering with a PSP that can help merchants tap into the region without having a local entity can help alleviate significant administration burdens associated with expanding across borders. An effective partnership should also offer all relevant alternative methods and local card schemes that are preferred in each Latin American market.
Having access to these capabilities can be the difference between success and failure for organisations looking to recover in today’s economy. Not only will cross-border eCommerce enable business growth but it also creates an opportunity for Latin American countries to easily trade with the rest of the world, which is a significant factor in boosting the region’s economy.
The cross-border economy
Latin American consumers are increasingly being given access to financial services through digital solutions such as mobile wallets. As a result of this, cross-border e-commerce will be critical to achieving a new growth trajectory. Those who have unrivalled local knowledge and technology offerings that cater to each unique and nuanced market will see a smooth transition into foreign markets.
Investing in high-growth markets such as Latin America provides merchants with a diverse pool of consumers that they weren’t able to access before. In order to conquer these markets efficiently, merchants must look to payment providers who provide a frictionless payment experience as well as local market expertise that simplifies the process of international expansion and favours local acceptance.