The State of Cross-border Payments in LATAM

With the transition of Latin America into the online world comes the growing usage of online payment systems with cross-border payments being a growing share. Latter help people pay for goods and services ordered in a neighboring country or even overseas, which mainly helps to facilitate a thriving trade network to strengthen the regional economy.

The adoption of alternative payment solutions has been accelerated

The LATAM Cross-Border Summit – a conference yearly held by all big players in the tech- and payment-industry – focuses on the upcoming challenges and ways to implement such systems to the benefit of all parties involved. The list of attendees names the who-is-who: AliExpress, Visa, MasterCard, Amazon, Microsoft and others, and it shows that now all eyes are on this region for an evolving payment landscape. A remarkable commitment has been made by Softbank, a Japanese strategic holding company focusing on transformative technology, that created a 5 bn. USD fund for LATAM to further the advancement of payment system technologies.

Just 10 years ago major players such as Visa and MasterCard dominated the cross-border payments market in Latin America and the Caribbean with Fintechs only just starting their endeavor to conquer the region. Latin Americans depend largely on the Brazilian real due to the currency being used by the population of the biggest country in the region. Brazil can be described as the Latin American trade window to the world and therefore is the most important market for cross-border payments in the region.

During the last years, the market penetration of e-commerce in LATAM has grown to just about 3% each in Mexico and Brazil, while other countries in the region show even lower numbers. In comparison, the US sits at 15% and China at 22%. Although there is significant progress in that regard, the low numbers show a huge potential to be harvested in the coming years, especially for LATAM that is about to catch up quickly. Currently, LATAM accounts for 0.2 tn. USD in revenue of global payments. EMEA sits at 0.4 tn., North America at 0.5 and Asia Pacific is the biggest region with 0.9 tn. USD. LATAM, while still being the smallest force, shows the biggest growth besides APAC. In terms of cross-border payments, LATAM accounted for 5% of all transactions. The region can be characterized as credit-card- and liquidity-driven, according to the 2020 McKinsey Global Payments Report.

Mobile payments on the rise

A BNY Mellon report breaks down the current usage distribution of different payment solutions in LATAM: 4% of the banked population uses direct debit, 8% cash on delivery, 10% e-wallets, 13% bank transfer, 47% cards and 18% other forms. Overall there is a 54% non-card-based usage. The development progress from 2012 is notable: 43% alternative payments 8 years ago and 59% in 2017. The last number even outperforms the usage profile in EMEA where there is only a 54% non-card-based usage. Through this profile we see the ongoing shift towards mobile based payment systems.

Although cash usage will continue to play an important role in everyday payments, mobile wallets such as PLIN and Yape acquired over a million users since the end of 2019. The pandemic has clearly accelerated the adoption of such services. Additionally, it has been observed that 62% of Brazilians use their smartphone for international orders, so the potential of a growing number of users in the coming years is huge.

Overall the mobile financial service sector has seen big growth within the last 12 months, mainly due to the Covid-pandemic. Many banks have accelerated their efforts towards offering mobile banking and mobile network operators pushed for new partnerships to cover more consumers. Two milestones in that regard have been achieved by Télefonica which now works together with MasterCard, and the 2nd one being the America Movil partnership with Citibank.

It becomes apparent that progress has undoubtedly been made, but so far no major step has been taken towards making mobile payments suitable for the masses. A likely hindrance for the slow progress in that matter is the splintered regulation landscape in Latin America, with the result of a diverse set of processes and practices being implemented by financial service providers, so that micro-ecosystems for payment solutions evolved, maintained by all the bigger finance and telecommunications companies.

Another worrying circumstance is Latin America’s banking infrastructure. It was not created with mass global payments in mind. The local service providers face difficulties implementing cross-border payments. As all over the world, organizations that want to make international payments to and from their customers want to ensure that their transactions are carried out in the most secure and efficient way.

PayRetailers has been active to implement many mobile-based services such as the newly launched PIX Uno in Brazil and the biggest payment suite for cross-border payments available.

Contact us to learn more about your possibilities when partnering with us.

https://financialit.net/content/payretailers-helps-companies-offer-payment-solutions-latam-region

PayRetailers helps companies to offer payment solutions in the LATAM region

How does the payment industry work?

The payments industry is a rapidly and aggressively changing landscape due to the emergence of new payment methods, new technologies and acquisitions.

As technology advances, payment technology companies play a more important role in the payments industry, which is why in this article we will talk about how it works and the players that participate in the operational process.

 1- The Merchant

In particular, the merchant is an individual person or a company that sells goods or services with reference to  the digital environment (e-commerce).

Thanks to them, payment gateways exist since they help the merchant to reach a greater capacity of customers in various parts of the world by offering facilities and payment methods benefiting the prosperity of their business.

And a merchant account?

 A merchant account is defined as a type of account that is created with a bank or financial institution with the intention of accepting online payments received by businesses that trade online. Banks that offer these types of accounts are called acquiring banks.

2- The Shopper

 Thanks to technology, online shopping continues to grow exponentially year after year, driven by a new generation of consumers seeking more convenience, value and options. For e-commerce, this trend poses both significant challenges and opportunities.

When “buyers” make purchases online, it is to request a service or product that appears on a merchant’s website and to make the operation effective, they must enter their payment details (credit / debit card details or other payment method details) on secure web pages, such information will be encrypted by the web browser and sent to the merchant’s servers or to a payment service provider or payment gateway that the merchant uses to accept payments.

3-  Payments Processing

 Many merchants use payment service providers to access payment gateways to accept payments. At @PayRetailers we have a full range of online payment services:

Credit and Debit Card Payments

We can help merchants to implement effective strategies to accept credit card transactions from all over the world. From the moment your customer pays, to settling up your account, you’ll enjoy a single payments platform managing the entire payment journey.

Online Bank Transfers

 All payments are processed online and in real time via the customer’s bank account. The process is particularly easy for consumers, since payment can be made using their online banking login directly.

Local Cash Payments

 We specialize in local payments for emerging markets. Customers who do not have a credit or debit card will be able to make their payments by simply scanning a barcode. Let your customers pay in their local currency and feel at home while making purchases.

Expand your audience reach by offering your consumers the largest selection of payment methods available in the industry.

Contact us to see how we can help your business grow in the Latin American market.

What Is a Payment Gateway?

A payment gateway is a technology used by merchants to accept debit or credit card purchases from customers. The term includes not only the physical card-reading devices found in brick-and-mortar retail stores but also the payment processing portals found in online stores.

A payment gateway is what keeps the payments ecosystem rolling smoothly, as it enables online payments for consumers and businesses. If you’re an online merchant, you don’t need to be a payment gateway expert, but it’s worth understanding the basics of how an online payment flows from your customer to your bank account.

The key players in online payments

We need to identify the key players in the online payment process:

• The merchant: an online business operating in any, offering a product or service to customers
• The customer: the customer, also called a cardholder, who wants to access the products or services that the merchant is selling, and initiates the transaction
• The issuing bank:  is the customer’s bank that issues the cardholder’s credit or debit card on behalf of the card schemes 
• The acquirer: also known as the acquiring bank, the acquirer is the financial institution that maintains the merchant’s bank account.

How a payment gateway Works

A payment gateway focuses on securing the sensitive information given by the user throughout the process.

Below you can see the basic steps showing how a typical payment gateway works.

• Step 1: A customer places his or her order and then presses the Submit or Checkout button on the website
• Step 2: the website or the e-commerce platform takes the customer to a payment gateway where he or she enters all the information about the bank or the card they are using to pay. The PG then takes the user directly to the page of the issuing bank or a 3D secure page, asking for the transaction to be authorised.
• Step 3: Once the payment gateway gets the approval for the transaction, the bank then checks whether the customer has sufficient balance in the account to make this transaction a success or not
• Step 4: The payment gateway sends a message to the merchant accordingly. If the reply from the bank is a “No’”, then the merchant subsequently sends an error message to the customer. If the response is a “Yes” from the bank portal, then the merchant seeks the transaction from the bank
• Step 5: The bank settles the money with the payment gateway, which in turn settles the money with the merchant

Once this process is completed, the customer gets a confirmation message of the order being placed.