From economic uncertainty, through to disruption in Argentina, and of course – the launch of our new acquiring licence in Brazil - we caught up with VP of Strategy, Daniel Belda, to get his thoughts on the year so far – and what the rest of 2017 holds.
1. What 3 words would you use to summarise the first half of 2017?
Disruption, opportunity and challenging.
2. Has 2017 lived up to your expectations so far? Why/why not?
Definitely. I had expected an exciting year with many challenges and I haven’t been disappointed. From the socio-economic trends in Brazil, to the push to end Argentina’s acquiring duopoly, things seem to be setup for a very interesting second half of the year with many new opportunities opening up.
3. In January, 2017 looked to be a year of uncertainties – Trump’s presidency, the UK triggering article 50, a slowing global economy – to name just a few. What impact do you think these have had on global businesses based in Latin America?
These have created uncertainties with markets and currencies fluctuating more than in recent years. This makes doing cross border business riskier. Companies doing business in Mexico have seen a significant devaluation of the Peso impacting profits significantly, especially when dealing cross-border. On the other hand, Mexican businesses doing businesses globally had a positive impact from these fluctuations.
I would say that, the uncertainties of the local markets, have probably played a larger role in negatively impacting global businesses based in Latin America more than the international ones.
4. In terms of payments, what do you think have been the major developments so far this year?
The major development so far this year is happening in Argentina. Disruption is the main theme in Argentina this year, with the Central Bank stepping in and opening up the acquiring market in the country. Many players will now be looking at how this disruption takes shape and try to make the most of the opportunities it presents. While the same is happening in Chile, the regulatory body there is not as pro-active in incentivising new entrants as the Argentinian Central Bank.
5. And what payment developments do you think the second half of the year will deliver?
In the second half we will probably see the likes of AndroidPay, SamsungPay and ApplePay try to make a play in the Brazilian market. NFC is starting to roll out in the country due to the high penetration of smartphone users. Couple that with the fact that a large proportion of eCommerce is done using a mobile device, makes it a prime market for these payment methods.
The other key item to watch out for is how the credit card settlement process will be changing in Brazil (aka Grade Unica). The Brazilian Central Bank has mandated that as of the 4th of September all credit card settlements be made via a centralized clearing system that will provide the net positions between the different financial institutions. This is intended to further safeguard merchant funds, but many are still questioning if the financial institutions and current acquirers will be truly ready to work in the new system in time.
For now, the Central Bank is adamant on the deadline and is keeping to the line that if any acquirer is not ready in time, that acquirer will simply not be able to settle their merchants after the 4th. We will be watching this unfold very closely as the impact it can have in the market is substantial should things go wrong.
6. 2017 has seen major alternative payment methods (APM players) in the East moving into Western markets. What impact do you think this will have on payments within your market?
In Latin America, APMs are as prevalent as in Asia. The percentage of the population that is unbanked is still significantly high. This means Cash based payment methods are the main APMs rather than those like AliPay or WeChat Pay. As a traditional card provider I wouldn't be worried just yet. Other APMs, like PayPal, have tried breaking into the market but have met significant consumer resistance. That being said, it is something to keep a serious eye on as Asian websites are extremely popular, with Aliexpress.com ranking very high on most visited ecommerce sites.
7. At the start of the year, we highlighted India as the global eCommerce rising star. Do you still think it is? Or have things changed?
I still think it is. The economy is still growing at a healthy pace. Which is more than can be said for Latin America. Brazil came out of its longest running recession only last quarter and has a lot of ground to catch-up on before it can match India or China. India’s unbanked population also continues to reduce and I expect this market to see significant movement as result of online only banks coming into play.
8. If you were CEO of an international business in Latin America, which markets would you be keeping an eye on in the 2nd half of 2017?
First one would be Argentina. The changes being driven by the central bank should make it a more favourable market for international/regional companies. After that it would be Brazil. The current market volatility makes for uncertain times, but it also creates many opportunities.
9. How do you see IoT impacting payments?
IoT will increase invisible payments, reducing one more barrier in the consumer journey. It is very exciting to see the new services will be offered to consumers as a result of IoT. The part I am most curious about is how IoT devices could make intelligent use of tokenizing a consumer’s payment methods and preferences based on previous behaviour. For example, for orders under a certain value, use a direct debit on my account and above a certain value use my credit card. This intersection of machine learning, IoT and payments will probably prove to be very exciting in the near future.
10. Do you think VR/AR will become mainstream this year? If not – what do you think is preventing it?
I don't think it will be. In my opinion, one of the key elements holding it back is the logistics of rolling out the necessary hardware for it. At this moment there already are software and hardware available that allow for a good consumer experience. The trick will be getting them into place so consumers can use them. Those that crack that nut first will probably experience a good boost in consumer satisfaction and share of wallet until the rest catch up.
So, it’s been an exciting – and challenging year – across Latin America so far – and it looks like there’s still more to come. To find out more about our operations across the region, and how we can help your businesses...