Kushki CEO: Latin America’s Digital Payments Explosion Demands New Infrastructure

Around the globe, inflation mounts, sapping purchasing power and straining budgets.

In Latin America, inflation is running at double-digit percentage points.

Logic might hold that with these pressures in place, spending — in terms of transaction volume — would be scaled back drastically. In this case, logic would be wrong.

“Regardless of how inflation moves, the demand for digital payments is growing at a record pace because it was so behind,” Aron Schwarzkopf, CEO of Kushki, told PYMNTS’ Karen Webster.

The tailwind in the transition from cash to digital is smartphone penetration and access to the internet, both of which are high.

As noted in PYMNTS’ own research on the digital transformation of countries, 74% of the adult population in Brazil is connected to the internet, and 65% own a smartphone.

And in evidence of how the digital payments landscape is changing, Visa said recently that cardholders in Latin America and the Caribbean increased their digital transactions by 55% in 2021.

Overall, in the region, digital transaction values top $100 billion and will be worth as much as $175 billion by 2025 alone.

Read more: How Pix Ignited Digital Payments in Brazil

Greenfield Opportunity

The greenfield opportunity is there for the merchants, large and small, who want to make inroads into Latin America, with its population of more than 660 million individuals.

But doing so means that these same forward-thinking commerce companies need a local presence that lets them offer a range of preferred payment methods to consumers, both market by market and across borders.

For firms including Kushki, time and money is well spent expanding the platform model that offers card and alternative payment processing, regulatory, compliance, onboarding, underwriting, checkout and other services for a range of companies that want, in turn, to offer payments choice and localization to their end users, across channels online and offline.

That broad range of functionality is enabled through a single application programming interface (API).

That digital payments transition, said Schwarzkopf, is helped by the fact that Kushki and other firms are “helping redo the infrastructure” and allowing client firms to build new services and products on the platform.

Fundraising and a Vote of Confidence

The conversation came against the backdrop where Kushki said Tuesday (June 7) that it had garnered a $100 million extension of its Series B fundraising.

The latest capital brings the total amount raised in the Series B to $186 million at a $1.5B valuation and comes roughly a year after the initial tranche of that series was announced. The latest round includes participation from new and existing investors including Kaszek Ventures, Clocktower Ventures, SoftBank Latin America Fund and DILA Capital.

See also: Kushki Lands $86 Million To Fix LatAm’s Fragmented Payments Infrastructure

Schwarzkopf said the new funds will be earmarked for product development.

He said the new funding and votes of confidence from continuing investors reflect the fact that “the fundamentals of our business continue to accelerate at a ridiculous pace.”

The ability to raise significant capital even in the current challenging macro environment represents clear validation of the drive to refashion that infrastructure.

Schwarzkopf said the company’s growth topped 200% last year. But as he noted: The slice of the overall payments volume captured by Kushki thus far has been negligible — a proverbial grain of sand on a vast beach.

Within that broad swath of payments, he said, given that there’s been a wide embrace of mobile devices and the internet, soft POS and contactless payments and installment plans have all gathered momentum. There’s room, too, for a number of domestic wallets and cards to become interoperable. Schwarzkopf also noted that crypto has its place in an inflationary environment amid the specter of currency devaluation.

As Schwarzkopf told Webster, “Even in the era of blockchain, we are still talking about Visa, Mastercard, and acquirers and ISOs.” All of that comes as merchants represent a ripe opportunity — as he illustrated, the merchant “count” of firms accepting POS for the first time topped 60% year over year.

That growth has attracted the attention of global brands and providers who may have once been reluctant to enter Latin America’s varied markets. (Kushki even works with and enables some of its own competitors.)

“They want to understand more about the region,” he said, “and we’ve been in the business of helping them understand Latin America from a payments and regulatory and compliance perspective.”

And with a nod to the capital just raised, Schwarzkopf told Webster, “The round extension is a confirmation that we are here to stay, that what we are doing is working, and it’s changing peoples’ lives.”