'Payments is at the centre of the platform experience' – interview with Rappi on payments integration and the evolution of their marketplace model

The Paypers hosted a discussion with Juan-Pablo Ortega, co-founder of Rappi, touching upon the beginnings of Rappi and how they scaled up in Latin America within the marketplace and goods delivery industry. We also learned more about payment orchestration and multiple gateway payments processing as the secret weapon for enhancing acceptance and chargeback metrics.

Juan Pablo Ortega: In the beginning, Rappi was designed to facilitate convenience store delivery in the fastest way possible, in 15 to 20 minutes, using a crowdsourced team of delivery people. The idea was to use technology to connect people who wanted things from the convenience store with the ones who had time to go there, pick up the items, and deliver them. We started out with a ‘1000 items’ portfolio, everything you can find in an OXXO, and we added a little section called ‘Whatever you want’, where people ordered things from wherever they needed. This is where we started and gradually got to where Rappi is today – customers having access to get whatever they want, within minutes, at any time. 

The Paypers: When you started out, Rappi was essentially a platform. How did you find the merchants that you were going to pull together initially? Why did you choose the 1000 products that you chose, basically? 

JPO: Initially, we used to go to a convenience store, index these products, and have people introduce them into an Excel sheet that we later uploaded into the app. From there, we saw what people were ordering and were tracking the most ordered items on the list. Later on, we went to restaurants where people were ordering a lot from. Therefore, the bulk of what we built further on came from feedback we got from regular users of the app. 

TP: When you got this feedback, was this a recruitment tool, for these merchants? Did you have to go back and convince the merchants to come on to your platform?

JPO: Yes, basically. We had to acquire two or three kind of users. First, the end users, then the curriers, and, as you said, we had to acquire the merchants. We needed to convince the merchants that this was a new way to get sales. In the early stages, they were a little bit sceptical – it was hard for them to understand that they were able to do deliveries without having delivery people and when we told them that someone is going to come to the restaurant and pick up the order, they were asking us who those people were, who is going to pay them, and so on. This is when we explained that we are using technology to make that happen.

TP: Essentially, once you get those first merchants in place, others started to get excited about coming on board. There’s less recruitment needed…

JPO: Yes. And an element that helped this process was definitely the ‘Whatever you want’ section. When merchants started seeing these couriers coming to the restaurant and order as a regular customer, once, twice, a hundred times, they became interested in learning more and we developed official channels of communicating with them.

TP: They started to see it as an extension of their business in a way, or a form of added value for their customers.

JPO: I think the first thing they were worried about is how to make sure that the quality of their food is at the highest level possible when the customer receives it. In this sense, we worked with our acquirers to understand what kind of packaging they have to use and to make sure that we are able to reduce delivery times.

TP: One of the things I find interesting about platforms such as Rappi is the way you end up with a sort of combination of experience for the customer. If you do a great job at delivering the food in a timely manner and in great shape, then you’re both improving the brand of Rappi and the brand of the merchant as well.

JPO: Exactly. We had to put in a big effort on the technology side. We had a group of people that coordinated all the people involved in this chain of services, from the moment someone placed an order, through the process of the courier going to the restaurant, picking up the order, and delivering it. Today all of that is automatic through algorithms.

TP: I am sure you have a large team looking at that kind of data to see how you can improve this process. In this context, could you help The Paypers readers understand what is the difference between how a platform operates payments and how a merchant deals with the same process?

JPO: The biggest difference consists in the fact that when someone goes on an ecommerce website, they have full control over the order value. You have to charge an amount and that’s it. For us it’s actually a lot more complex: firstly, we have different kinds of orders. For a supermarket order, we have to do a pre-authorisation for the total – when a user makes the order, final prices vary (such as the final price of a certain quantity of fruit and vegetables). Thus, we make a partial capture of the final price, in some cases having to make a refund and a recharge, depending on the country we operate in.

Secondly, we operate in 9 different countries, each with their own payment methods and different rules for charging a card. In Colombia, for example, we are unable to do pre-authorisation and then capture, but can only do one-step payments. This is why we need to create different logistics in the backend for charging a credit card.

TP: How do you address these differences between countries when it comes to the backend payments process?

JPO: At the start, we used one model for every country: for instance making a purchase and a refund. As we got better at what we were doing, we developed authorisation, capture, and partial capture, which added up on the side of the customer, speeding up transaction time. We managed to cut the time for a refund from a couple of weeks all the way to bringing the money back in the user balance in the span of 24 hours by using authorisation. When we started looking into expanding and adapting to new markets, we implemented around ten different logins depending on the country and the transaction type, to understand how we were going to charge the customers, in order for the experience to be the best we could create.

Flexibility, in the backend, was, therefore, vital to our strategy. We needed to be flexible when entering a new country. Many times, the current providers that we had for payments were not available and doing a new integration would have taken weeks, not counting testing, which would have doubled the time. Apart from that, in the markets we were already working in, it was really important for us to improve our metrics by testing new providers, sometimes even one, two or five providers at the same time, in order to see which one was performing better.

TP: What are the metrics that you care most about besides success rate and how does payments orchestration impact those metrics?

JPO: We have three main metrics that we take into account: acceptance rate, chargeback rate, and the overall cost of transaction. The first metric that we wanted to fix was acceptance rate. When we started testing this metric, we were looking at around a 75% acceptance rate, whereas today we are at around 95% – which is amazing considering our region and the fact that, in ecommerce, the average acceptance rate is below 70%.

What we learned from comparing providers and increasing the acceptance rate, especially in Mexico, is that if a transaction is coming through one gateway, we retry it through multiple gateways and we see increases of up to 10% in the acceptance rate.

When it comes to the chargeback rate, you think changing your gateway provider could help, and some PSPs that have a good anti-fraud system. However, we managed to improve this metric by working with third-party anti-fraud systems.

Lastly, once you get back leverage from working with a third-party credit card vault, separately from the PSPs, you have a bigger advantage. When having the credit card vault within the PSP, you’re not really able to negotiate, because for each new provider, you have to migrate vaults and do a new integration. Therefore, being able to have the flexibility to move our own volume every day allowed us to regain bargaining power and to improve your negotiated rates.

TP: On the frontend of things, does Rappi think of payments as being core to the customer experience? More on point, the Rappi app receives five stars, do you think the payments process is part of that rating?

JPO: When things go smoothly, people normally don’t give you a rating. It’s more often that it happens when something goes wrong. An issue we had at the beginning was with acceptance. In Latin America, for a long time, ecommerce was blocked for multiple cards, mostly debit cards, whereas banks are now opening up to enable customers to make purchases online. When an issue with acceptance happens, the end customer can’t see this as being a problem with their bank – it becomes more about wanting to buy a hamburger and Rappi not allowing them to. When we looked in the backend, there were difficulties with payments that we had to fix and control because payments are at the centre of the whole process.

TP: How has COVID-19 impacted the business?

JPO: Of course, one of the verticals that we are growing a lot is groceries and food delivery and we saw a huge increase after the pandemic started. What we noticed is that when people place their first order, they get hooked and start doing it week after week.

Another change that we noticed is people are more willing to try our financial services offering. We launched debit or credit cards in different markets that have seen visible increases in usage compared to the rate they were accessed pre-COVID.

TP: What are some of the main trends around payment orchestration that you can comment on and how do you see this process evolving in your industry?

JPO: For some reason, when people think about employing a multiple gateway strategy, they’re thinking of having to do new integrations. When I show them different solutions, such as Spreedly, where you create one integration, but have the flexibility to try different ones, it seems like they haven’t heard of it before. Payment orchestration is a new idea that is starting to become more and more widespread because, when merchants hear about orchestrating payments in different gateways, it seems it might be a super-complicated process that takes time. When faced with solutions that remove that complexity and time, things clear up and become easier to understand and to put in practice.

TP: If you were to look back at the approach you’ve taken at Rappi, do you have recommendations that you would make to other platforms, maybe in different verticals? What are some learnings that you would share?

JPO: First of all, I would strongly recommend testing and looking at different solutions. I don’t think that there is one solution that would solve all your problems, and understanding what the financial needs for each industry are and devising a mixed strategy is a fundamental principle.

Secondly, there are metrics that might seem impossible to improve, such as acceptance with certain issuers, but there is always a way to fix these issues by thinking outside of the box. There are all sorts of alternatives, like trying out different transaction types, the way you send the message, the way you charge the card. Trying new things, learning, and seeing new data may allow you to understand how the issue is behaving depending on the payments context you find yourself in.

About Juan Pablo Ortega

Juan Pablo Ortega is a Co-Founder of Rappi, Latin America’s largest and fastest-growing on-demand platform and one of the region’s ‘unicorn’ startups. As co-founder, Juan Pablo has played an instrumental role in taking the company from being a small team food delivery startup to becoming one of the region’s largest, multi-functional digital platforms with operations in nine countries and a valuation of ~ USD 3.5 billion. Juan Pablo started Rappi's rapid international expansion launching Mexico and then built and scaled Rappi’s Payments and Fraud teams and capabilities while architecting the buildout of Rappi’s financial services arm – starting with RappiPay. RappiPay offers Rappi users with a variety of digital payment functionalities including in-store QR payments, P2P, and bill payment services, as well as a contactless-enabled Visa debit card.

About Rappi

Rappi is a Latin American multivertical company headquartered in Bogotá, Colombia, and with main offices in São Paulo and Mexico City. It was founded in 2015 by Simón Borrero, Sebastian Mejía, and Felipe Villamarin and today it is present in nine countries (Mexico, Costa Rica, Colombia, Peru, Ecuador, Chile, Argentina, Uruguay, Brazil) and more than 200 cities. Rappi has been defined as the Latin American super app and one of the fastest growing companies in the region.