The advance of digital payments in Latin America over the last two decades has been slow when measured against other parts of the globe.
Visa’s Senior Vice President of Products and Innovation for Latin America and the Caribbean Ruben Salazar told Karen Webster in a recent digital discussion that the sluggishness is a reality created by the fact that until very recently, Latin America’s ability to bring consumers into the digital fold was dependent on merchants’ enthusiasm for getting hardwired into terminal technology to make card-based transactions happen.
But those terminals, he noted, were often an expensive integration. In a region where 80 percent of transactions are still carried out in cash, penetration remained low, and digital payments remained a tough sale.
The last few years, he said, have changed the game in terms of Visa’s ability to give digital payments a nudge by giving acquirers and issuers an ability to reach both consumers and merchants without the need of either a card on one side of the transaction, or a terminal on the other.
As part of the broader effort to push digital payments’ expansion in Latin America, Visa announced this week a new working partnership with Facebook to help power the new payments feature on WhatsApp in Brazil. The companies will tap into the collective capabilities of Visa’s real-time push payments technology and Visa Cloud Tokenization, a cutting-edge security capability launching alongside payments on WhatsApp.
“With the development of these digital platforms, what we are doing is facilitating both the issuers and acquirers to consumers and merchants in a simple … terminal-less, cardless way,” Salazar said.
Tokens In The Cloud
Critical to bringing digital payments into Latin America in general, and into WhatsApp in specific, is they must be secured via tokenization. But in Visa’s latest rollout with WhatsApp in Brazil, Salazar noted, the tokens Visa is bringing to the table are a bit different than the tokenized transactions it makes possible via Apple or Google Pay in that the tokens don’t live in the secure element of a specific device; they are stored in the cloud instead.
Select @WhatsApp users in Brazil can now easily send and receive money with friends and family, as well as pay businesses with Facebook Pay on WhatsApp and the help of @Visa Direct and Visa Cloud Tokenization.
— VisaNews (@VisaNews) June 15, 2020
Cloud-based tokenization creates all the same baked-in security its device-paired counterparts offer, but it allows that tokenized service to be available regardless of the type of device and who controls its secure element.
“In order to eliminate friction and complication, it’s easier for us to leave the token in the cloud and treat it like any other API [application programming interface] that we have today,” Salazar said.
The project to make this possible has been underway for a little under a year, Salazar noted. Visa worked with partners to make sure transactions are secure. Now, the technology is launching in time for the upswing in eCommerce caused by the pandemic.
“We are seeing a massive adoption of eCommerce and a massive adoption of digital platforms, and I think what the pandemic has drastically accelerated in these economies is a push for these technologies and digital platforms and how they can make their lives easier,” Salazar said. “And very frequently, consumers and merchants in these conditions are highly correlated to the ability for us to develop these kinds of platforms to allow commerce to happen.”
Latin America’s Digital Path Forward
As digital payments expand throughout Latin America, Salazar noted, Visa is seeing eCommerce growth suddenly spike. Mobile wallets like PLIN and Yape — both of which have adopted Visa’s payments technology — have seen their user count cross the 1 million mark since December of last year.
In Mexico, Visa has seen tremendous progress in shrinking the income gap between those who use digital payments and those who rely on cash. That makes it possible for low- and middle-income consumers to participate in the digital economy — and although there are many hurdles to clear, Salazar said Visa is confident progress is “headed in the right direction.”
In Argentina, Columbia and Brazil, he said, the market is opening to an ever-wider array of digital commerce and payments players, breaking the dependence on the physical payments terminal, which is leading to experiments with QR code-based payments and other easily integrated contact solutions for the point of sale.
In 2020’s first five months, Salazar noted, five countries in the region saw more than 30 percent of their transactions go contactless.
Moreover, he noted, Visa is beginning to make inroads into categories that it never has before — most notably in the transportation field. Regionwide, the entire commerce ecosystem is waking up to the idea that the time of change has irrevocably arrived, and if they want to stay involved, digital upgrades aren’t an option any longer.
“For those looking to participate in the larger payment ecosystem, they want to be able to participate in the large digital platforms with the huge consumer engagement that Visa is,” Salazar said. “They know they need to get ready on tokens and contactless because that will empower them to reach more consumers in the future.”