The size of the global cross-border payments sector, according to a Mckinsey study, is a USD 230 billion-dollar industry and there are four key segments: C2C, B2C, C2B and B2B. The C2C has profit margins of 5.4% and the B2B, 0.1%. The first accounts for 0.5 trillion dollars in volume and the last for 133 trillion. The B2C segment has margins of 1.5% and 1.2 trillion in volume.
The figures above are more than enough for a move towards the B2B and B2C market. The movement around big fintechs and the increased focus on BIG TECHS in the payments industry (Apple Pay, Allipay) is a reality. These have created payment structures around their billionaire companies and all their users worldwide. This great movement was made for a few reasons: accessing new revenue channels and protecting its core products, increasing the margins of existing products.
Some fintechs like Transferwise, clearly positioned as a B2C service provider, started in 2018 the cross-border solution for companies offering batch payments that enables international payments of salaries and corporate payments to suppliers. This solution had been pivoted already in 2016, according to data on the crowdfundinsider.com website.
If, on the one hand, this movement by BIG TECHS places additional pressure on the competitive environment, on the other hand, there is growth in non-traditional areas and demand for integrated solutions, with greater significance between scale and efficiency and increased need to trust the provider. A perfect environment for the emergence of solutions and payment offers for SMEs and SMBs.
Is the market dominated by Bigtechs and Big fintechs, or is there room for other models and providers? The case of Brazil.
Fluctuations on currency conversion, with public offers to sending money to Brazil without guarantee of exchange rates is still a reality. A fintech publicly states on its website that if the exchange rate changes by 5% or more from the moment the transfer is created, until the transfer is completed, the transfer may be delayed, cancelled and refunded.
If processing cross-border payments with Brazil does not seem an easy task, even for some big fintechs, when exchange rate fluctuation alone is a challenge, although regulation is more defined, there are gaps in interpretations and can cause risks. this is a perfect environment of opportunities for other models and especially for new fintechs.
Solutions with API-based architectures, open banking and agile methodologies are already transformations that are accelerating innovation and competitive intensity in many facets of the Brazilian payments industry.
The fintech market in Brazil is quite heated. Companies offering cross border payment services are becoming better known and competing for space with traditional companies that were previously positioned alone in this market. Major efforts by the Central Bank of Brazil in defining regulations applicable specifically to the payment industries and acting strongly in the security of third-party funds, make the offer from new suppliers more common and safer.
In traditional or large companies, aiming to serve the largest number of people and clients in a single model, it ends up offering off-the-shelf solutions that do not necessarily serve everyone.
Without guarantee of transparent flow and proper integration, SMBs and SMEs start looking for suppliers that offer prices that fit the business, have a complete, personalized and customizable solution that really meets their needs and, mainly, are made by local specialists who are used to the barriers and difficulties that the country offers.
When looking for a supplier, SMBs and SMEs must understand that currently in Brazil, even small volumes and companies can receive a great offer of services and price in the cross-border payments. Price is a differential for small companies. They should look for payment service providers that make clear the composition of prices and the amount that will be paid to the final beneficiary.
Looking for providers and professionals that are specialized in the industry and who focus efforts on small and medium-sized companies will guarantee the offer: customization and attention that these businesses need.
New entrants do not mean less security or technological capacity. Strongly supported by regulation, with great experience in the industry and with competitive prices, they can be great options for offering and solving old payment problems with new solutions.
About Fernanda Zago
Fernanda Rachel Zago, CEO, is responsible for strategic partnerships and business development at WePayOut, a Brazilian fintech working in the cross-border-disbursements industry. She also coordinates the positioning of the WePayOut brand nationally and internationally. She has ten years’ experience as an executive in the cross-border-payments sector.
About WePayOut
WePayOut is a Brazilian Fintech specialized in cross border mass payouts to Brazil helping international companies with no presence in the country to disburse payments in local currency. Through a technological and diversified solution that includes bank transfers, cash pick up, wallet and instant payments (nov 2020). It is offered via API or dashboard. Some industries serviced are: payroll, contractors, affiliates, free lancers, remittances, money transfer operators and many others.
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