Digital Payments Set To Take Off In Emerging Markets

Co-founder of dLocal, cross-border payment solution. Organizer of Punta Tech. Board Member, Endeavor Uruguay. INSEAD MBA and Technion MSc. 

By now, those of us in the payments industry are well aware of the growth digital payments have endured and continue to experience during the Covid-19 pandemic. A recent study from Research and Markets found that almost 50% of consumers worldwide are using digital payments more now than they did before the pandemic, and the majority of those consumers said they plan to continue using digital payments after the virus is contained. 

Merchants should take notice of these shifting trends worldwide and assess how they can plan their future strategies accordingly. Here I’ve highlighted a few key digital payments ecosystems around the globe, among many, that we’re watching closely.

Brazil And Real-Time Payments

Brazil is in the process of implementing a real-time payments system, PIX. The Central Bank of Brazil created this new system, which is set to formally launch in November, in response to the challenges facing the current payments ecosystem.

For consumers, most transactions will be confirmed in a few seconds instead of 48 hours. Fees are expected to be lower as new payment players join the existing competition. The “always-on” nature of PIX gives consumers the ability to buy products and services at any time. Consumers will also experience better overall payment methods such as scanning a QR code to complete a transaction versus manually inputting credit card information. 

Retailers can expect more purchase completions by reducing the wait time for order confirmations and delivery. But more importantly, PIX will give merchants access to a potential market of 45 million people who do not have bank accounts. And when it comes to the fight against fraud, a long-standing issue in Brazil, the centralized nature of the system’s database could make it an effective ally in this battle.

The rollout of the PIX system should also be a boon for e-wallet adoption in Brazil, where the share of online payments completed with an e-wallet stands at 8%. Brazilian banks with over 500,000 accounts must connect to the system by November. Doing so should be beneficial to banks offering e-wallets as a user acquisition tool, bringing on new unbanked users who can get into the mainstream and buy online.

India And UPI

When we turn our attention to Asia, most of the focus there tends to be on China and the rise of Alipay and WeChat Pay, and rightfully so. Just last year, both made major announcements that they had expanded access to include international bank cards, providing us with yet another reason to keep an eye on them.

But in recent years, India has gained traction thanks to its own real-time payments system. And as I’ve mentioned in the past, India represents a huge opportunity for those who are willing to learn and adapt to its unique complexities.

UPI is the fastest-growing payment method in India. Between November 2018 and November 2019, the number of transactions on UPI increased 132%. The value of those transactions during that period increased similarly. More importantly, UPI enables international merchants to claim their part of online spending that is not being completed with a credit card. 

The pandemic has only reinforced UPI’s importance. In April, there were 999 million transactions recorded on UPI. That figure rose to 1.23 billion transactions in May, and increased again to 1.34 billion in June, showing the importance of digital payments in today’s environment. Couple that with India’s e-commerce market, which continues to gain steam due to the healthy spending of today’s consumers, and the opportunity becomes obvious.

Nigeria And Mobile Money Accounts

When focusing on Africa, Nigeria presents an interesting opportunity to bring more consumers into mainstream payments because of its sheer size. With a population of more than 200 million, Nigeria is a large market brimming with potential. And while online spending overall in the country is expected to reach $4.9 billion in 2020, forecasts show there is a lot of growth left to be realized.

Alternative payment methods are the key to launch operations in Nigeria because card usage is low, particularly for online transactions. Mobile optimized checkout processes become more important each year, as smartphone penetration is growing quickly.

Of course, the most popular method of digital payment in Africa is M-Pesa. The service said it had 37 million active customers in fiscal year 2019. What started out as a simple SMS payments system has morphed into one that also relies on a smartphone app and QR code to conduct transactions. In Nigeria specifically, alternatives to M-Pesa have emerged, including Paga, which offers free person-to-person transfers between its network of agents and 14 million customers. 

Key Takeaways 

The past several months have highlighted the important role digital payments play. For merchants looking to maximize growth potential, adjusting to changing customer payment preferences can be just as important as the evolution of your product set or services. In examining the changing payment landscapes around the world, here are a few more things you need to keep in mind:

• As new services and opportunities show up through digital channels, more consumers (especially younger ones) are expected to consume more online. That was a fact before the pandemic and will be true well after it has passed.

• Whether it’s the introduction of new payment methods or a sudden change in consumer payment preferences, disruptions frequently involve opportunities for those who can adapt and make flexibility part of their go-to-market strategy. 

• Finding success in emerging markets requires being truly local in your approach and execution. It means having operations or partners on the ground to help you make sense of each country’s unique attributes and requirements and help you take advantage of the opportunities while minimizing the risks.


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