For as many differences as there are in the payments ecosystem between the U.S. and emerging markets, there's one common thread that both sides of the consumer spectrum have increasingly found access to.
And that thread, of course, is mobile.
As a result, the conversation among payments ecosystem players about mobile payments in emerging economies and financial inclusion has become a hot-button topic since that mobile device now gives companies cross-border access to populations never accessible before. It's also given consumers in those regions access to more efficient, more affordable options that bring them into the mainstream financial fold.
Once the mobile revolution began to take shape, it wasn't long before companies in developed markets found value to boost their cross-border footprints within the populations of the developing regions of the world. But, for companies like PayU Latam, the focus on emerging markets has helped develop strategies from the inside out.
Now, PayU is ready to take that vision global.
But to compete with the PayPals of the world, that means threading consumers in emerging markets into the fold using new technologies and services (mainly mobile) not previously available. Luckily, for PayU Brazil, it’s already got one foot in the door.
In an interview with MPD CEO Karen Webster, PayU Brazil CEO Marcos Marins Machado lays out how PayU plans to use its regional approach to help grow its international merchant footprint in order to bring more consumers under its global payments solution umbrella.
Starting with giving its local users global access.
"We are at a point where we want to develop, and we are trying to bring this global eWallet from India to Brazil. We have approximately 7.5 million users. These consumers have an eWallet with PayU only in Brazil. And our next step would be to give them the capacity to use this eWallet as a mobile wallet,” Marins Machado explained.
Regulation Changes Spark Innovation
Up until recently in Brazil, this option wasn't possible, but new regulation led by the Central Bank of Brazil is going to help companies like PayU innovate the financial services market in a way that enables consumers to have access to the same opportunities — without the need for a traditional bank account. PayU's options also enable payroll, which opens up its ability to become an alternative to a bank by providing consumers with their financial needs.
Because of the Central Bank regulation changes, Marins Machado said the battle for mobile users in markets like Brazil are just beginning.
And when talking about bringing consumers into the mainstream financial fold, it isn't just about serving the unbanked but rather the underbanked and underserved as well.
"We can give the consumer the possibility to use their money inside the country by giving them a credit card. And we are going to put money in a wallet that's linked to a credit card. The consumer doesn't have any need to go to the bank or have an account at any bank,” Marins Machado tells Webster.
"We would give the possibility to the people to use the money online through a credit card or even transfer money into the traditional bank system. What the central bank wants is to give to the people the possibility to use new tools," he added.
Previously, this process had been managed by the banks, which left much of the population underbanked and unbanked. Brazil's population is roughly 200 million, yet just half of them have bank accounts.
Because Brazil's central bank has now opened up the innovation floodgates by encouraging innovation in financial services outside the traditional banking sector, PayU now has the regulatory groundwork laid to play a more important role in shifting the financial ecosystem.
But, most importantly, it will help put those consumers "into the digital world,” Marins Machado says.
"We have a huge opportunity in these areas," he said, hinting that the company plans to duplicate the experience in other international markets.
But that's no easy task, as there are other big global players already vying for traction in the same space.
The Global Payments Competition
Global players like PayPal, of course, which has presence in 203 markets — and counting. Still, with a presence in 16 markets, PayU Latam has an end goal of being a PayPal competitor. And Marins Machado believes the company's approach to global payments is different enough from the global payments giant that his company has an edge.
"We want to compete directly with PayPal,” Marins Machado said. "It's ambitious, but we are an ambitious company ... We think we have a good opportunity. We do things a bit different than PayPal, and because we have footprints in emerging markets, we think we can get special margins. And [margins] where the opportunities are big."
But what's the main difference between how PayU defines its market and how PayPal does? Marins Machado said he believes PayU and PayPal have different positioning in the market.
"PayPal wants to create an ecosystem based on consumers. We want to create an ecosystem based on merchants and also on consumers. We think that these ecosystems grow together — otherwise, you are going to fail," he explained. "We also have to develop some specific features to allow that. We think that we have the innovation to push this."
For PayU, that innovation starts with its eWallet.
"PayPal today is only PayPal. It's not an eWallet. All you can use is a credit/debit card (or bank account) that is stored in your account in PayPal. Our idea is a bit different. We want to offer to our consumers the possibility to use their eWallet as an eWallet, with all things you have in your eWallet,” Marins Machado explains, noting his respect for PayPal's business model. "What we are doing is something really powerful in the eWallet area. These features are being developed by our global teams — not local teams."
Which Comes First — The Merchant Or The Consumer?
In the mobile payments space, there's always the chicken-and-egg conundrum that payments players debate on which side to build their platform around. After all, for platforms to take off, they need consumers, and they need merchants. But there is a starting point that every company has to launch from.
In order for merchants to be interested, you need consumers. And in order for consumers to be interested, you need merchants. Which leaves Webster asking: Who should you target first? Merchants or consumers?
It depends who you ask, of course. But PayU is all about using its merchant-focused strategy to drive consumer adoption.
"I would say that we have a clear strategy to get traction on the merchant side. That's a different approach from PayPal. They go after consumers,” Marins Machado emphasized. "Our strategy is more focused on merchants than consumers. But I believe we have to something to get more consumers on board."
That's where the eWallet comes back into the mix, which plays back into its overall global payments vision.
"We want to bring something unique from this global layer, and by doing that, we are going to be able to have a very big strategy toward consumers. We have the opportunity to target consumers using the rule that the central bank is giving us,” Marins Machado said.
And that's how innovation begins.
Marcos Marins Machado is one of the panelists at Innovation Project 2016, being held March 16–17, 2016, at Harvard University. He will share more insights on trends surrounding financial inclusion innovation at the event.