Digital Banking

Creating LATAM’s Commerce ‘Digital Value Chain’

digital banking

Instant payments, digital commerce and banking across mobile devices are all gaining ground no matter where you look, geographically speaking.

But among the most greenfield markets are those found in Latin America, where mobile devices may have high penetration, but traditional banking services do not.

Consider the fact that the World Bank has estimated only 55 percent of adults in the Latin America and Caribbean regions have access to bank accounts. The opportunity is there, then, for banking as a service to take root alongside the inexorable rise of eCommerce, which in turn offers challenges to merchants and merchants service providers alike.

In an interview with PYMNTS, Deirdre Bobadilla, chief incubator officer at NovoPayment, delved into the pressing need for merchants to offer a streamlined onboarding process for their end customers.

“They want the lowest friction possible,” she said of merchants, “but the highest levels of compliance possible.” The ultimate goal is to provide what she termed a “friendly” process for the consumer, who can provide requested credentials easily, through the aid of technology — such as verification via facial recognition enabled by their mobile device camera. Along the way, said Bobadilla, the merchant or issuer can collect basic information from consumers.

With all the data that is provided during onboarding or account creation, said Bobadilla, “these same merchants can create powerful databases that often represent a wealth of data that may even be better than that seen at banks.”

The Value Chain

That same data can be used to enrich the financial services ecosystem, said Bobadilla, where the benefits extend to issuers and acquirers. She said the continued emergence of technology and application programming interfaces (APIs), tied to banking as a service, can help financial institutions (FIs) and FinTechs to work together to introduce new products that can bring speed and security to commerce.

She offered the example of the digital wallet, where a series of efforts must come together to create a “value chain” — the consumer needs to be able to onboard a digital card (perhaps received through instant issuance) into the wallet. The cards themselves need to be tokenized.

With a nod toward tokenization, Bobadilla said, “The issuers are finding out that they need to include that kind of service.” And here, she said, banking as a service providers such as NovoPayment (serving FIs), through its relationship with Visa, and specifically Visa Token Services, can help issuers tokenize their cards.

Since each consumer/identity is issued a single token, at a high level, Bobadilla said this translates into a “secret identity” for the cards that helps prevent fraud while boosting acceptance rates, benefiting consumers and merchants alike.

Beyond tokenization, Bobadilla explained to PYMNTS that APIs on offer through platforms and banking as a service lets firms (and their developers) build new offerings and use cases that can span digital accounts, instant payouts and decide “based on their own financial rules the way they want to use our financial services.”

(NovoPayment announced last year that it has scaled the deployment of Visa Direct to enable instant payments, P2P and P2M payments, account-to-account payments, fast funds and mass payouts, as well as the use of the aforementioned Visa Token Services.)

In designing new offerings for the Latin American markets, she noted that self-service processes, especially those in retail settings, are gaining ground. APIs and partnerships, and the expansion of digital solutions provide new opportunities for challenger merchants, especially those that opt to offer goods and services across omnichannel settings.

“These challenger merchants are looking to operate in the same conditions as bigger merchants,” she told PYMNTS. “They want to accept cards and they want to accept QR codes … at the same time they are looking for a little autonomy in the way that their processes work.”



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.