LatAm’s Digital Transformation Opportunity Is Best Viewed as 33 Different Puzzles

The digital transformation of Latin America is a massive growth opportunity. That is, as long as you don’t treat Latin America as one big place.

That’s a roundabout way of saying that this continent of 33 nations and over 600 million people is 33 individual markets, meaning players in digital goods and services like streaming entertainment are wise to take it one or two markets at a time, ideally with the right partners.

So said Andrew Monroe, global head of gaming and media at Worldline, in an interview with PYMNTS’ Karen Webster. With roughly 70 million people throughout the region now subscribing to streaming services versus the 500 million with internet access, largely mobile, Monroe said that’s the delta of the growth opportunity. But there is where the simplicity ends.

Asked what companies often get wrong when they make a move for Latin America, without hesitation, Monroe went for regulatory readiness.

“I wish individuals within these multinational corporations would ask more questions about the regulatory environment and the compliance environment beforehand,” he said.

Worldline sees “a lot of folks rush in, and then once they get in [they] realize … the regulatory compliance environment, the import-export taxes, taxes on digital goods and services, keeping money in the country, taking money out of the country” differs nation to nation, and can stop a cross-border expansion plan in its tracks.

“Start asking those questions first and use that as part of the overall business case for entry into the market so that once you get there, it’s less reactive since you’ve already proactively identified what those are,” he said.

Citing a litany of differences in regulations, payment preferences, access to credit, access to banks and cash usage, he said, “You have to come up with an individual strategy for each country. Don’t try and tackle it all at once. Go into the countries that have the biggest potential for the goods or services that your business is offering,” then get your payments strategy set.

For example, he noted that an expansion strategy heavily reliant on credit card payments would leave out 90% of the population of many Latin American nations where credit cards are barely used, while others, like Brazil, have closer to a 50% penetration of cards. Same with digital wallets.

For that reason, he said, “It’s important for merchants, when they create this Latin American strategy, to identify your top potential countries. For most folks, it’s going to be Brazil, Argentina, Mexico and Colombia because those are kind of the four biggest in eCommerce.”

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Payments Methods Unlocking Latin America

Given the immediacy consumers expect from streaming and digital services, payment methods need to optimize both customer experience and the provider’s need to get paid.

Monroe observed that while customers in Brazil are more digitally connected and likely to be using payment methods that might include the PIX real-time network, other nations still use cash vouchers which don’t settle immediately. In other countries, a strategy centered on credit cards would exclude 90% of the population. These nuances are crucial to success.

“It’s important to understand the different mechanisms of individual payment methods because otherwise, you’re putting your business at risk for fraud, or you’re putting your business at risk for losing goods and services if you give it too early without the payment being 100% confirmed, or you create an undesirable user experience” if it takes too long to engage.

Noting estimates that roughly 80% of internet access across the Latin American continent is happening via mobile, Monroe said many suppliers of digital goods and services are taking mobile as the path of least resistance. That’s smart, provided it’s customized.

“User experience has to be tailored towards a mobile device, to the way in which the user registers to the way in which they navigate through the app itself or the site itself on a mobile device, all the way through the payment, it has to be fit for somebody who’s using it on a handheld device,” Monroe said. Speeds ranging from 5G down to 3G must also be factored in.

Merchants are looking for easy turnkey solutions to solve this complex group of nations as one market, but there are issues with one-size-fits-all approaches. Better to work with experts who understand the preferences and capabilities within each distinct nation.

He said, “You want to choose a provider that can get you in easily, that has that kind of initial turnkey solution, but then also can help scale and grow with your organization as you become more successful, as you become more sophisticated, as you add on more local consumers.”

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Know Before You Go

Webster noted the importance of knowing the trend lines at the intersection of technology, consumer experience and payment preferences in this diverse and competitive region.

To that, Monroe said this is where knowledgeable partners with a presence in Latin America pays off, as companies can save time and money by leveraging that payment expertise.

“Understanding and treating Latin America as a truly unique animal is necessary,” he said. “Use a partner that is familiar with the current payment trends, but then look forward [at] where these are these going in the future. I would highly recommend engaging a Worldline or any other kind of PSP that is focused on that region and really understands it.”

Building flexibility into the corporate expansion roadmap is an approach that helps in all these areas. That will be decisive as more streaming providers look for Latam for growth.

He said as companies grow, their needs change as their customer base dictates.

As businesses scale, “Maybe we’re targeting a different demographic that has different payment demands, you need to change that,” he said.

“Maybe you need to change the entire checkout experience to meet the needs of increased demand. If you didn’t go into it with flexibility as one of your pillars, you can be a little bit stuck, and it makes it harder to modify things as you grow.”