Financial inclusion and digital innovation in LATAM – interview with SafetyPay

Monday 1 November 2021 08:53 CET | Editor: Raluca Constantinescu | Interview

We sat down with Gustavo Ruiz Moya, CEO of SafetyPay, to learn more about financial inclusion, digital innovation, and the role of alternative payment options in LATAM

LATAM has seen great progress when it comes to increasing general access to financial products. Can you elaborate on the initiatives in this space that either emerged or gained ground during the last couple of years? 

Over the last 18 months, financial opportunities and options in global markets have dealt with dynamic changes when it comes to everyday payments. LATAM consumers show a strong demand for digital transaction experiences, and LATAM is emerging as the world’s fastest-growing region for mobile ecommerce. Concurrently, the middle class has grown by more than 50% in the past decade, which, when combined with a high smartphone adoption rate of over 60%, has increased the demand for more fintech products and payment options. 

As of September 2020, 40 million people in LATAM remain unbanked, a decrease from 45 million in May 2019 – and according to Statista, Colombia, Peru, and Uruguay earned financial inclusion scores as high as 75 (out of 100) in 2019. They ranked highest as the nations with best access to financial resources, even above leading Asian markets like India and the Philippines, both scoring 71 out of 100. In addition, countries like Mexico, Brazil, Chile, Colombia, Peru, Ecuador, and Uruguay are all developing Open Banking frameworks. 

Many regions across the world have adapted to the global shutdown by taking advantage of digital payment channels. Cash-based payments are declining in favour of electronic payments but are still a critical payment method for the 200 million Latin Americans who do not have their own bank accounts. 

Commerce in the region is still reliant on cash, with 21% of ecommerce transactions paid with cash, compared to 10% in Asia and 7% in Western Europe. LATAM countries are implementing ideas (such as social commerce) that proved to be successful in other markets to help improve their business strategy – which starts with the implementation of digital wallets. Countries like Mexico have built and integrated digital wallets with QR into their marketplaces, allowing merchants to further examine data and growth rates in digital, cross-border patterns. With a digital payment platform based on QR codes, Mexico is much more advanced regarding instant payments than many other LATAM markets. Following this trend and in order to add more alternative payment methods for consumers and merchants alike, SafetyPay implemented a QR code-based instant payment solution, PIX in Brazil as an additional payment option for its merchants last May. 

What are the main barriers that still stand in the way of financial inclusion, and how can they be tackled in order to also support the merchant community in LATAM? 

Although financial inclusivity around the world is on the rise in 2021 due to new policies, tech-first financial institutions, and advancements in the fintech industry, there is still a long way to go. 

Geographical distance is one of the main barriers, as financial institutions locate banks in urban areas with high population density. The vast majority of the unbanked and underbanked population live in rural areas, and their lack of physical access to a reliable financial source leaves them financially excluded. Moreover, high transaction costs are also an issue, since many transactions have fees that could be unaffordable for low-income customers. Latin American governments are beginning to create more inclusive environments to support the growth of ecommerce. Colombia’s government introduced three VAT-free days in June, July, and November 2020. They focused on the efficiency of online sales, and they recognised the potential for ecommerce to power economic growth. 

For merchants and their customers, implementing new, frictionless technology that caters to discrepancies in payment options can make a positive impact. For example, providing QR options for purchasing products in-store and paying bills within one secure account makes paying for goods and services easy and quick for the consumer, while also enhancing convenience for merchants. 

In many parts of the continent the population has no access or limited access to financial services. How can digital innovation and digital financial solutions support a decrease in this sense? 

The framework behind digital innovation and digital solutions is designed to accelerate the flow of payments, ease reconciliation, and streamline opportunities. Digital investment and innovation around dedicated resources like interactive client support and payment management services for middle-class and lower income customers is critical moving forward. Keeping a customer-centric mindset and establishing awareness around digital innovations like QR codes, biometric payments, and cryptocurrency transactions can provide financial service access to millions of customers that may have missed these opportunities in the past. What’s more, Mastercard’s New Payments Index identified contactless technology as ‘the digital catalyst’ for the exploration of new payment options. The survey also found that 66% of respondents in LATAM and the Caribbean expect to use payment technologies such as QR codes within the next year. 

What are the biggest gains registered after the last 12 months in terms of existing financial habits of consumers? 

Customers are more concerned about fraud and actively shifting toward options that do not compromise their financial information, such as accessing their banking information via apps and secure sites on their mobile devices. Through this consumer shift, banks, companies, and startups alike are rushing to adapt to consumer preferences. LATAM is gravitating towards digital channels, products, and services across different spectrums. Along with the rest of the world, customers are seeking digital and contactless payment methods. Latin American consumers are very open towards the idea of shopping online for physical goods, they are also interested in premium products, and they are price-conscious shoppers. Recent data from Kantar shows that in Q1 of 2021 compared to 2020 people in Brazil and Mexico, across all socioeconomic levels, were shopping less often but buying more per trip. 

How did SafetyPay support financial inclusion in this new local context? 

Addressing financial inclusion is key for future economic growth and financial security. By providing an alternative payment option for consumers that are underbanked or those who chose not to use credit cards, SafetyPay opens purchasing options that previously didn’t exist. For businesses, there are two essential components toward promoting extra value that must be part of their overarching strategy: offering a transfer platform for those customers wanting to make online purchases without compromising financial information and providing instant confirmation to merchants to better manage their inventories in real time. Both must be considered and executed to build customer trust, which will ultimately lead to the future of banking success. 

This interview is part of the Payment Methods Report 2021 – Latest Trends in Payment Preferences, a comprehensive overview of the payment methods in scope for 2021, as well as best practices for checkout optimisation and customer conversion by addressing digital transformation, security, and localisation. 

About Gustavo Ruiz Moya 

Gustavo Ruiz Moya, CEO of SafetyPay, has led the company since 2013. His extensive background ranges across several sectors such as payments, banking, and travel industries. Prior to joining SafetyPay, Gustavo led American Express Bank in Mexico, holding several top positions including VP and General Manager. His strategic vision and knowledge of international markets guides SafetyPay to achieve aggressive performance goals. 

About SafetyPay 

Founded in 2007, SafetyPay is a secure and convenient alternative payments platform that enables ecommerce transactions on behalf of consumers and merchants. With a comprehensive suite of B2C and B2B payment solutions available, the company eliminates common pain points associated with traditional payment methods. SafetyPay enables cardless payments, either in the form of bank transfers or cash digitalisation. The platform currently partners with more than 380 banks in 18 countries worldwide, across Latin America, Europe, and North America.

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Keywords: ecommerce, financial inclusion, digital payments, QR code, merchants, financial services, marketplace
Categories: Payments & Commerce | Online Payments
Countries: Latin America
This article is part of category

Payments & Commerce