2018 Review – our Latin American Highlights from the Region
1. Latin America has seen some big changes this year. What are your top 3 highlights for 2018?
It’s been a pretty amazing year. Especially because there was a lot of change across our entire region. We had elections in Mexico; we had elections in Brazil; Argentina went through a bit of a crisis - which seems to happen about every 6 months. So, we had a lot of things happening at the beginning of the year. And, if you look at where we started, and compare it to where we’re finishing the year, I’m pretty amazed at how much we achieved.
We started the year with a pretty significant challenge in terms of new regulation coming in and pretty dynamic changes in the landscape. Just to give you a bit of context: in the first 6 months of the year we saw the operators in the Fintech space almost double or triple. And that brought a lot of disruption to the market, especially amongst the merchant community. They weren’t sure what they wanted to do. They have seen a number of things coming into the market, led by consumer demand. Even established players were launching new things that changed the dynamics of how payments are processed in the market. So, there was a lot curiosity from the merchant community, and a lot of uncertainty over which one had longevity and the ability to develop, as opposed to ones which were just ‘flavour of the month’. By early 2018 we’d already seen some pretty fundamental changes across the region. For instance, companies like MercadoPago, which is the largest e-wallet for the region, introduced a QR code at point of sale. That wasn’t there are the beginning of the year. Now you would be surprised if you saw a store that doesn’t support that – and all of that change took place in 6 months or so.
In the case of Argentina, for instance, the Central Bank changed regulations and made it mandatory for all merchants to support debit cards at the point of sale. And that’s changed what merchants need to do in order to comply with the law. Mexico introduced a regulation about Fintech companies and how they should operate in that market. It was a very interesting year. I’ll just say that it kept us extremely busy. And that’s the beauty of this industry, isn’t it?
2. So what do you think is driving that growth? Why has it been so rapid, with so many new entrants into the market there, is it just because ecommerce is growing as a whole or is there anything else driving it?
It’s a good question. I don’t know if I have the answer, but I can tell you my view. You know, the market is starting to pick up. And the region itself too. In terms of the economy, that got stronger, mainly because there was a bit more confidence in consumer spending. If you consider that previously, several markets had been in turmoil, which led consumers to be wary of spending. But that’s changed. Even before the elections when there was some certainty amongst the population that the country was going to go into retraction. We saw consumption start to reactivate again and that I guess that fuelled the entry of companies that were looking to enter the market but were uncertain about whether it was the right time to do that. And, again, it’s impressive. We went from having a modest presence of these companies across the region, and if you look at right now, I would even argue that you see as many options as you would in very mature markets like the UK or the US, right? I guess the challenge right now is to see which one of those will survive and will make the cut and will become mainstream, and which ones will simply be a nice attempt, that some consumers will adopt, but that will not gain mass adoption.
3. So obviously, Worldpay merged with Vantiv earlier this year to become one of the world’s largest acquirers. How do you think this actually benefits our customers in Latin America?
Pretty significantly I would say. I mean the US is normally the first expansion market for companies in Latin America, outside of the region. So, it’s the go-to-market once they have conquered the biggest markets in Latam. Having a partner that allows them to access the US, in the most successful way, with a strong, economically viable solution and with a lot of modern technology is important. I mean, there are companies right now that are entering the US or are shopping around, some of them partnered with solid companies, and some of them just went for somebody who welcomes them with open arms. Not every case has been successful. The US is a pretty tricky market, interchange is complex and the penetration of credit cards is so critical that if you don’t succeed in processing credit cards you don’t succeed at all. I guess you could say that about many other markets, but in the US that goes twice.
And I guess partnering with a company that is one of the most well-known players in the market, a company that continues to develop new technologies to allow merchants to reduce costs, to increase acceptance, those kinds of things, are fundamental for companies here. Also, due to the proximity to the US, it’s much easier for companies in Latam to enter that market. And when they are successful in the US, they gain the confidence to start expanding into other regions much quicker, right? The US market is complex. It can take several years to crack, as setting up a successful payment operation isn’t something you can do overnight. And that consumes resources that you could otherwise use to expand into Asia or Europe. That’s why I think the merger has helped us to shorten that process for them, making it much more seamless. We have seen clients expanding into Asia and Europe much quicker than we would normally see. I mean, yeah, this is not really about the US on its own, this is about supplying a solution that makes our customers’ lives easier.
Our 2018 Global Payment Report has just launched and within in it, we predict that mobile will overtake desktop commerce globally by 2023. Do you think this is true across Latin America?
"Yeah, absolutely. I would even argue that it might be even sooner than that in the region."Read more in our Global Payments Report
4. Our 2018 Global Payment Report has just launched and within in it, we predict that mobile will overtake desktop commerce globally by 2023. Do you think this is true across Latin America and are there any specific markets that we should keep an eye on in terms of mobile commerce?
Yeah, absolutely. I would even argue that it might be even sooner than that in the region. I guess like any emergent region, one of the things you see here is that some of the new technologies are leapfrogging the more established ones. I don’t know if everyone has a computer in their house, but I can promise you, that everyone has a smartphone. And that smartphone has become the source of entertainment, the source of shopping and the source of being connected through social networks. So, I guess my point is that the availability of those devices in markets where effectively you have more phone lines than people is a really good combination. And you see more and more efforts in the merchant communities to adapt to the growth mobile devices, whether it’s via native apps, or via web-responsive applications. The shift to that is pretty significant. I guess everyone should have a mobile strategy, but every merchant should analyse whether they should develop an app or a web-responsive website. And the answer to that is how frequently that app might be used. You don’t want to spend resources in an app that will be downloaded, used once and then deleted until the next holiday, for instance. But on the other hand, you don’t want to spend your efforts on a web-responsive site for something that’s used frequently when you know that you need an application, and the navigation and user experience is not going to be the best, right? But yeah by all means, I would really argue that mobile commerce will take off across Latin America before 2023.
5. And are there any specific markets we should keep an eye on?
Well I’m always a big fan of South East Asia, because of its similarity to Latin America. I guess culturally speaking, the two regions couldn’t be further apart but in terms of the dynamics, they’re pretty similar. Both are emerging markets, where you don’t have access to established technologies. Both are mobile-based, the population is growing really fast, the economy is going in the right direction you see the same trends…. The challenges that we deal with, despite how different the regions are, to some extent are similar. You know, for example, a really fragmented payments culture. Across Europe, you have a couple of trends: northern countries operating in a similar way, and the southern countries operate in a different, but similar way. In Latin America though, no two countries are alike, in the same way that no two countries are alike in Asia. So that’s only my reflection because the access to technology is a bit more established in Asia, which means that what happens there will inevitably happen in Latin America but perhaps a couple of months or a couple of years afterwards. So it’s a good mirror to reflect upon.
6. Last time we talked about how Latin American merchants are starting to look outside the region for opportunities that traditionally they had stayed within the region. You’ve talked about the US as being a key market. Are you starting to see more local merchants expanding outside of Latam?
Yeah so one of the highlights of this year is that we’ve seen some of our clients expanding into Asia which surprised me quite a bit. It surprised me in a positive way I guess.
The opportunity for Asia has always been there because of the size of the market and how relevant it is. We’ve finally seen clients expanding into that market, and they’ve lost the fear of entering such a vast region and we have seen the results. They’re pretty stunning, so, we expect to see more of that. Europe’s obviously a region that our clients go to, but typically they go to Spain, Portugal and target countries that have the closest ties with Brazil and the rest of the Spanish-speaking part of Latin America. But we are also seeing clients going to the UK, we have some clients going to the Netherlands, so, it’s slowly happening. The Latin Americans are going out into the world and selling whatever they have to offer, and apparently there’s a market for it.
8. What are you most excited about for 2019?
The launch of our Argentina acquiring licence is one I’m definitely excited about, especially as I’ve been working this market for 20 years or so. We’re going to be the first and it’s always interesting to be the first. So that’s one that I have a personal interest in seeing succeed, especially as I think there is a pretty significant demand for it.
So, I guess that’s the main expansion market and then my expectation for next year is consolidation of our Brazil offering. We have a solution that, from a technological perspective, is light years ahead of other operators in the space. Merchants who operate with us are starting to see the benefits of it. We expect to go further into the market and offer our full solution to more and more merchants. What we have is not for everyone, from the point of view that merchants need to be of a certain size to benefit from those solutions but those who are, they see significant improvements to their operations. Things that in the past would require an army of people to reconcile transactions or work on acceptance, those kinds of things, right now we provide a turnkey solution. So, what would normally require 5 or 10 people to do, they can do with 1. So, they can allocate those extra 4 or 5 heads to focus on selling more or improving the customer experience. For these reasons, we only see good things for that market for next year.
So, 2018 might have been a good year, but it looks like 2019 is shaping up to be even bigger. If you operate in the region, or are looking to expand into these markets, get in touch.