A closer look at potential payment challenges and opportunities
By Tory Jackson, Head of Business Development and Strategy, Latin America,
Mexico’s fintechs have been major drivers of modernizing the nation’s financial services, but how could the health crisis shape the future of digital payments and where should we look for opportunities? Examining the parts of the financial system that could be disproportionately strained by the crisis may reveal some answers.
Getting Pymes adoption right
Nationally, there are about four million Pymes representing 42 percent of PIB and 78 percent of total employment. Segments don’t get much bigger or more diverse than that. But, even if large portions at first don’t seem addressable, there’s a lot of rich territory to cover.
Naturally, many of these “nonessential” businesses today find themselves needing simple ways to stand up digital channels and requisite digital payments. Here we can see how traditional acquiring models are inadequate from the tech, onboarding and pricing point of view.
Standing up digital channels
Clip’s pagos a distancia provides a great example of how a homegrown fintech has jumped in to close a critical commercial gap by providing microbusinesses not only a way to keep selling from home but also a way to improve liquidity by drawing daily on their sales receipts.
Broadly speaking, this is a promising area as Pymes seek ever-more affordable and frictionless ways of enabling their businesses – some of which have lower volumes but higher-than-average individual transactions; for example, freelancers working from home.
Integrating with on-demand players
You don’t have to walk very far these days to notice the number of “we deliver” signs popping up on every block. That’s because integrating with a delivery player has practically become a lifeline for small and medium-sized businesses that don’t have or don’t want their own delivery capabilities.
The ability to easily integrate payments into these new relationships is another area where traditional infrastructure falls short. For starters, these digital players like to communicate via APIs and tend to dislike offline or cumbersome connections with partners in their value chain. They want to settle accounts digitally and in real-time. The family business on the corner may want to sell through an on-demand delivery service, but be anxious about the terms and steps to setting up a requisite merchant account – and giving access to a faceless party. Taking away frictions like these seems like a good place to find opportunities.
With so many people working from home or no longer gathering at places of business, how will small and medium-sized companies reimburse or remunerate employees for wages and expenses? For example, are home workers eventually going to want their employers to pay for all of the toner, paper and other miscellaneous items that were once provided at the office? And, what happens to the cajeras (tellers) in offices throughout the country where employees would go to collect stipends and other funds?
Examining how the crisis has changed behaviors and their associated payment flows is going to be key to identifying opportunities that will shape the future of fintech and the transformation of the nation’s financial services. Experience working with disruptors in other markets has taught us that change brings with it seemingly minor, but important frictions that once unlocked can have exponential effects.