Sometimes there are advantages to being late to the game. Latin America offers an ideal use case.
Regarding payments, Michael Bilotta, Global Head of Digital Goods and Services at Worldline, told PYMNTS’ Karen Webster that digital growth in Latin American countries is following familiar tech paths.
So-called “first-iteration platforms” are added and perfected over time, and so is e-commerce in the LatAm region, which in a way came forward by coming a little late to the party and from the insights other digitization benefited geographies.
“They are a first iteration eCommerce market,” he said. “All the things that have been developed over time in the US, UK, Australia and parts of `AC, all of these insights flow together to form what we as consumers worldwide want as, say, a user experience.”
Ironically, this means LatAm had a head start by waiting. That has made the region a ready hotbed for the sale of digital goods and services as payment localization meets growing demand.
Bilotta said: “Payments are the lynchpin that ensures you can monetize your service because without an effective payments stack, everything falls apart. You can have the best product or service in the world, but if people aren’t willing to pay for it, it becomes a problem.”
Because there is no one-size-fits-all track for a continent of 20 countries and 14 territories, Bilotta says businesses can go cross-border or look in-country for tech stacks that support digital payments. Each has its pros and cons, and there also remains a cash attachment.
Taking Brazil as a key use case, he found that the country of 250 million people has 80% internet penetration, which is higher than China, and 88% smartphone penetration in urban areas. However, cash and voucher payments are still popular there, such as Boleto Bancário.
Boleto continues to coexist with PIX, Brazil’s near-real-time digital payment network, which is more like an open banking model. As the digital press extends its growing advantage in LatAm, things are moving towards faster digital payments: “Same concept behind PIX,” he said.
“If we just opened up banks’ `Is for tech companies to build on, we could build payment methods that… disintermediate the systems or the wallets or whatever the case might be. Nowhere in the world has better implementation been seen than in Brazil. Brazil has PIX.”
See also: Worldline buys Banco Desio’s merchant acquiring activities
Use local trust
Worldline overcomes this complexity – and the fees that come with card rails – with its money transfer model, which allows a local entity to act as a merchant of record for a foreign seller.
He said: “It gives merchants access to this growing market, to all local payment methods, and it allows for that penetration without them having to step in [and] set up a local unit.”
Digital goods and services enjoy the advantage of not being physical products that require shipping and associated hassles, making certain digital goods ideal for this experience-hungry region.
He said traditional e-commerce “has it harder especially because it’s about logistics and shipping, they have to get things in the country. In terms of a specific category, I would say that everything that comes with a subscription, which is the main business model for digital goods and services, has been able to penetrate the market quite effectively.”
It goes back to being fashionably late to the party. “LatAm is kind of like the third installment of markets coming online to become a real player in e-commerce,” he said. “All those lessons we learned from the start about localized language, localized currency, local payment methods and real immersion and understanding, they did.”
See also: Latin America could be a Christmas present Looking for cross-border dealers
Responsible Consumers
He made the point by noting that LatAm buy now, pay later before it breaks out of Australia.
“A lot of people don’t know that in Latin America it’s common practice with Visa and MasterCard etc. to allow consumers to pay not even just for expensive items but for regular items in a series of installments, just like you would with a regular one credit card, which means it’s cadence for them,” he said.
That’s a revealing and little-known fact about LatAm’s fascinating role in developing new payment models that flip old models in real-time.
“The most important thing to keep in mind is that the customer is in charge now,” he said. “I think in e-commerce there has long been this paradigm that I’m a big retailer with a big market share in my space and therefore I can go to market with a solution that feels frictionless for me.”
That is fading as LatAm becomes a digital superpower in its own right and big names in payments can be brushed aside by a provider that does the right localization.
Consumers “will find a competitor that offers them a user experience or checkout experience that they are used to in their home country. Traders need to keep that in mind. If they don’t, this is a recipe for them to lose their share of the wallet very quickly.”
How consumers pay online with saved credentials
Convenience is prompting some consumers to store their payment information with merchants, while concerns about security are causing other customers to pause. For How We Pay Digitally: Stored Credentials Edition, a collaboration with Amazon Web Services, PYMNTS surveyed 2,102 US consumers to analyze the consumer dilemma and how merchants can overcome resistance.
See more in: Boleto Bancário, Brazil, Cross-Border Payments, Digital Payments, E-Commerce, Special News, LatAm, Latin America, Local Payments, Michael Bilotta, News, PIX, pymnts tv, Retail, Video, Worldline
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