Some people equate an end to the pandemic with completion of the digital shift. They obviously haven’t visited Latin America, Asia, the Middle East and North Africa (MENA) region, or even parts of North America.
When it’s said that we’ve crammed roughly 10 years of digital transformation into just over two years, the underlying math tells us that despite inflation and recession fears, the digital shift is in early stages for much of the world, with whole continents busily connecting.
Speaking with PYMNTS’ Karen Webster, PayU CEO LatAm Francisco Leon put it all into perspective.
“Before the pandemic, when you used to talk about eCommerce and online payments, you used to say share of the market was between 2% to 4%,” he said. “It means that the total volume of sales in every country was not more than 2% to 4% online. During the pandemic, we had a percentage [of] about 40% of the total volume of the economy [move online].”
As the pandemic fades and people refine relatively new digital-first lifestyles, he said digital payments volume is settling in the 12% and 20% range.
“It means that we grew a lot,” he said. “The adoption of eCommerce and online payments is there. The economy keeps growing and [finding different ways] to leverage this growth.”
Looking for a silver lining to the pandemic — and finding it — he told Webster: “In certain ways, what we are seeing is a very positive trend that started in 2020. The trend is not stopping. Everyone thinks that maybe after the pandemic, everything is going [back] to pre-pandemic times, [like] it never happened.”
That’s a flawed understanding of what’s really occurred, he said.
Noting that digital payments volumes are up 50% year on year for PayU, he said, “This is a big trend. This is adding value to small and medium business. It’s adding value to the economy.”
“All the governments across the region, you cannot imagine how many conversations we have with public entities every month because they’re interested to keep helping the adoption of digital channels,” he added. “It is incredible what happened … and it didn’t stop.”
See also: PayU Acquires Payments Platform Ding From CredibanCo
Localization Unlocks Latam
With a data-based view of the scale of change based on PayU platform insights alone, Leon said he also understands that many regions must move beyond outdated ideas of online selling and paying.
“We used to talk about Brazil [being] 10 years more developed than the rest of the Latin American countries,” he said. “What I see now is that this is not 10 years, maybe this is two years. The [Latin American] countries are now very similar in terms of digital adoption. Basically, what you need to make sure of is that you offer different payment methods that fit with the [local] population.”
That’s a tall order in the assortment of nations that comprise the Latin American and Central American markets, with language barriers and different currencies creating barriers for large unbanked populations all wanting to join the connected economy via digital payments.
Those having the most success with cross-border payments in Latin America (or anywhere) are incorporating several local payment methods to optimize online conversions.
“It’s not enough to have credit or debit cards as a payment method,” Leon said. “You need to have in Brazil, Boleto. You need to have in Mexico, Oxxo. We have more than 70 alternative payment methods in Latin America to offer to the merchant. This is the value.”
“You are opening a big base of consumers to these merchants,” he added. “They don’t need to have thousands of stores across the country or the region. They just need to have a good process selling online.”
That means no slapdash web storefronts, but eCommerce sites that play to rapidly evolving online shopping habits and, most vitally, have the right payment options.
Read also: 5 Million Colombian SMBs Are Ready to ‘Go Digital’ Amid Exploding BNPL Demand
With a large unbanked population with high smartphone penetration as is found in Latin America, “you need to see how you can capture this base,” he said. “This is why now we are talking a lot about buy now, pay later, about cash vouchers, about PIX Brazil. Offer more payment methods, and you are going increase your conversion rates, you are going to attract more consumers, so you are going to grow faster.”
From Argentina to Chile to Peru, different currencies and exchange rates are being overcome by digital means. Communicating the nature of digital payments is foundational in this.
“If we move the population to understand that digital payments don’t need a credit or debit card, you just can use your own money for digital purchases, this is going to be powerful,” Leon said. “It happened the same in India.”
A Connected Economy in the Making
Infrastructure is a major consideration in nations and entire regions onboarding with the connected economy, and while much of that is the responsibility of governments, at the corporate level — large or small — it’s about having local partners who know the terrain.
“Imagine that [prior] to the pandemic, we used to peak [at] 120 transactions per second,” Leon said. “Now we have 600, 700 transactions per second. It changed completely, and if you don’t have good technology, you’re not going to provide good service for your consumers.”
Which brings it back to localization and payments options — especially if you’re not local.
“When you are talking with a merchant, you tell this person [that] you need a local expert partner because if you go through traditional rails, you are not going to be able to reach the [biggest] portion of the population,” he said. “You are only going to touch the traditional people who have traditional payments like credit cards and debit cards.”
“This is why we have offices in each country where we operate,” he added. “We need to have expertise on the ground to show you exactly what that consumer means. It’s not the same, what is happening here [in] Sao Paulo and what is happening in Bogotá.”
It’s the same with compliance and fraud.
“The idea is … you can be successful in each of these countries by being compliant with local regulations,” he said. “The second part is fraud. The fraud in Mexico is really high, but not in the same way [as] in Chile or in Peru. We know the markets. We know the consumers. We know the fraud trends in each country.”
To productize these digital dreams, PayU is setting up an innovation lab with ambitions of not just improving website conversions, but helping facilitate the global connected economy.
“This is very interesting because digital payments are not completely developed, so you have a big opportunity to help countries [set up a digital economy],” Leon told Webster.
Central America stands out as untapped even compared to Latin America, and it’s on Leon’s list.
Also on his agenda are super apps, an attractive idea to smartphone-dense populations that still have large unbanked segments. The super app knocks out multiple problems in one go.
In recent months, PayU has invested in Bogotá-based super app Treinta at the same time it was acquiring mobile payments platform Ding. Both are crucial to PayU’s expansion plans, with Ding enabling it to develop new financial services “but for that population that used to be out of the traditional system,” Leon said.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
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