Reviewing Your Organization’s Payment Health in Latin America
Karl Heinz | Senior Business Development Manager, Strategic Solutions, Worldpay from FIS
August 13, 2020
Commerce has always connected us with different people and cultures, broadening our horizons and changing the way we work, live and communicate. As eCommerce and the convenience of online selling create instant globalization, new opportunities are opening up to expand operations abroad.
These opportunities are also opening the door for every company to review the state of their global payments health. At Worldpay from FIS™, we often compare the global payments health of an organization with aspects of personal health. This has been a useful comparison for years, but at a time when personal health dominates nearly every headline globally and is revolutionizing online buying patterns, intense scrutiny and awareness of both of these items are more critical than ever.
The four key pillars of personal heath are generally agreed to be:
Adapting for 2020, a sense of community health—involving how we share space and the common sense of washing hands—has also joined the list. As individuals and communities look for ways to improve personal health, there are a few important things to consider:
- We prioritize these things differently and mix and match them according to the reality of each day
- We are all unique beings who will have unique results
- Ultimately, if we were to never to check in on or manage the awareness of our healthy practices, our wellbeing would suffer, perhaps critically.
Global payments health
Global payments health also had four major attributes to consider:
- Consumer expectations for local currency
- Awareness of market-specific relevant payment methods
- Understanding the revenue and cost ramifications of domestic payment processing
- Managing the ever-expanding complexity of a global payments organization
Whether targeting a new region or looking to hone in on an optimized solution, it is critical for you to be aware of these elements, even if it’s not always possible to pursue them all at one time, as these elements are applied diversely across the global economy. For example, a consumer in Buenos Aires or Rio de Janeiro approaches them differently than someone in London or Miami—and so should your organization. The idea of one size fits all does not work in eCommerce.
Let’s find out more about each attribute, and specifically apply them to Latin America, a booming eCommerce market and the focus of this series of articles.
Looking at Latin America
Local currency: Customers expect and prefer to pay in their local currency when they shop online. Based on the behaviors of both consumers and card issuers, local currency increases both transaction size and the likelihood of a completed transaction, which means more revenue to the merchant. Most consumers have felt the negative customer experience of paying in another currency on a website. It can be confusing and is likely to elicit increased fees by the issuers that add to the overall purchase price. Especially in Latin America, where merchant approval rates can swing wildly from country to country, offering the local currency to the shopper is an opportunity to solidify your presence in the market.
Relevant payment methods: As eCommerce continues to accelerate in Latin America, popular digital payment methods vary by country. As a merchant, you must be aware that there are large portions of the Latin American market that are unbanked and underbanked, so the credit card/debit card philosophy doesn’t work the way it might in other markets. Companies looking to attract local consumers in Latin America need to be able to evaluate the benefits and consequences of different methods and the ramification for the merchant’s business model and user experience.
Again, one size does not fit all across such a diverse economic region. As a simple example, PostPay is a leading payment method in Brazil at 16% of eCommerce spending. However, digital wallets and a totally different set of characteristics are growing fast in Argentina with a 20% share of eCommerce. Meanwhile in Peru, cash on delivery has become prominent at 20% of eCommerce.
Domestic card processing: Doing business in Latin America can be a challenge. In order to optimize success, a local entity or partnership can be key for achieving success. In countries like Brazil and Argentina, acceptance rates can increase if the company is processing transactions locally. Creating a local operation generally reduces operational costs but, in some cases, it can actually increase cost while providing significant revenue uplift. It really becomes a country-by-country strategy, but the size of the market warrants some awareness of the possibilities.
This has actually been true for many years, but recently, new solutions, partnerships and ways of working are allowing entry into the eCommerce market in Latin America. Merchants should be aware of these changes and find a consultative partner who can explain the benefits and costs of working in the market in unique ways.
Complexity creep: As merchants expand their business globally, the web of legislation, regulation, licenses, taxes and other bureaucratic matters becomes difficult to unravel. Latin America is no exception. It is common to end up with several payment providers and multiple APIs in which the operation becomes overly complicated and hard to maintain. Choosing just one payment partner with a history in the region of offering strategic solutions across Latin America and the rest of the globe will make it easier for you to be aware of your organization’s payments health in this booming region.
At a time when maintaining personal health and online buying habits are becoming more of a necessity as opposed to a matter of convenience, it is critical for all to maintain awareness of what the realities are that define success in both regards. Be certain to acknowledge that every crisis creates an opportunity for you to restructure both your personal ambitions as well as the strategy for your organization. Don’t be caught unaware of both the old and the new factors at play and how best to take advantage.