Expanding into new markets in other countries is the way many big companies got big. Yet even after the pandemic and digital shift that it triggered, digital payments are far from ubiquitous in some large markets, like Latin America, where cash still rules and digital has its work cut out.
Beyond connected regions like North America, Europe and parts of Asia where cards and now digital wallets are familiar and reliable, consumer not only encounter difficulties digitizing cash, they also don’t trust the process. That’s step one in transformation.
Speaking with PYMNTS’ Karen Webster, Uber Core Payments Lead Maria Jose Cornejo and PayU CEO of Global Payment Mario Shiliashki used Latin America as a case study in how cash is slowly ceding ground to digital in emerging markets, introducing digital ways to pay and be paid.
For global businesses operating in local markets, “it’s not easy, mainly because consumers have different preferences around the world,” Shiliashki said. “In fact, what we see in the majority of our markets globally, not just in Latin America but across Europe, Africa and Asia, [is that] the predominant payment methods are not cards. Those [methods] are very local,” and often, cash.
PayU’s mission of helping global operators address local consumer needs includes elements like “providing local currency and displaying local currency in real time,” he said, and connecting to every local network and payments scheme to facilitate transactions.
Cornejo, who heads Latin American payments for Uber, agreed, saying global brands like Uber “need to understand the countries and which are the most accurate payment methods, as well as the regulations, the infrastructure that each country has. It’s really challenging. Every time you open a new market … you have also to think about all the payments infrastructure you need.”
Latin America’s cash reliance presents both a challenge and an opportunity to PayU, Uber and others. Consumers and gig workers don’t completely trust digital — but they do trust cash in hand.
“Even though our main business is a frictionless experience and it’s based on not even feeling that you [paid], you have to adapt and understand which are the payment methods [used by] consumers and drivers” in each new market being opened, Cornejo said.
Given that major card networks including Visa and Mastercard don’t currently process transactions in Latin America, FinTechs like PayU are stepping in, helping rideshare drivers in that region and others to trust in, and realize, the benefits of digital payments versus paper money.
See also: PayU Boosts African Footprint With Ghana, New BNPL, QR Products
Overcoming Trust Issues
Uber’s drivers in Latin America offer an ideal example of this conundrum, as Cornejo said most generally do not want to be paid via digital means in that part of the world.
“The main issue is that not all drivers like having a debit card or an account,” she told Webster. “The penetration is still low. Most of them do not want to be paid digitally.”
In Mexico where Cornejo is based, the Oxxo prepaid card from the eponymous convenience store chain is a widely used and trusted method in that region.
“It has more authentication in order to reduce any fraudulent attacks,” she added. “That’s the way we do it, but obviously it’s a lot of work for us. It’s not the best.”
In Argentina, Mercado Pago is the preferred digital payment method Again, local. The common thread is localization, and that’s the code PayU is helping firms like Uber break globally.
Enticing drivers to drop cash in favor of digital payments is once more a matter of gaining trust through reliability and convenience, which tend to work their magic after just a few uses. One way to get it going is through incentives, paid in local currency and reinforcing confidence.
“On incentivization, creating that trust and putting the convenience there so that you’re gently pushing, you’re not imposing, is, I think, the way to go,” Shiliashki said. That means “putting in the hand of the driver the ability to accept digital whenever they want — at the door, in the car or outside as a pre-booking — that, I think, is the way we incentivize it.”
Vouchers are another interim measure being used in Latin America as companies like Uber and FinTechs like PayU nudge drivers closer to those first few crucial uses of digital. Cornejo added that she’s exploring QR payments instead of cash to jumpstart awareness of what’s possible.
“We need to do it step by step,” she said. “You cannot completely change habits from cash to digital. You need to do it [like] a school, teaching them that maybe you can start trying QR payments, transferring money from your account, doing these prepaid cards that can work in a moment, and you can start understanding the system and trusting it more.”
Read also: PayU Acquires Payments Platform Ding From CredibanCo
Get It Right the First Time
There’s a first time for everything, including digital payments. Both executives returned to the notion throughout the conversation as the necessary leap of faith needed in these regions.
“One of the things we’ve seen from other markets is that first experience that we need to encourage right from the driver,” Shiliashki said. “If we get that right, then they start to adopt it, and we’re back to that seamless experience Uber started 13 years ago. You get in, you get out, there’s no payment even discussed. That’s pretty magic.”
In Mexico, Uber’s digital disbursements strategy is succeeding, Cornejo said, “because people are now receiving their money more instantly. They know the day and the hour that they are going to receive their money, and that certainty, that accuracy of delivering their money is … why we have more drivers using electronic payments for disbursements. That’s the key.”
Scaling that globally is a job of education and awareness, which Shiliashki called a never-ending job of educating local companies, workers and ultimately consumers to retire cash.
Then it’s a matter of “incentivizing that first experience through the right use case,” he said. “Second is about convenience. Then third is ensuring that the money really is there when we say it’s there. There’s no fraud, there’s no risk of a chargeback that is unrecognized.”
Local payment methods helping facilitate global commerce today include a mix of open banking and local automated clearing house (ACH) systems, along with instant bank transfers that are getting popular with those who have bank accounts.
Shiliashki said bank transfers “obviously [leave] a big swath of the population still unaddressed or not adequately addressed, which is why I think we will continue to see methods, especially wallets and various card methods, that are specifically targeting certain sectors of the population that aren’t well banked.”
For Uber and countless other companies operating in different countries, having a knowledgeable FinTech to clear a path and create the needed digital money flows is crucial.
“For example, we work a lot with PayU,” Cornejo said. “[You need a] company that knows the business locally, that can help you integrate correctly, and that can show you the things that you need to do in terms of acquiring and all the infrastructure that you need to have for messaging, authorizations, fraud tools” and other frameworks enabling digital payments.
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