As of April 2023, there were 1,000 active fintechs in Latin America (LatAm) with a vast majority focusing on financial inclusion, tackling the issue of 70 per cent of the population not having access to formal financial services. Em Conversa looks to uncover what the future of fintech could look like in the region, following a $2.1billion valuation in 2022.
Facilitating payments for consumers and businesses to use their preferred payments method is extremely important in an ecosystem like Brazil’s where the most common payment method is a fintech. In June 2024, PagBrasil, the Brazilian payment processor, launched two new payment solutions to make it simpler for firms around the globe to conduct business in Brazil through International Pix and Pix Roaming.
Exploring how else PagBrasil is accelerating and developing the Brazilian ecosystem, we hear from Ralf Germer, PagBrasil’s CEO.
Can you tell me more about the company and your role within it?
Ralf Germer, CEO and co-founder, PagBrasil
My partner, Alex Hoffmann and I created PagBrasil in 2011. We started the PagBrasil with the idea of serving companies from abroad that sold products and services, physical or digital, to the Brazilian market, but did not have a payment solution to make the sale viable.
We identify PagBrasil as a camel company (very resilient and focused on sustainable growth) that creates real value for its customers. Our services have become competitive within the Brazilian market and today we serve more companies domestically than abroad (in terms of revenue volume and number of store owners).
PagBrasil offers all payment methods that exist in Brazil: from Pix to cash payments, credit cards, debit cards, and bank slips (boleto bancário). It also allows transactions via wallets, such as Google Pay and Samsung Pay. We are official partners with the main e-commerce systems: Shopify, Salesforce and VTEX.
About Ralf Germer
I was born in Switzerland and grew up in Germany. When I was young, I moved to Brazil and went to a German Brazilian school. I studied business and engineering and worked in international technology companies.
The conception of PagBrasil came from some professional challenges I was facing. In 2008, I lived in Barcelona and had a company that sold software in Europe as well as to all Portuguese and Spanish-speaking countries.
In Brazil, one of the markets I was selling into, my credit acquirer was European, and that made selling into the Brazilian market problematic because customers couldn’t pay because the credit card was not enabled for cross-border purchases, which is still a problem today.
Brazilian merchants wanted to pay with Brazilian payment methods – and at the time there were no existing solutions at the time to handle those payment methods.
Here is the upshot: Brazil is the biggest market and country in South America and I needed a solution for selling into this market.
Two years later, after a meeting with Alex Hoffmann, founder of SiliconAction, the largest online software store in Latin America at the time, we partnered and PagBrasil was started and quickly became a pioneer in offering payment slip processing to foreign retailers who sold into the Brazilian market.
Our company is completely bootstrapped – we only use our own resources: we had a total initial investment of R$5 million. The first customers signed contracts only nine months after the company began, and the revenue in the first year already proved that the startup would be sustainable.
We decided not to consider any proposal from investors and would not take venture capital investment and instead, focus on how we can improve people’s lives with a long-term vision for improved payment processing solutions.
PagBrasil Pix solutions
We improved Pix with several exclusive features that make it more adaptable to e-commerce.
Roaming Pix: PagBrasil has just launched Pix Roaming, a solution that allows all foreigners in Brazil to pay for their purchases with Pix. With this new feature, fintech aims to include tourists in our country, giving access to shops and special discounts that are only offered to Brazilians (the only ones, until then, with access to instant payment).
International Pix: PagBrasil will allow payment with Pix abroad and will enable retailers from other countries, such as Argentina, Uruguay, and the United States, to accept the instant payment instrument in their establishments.
We also enable consumers to use the solution in other countries, with other currencies. In 2023, we were the first company to launch the International Pix, which enables payments via Pix in physical stores abroad. This solution is already live in countries such as Uruguay, Argentina, and Chile.
Boleto Flasht: Our first major innovation back in 2015, that confirmed payment in less than one hour. PagBrasil enabled this when all the other PSPs and Banks took 3 days to confirm the payment.
PagShield: Our exclusive fraud prevention solution, with machine learning – adapted to Brazilian consumption patterns.
Split payout: This solution automatically divides payments for different beneficiaries. This is an ideal solution for marketplaces.
PagStream: Intelligent subscription management solution, developed with the specificities of the Brazilian market in mind
What are some payment trends we’re seeing in Brazil and what is PagBrasil doing to improve the payment sector in Brazil and LATAM?
At PagBrasil, we believe that the payment process should be invisible. The act of paying should just happen in the background – it should be seamless and frictionless for the consumer who wants to pay for the goods or services as well as for the merchant who wants to receive payment.
Our goal is to improve the experience for the consumer and make the experience of buying as smooth as possible. We want to get closer to a situation where a customer doesn’t have to make a ‘physical’ payment anymore. This is especially important in Brazil, where solutions like Apple Pay and Google Pay are not so common yet.
Brazil’s unique payment culture
Brazil is a very particular country in terms of tax and logistics – and these are not covered by systems such as Apple Pay. So local service providers like PagBrasil are critical in terms of creating local solutions to help merchants and consumers.
Today in Brazil, as it pertains to e-commerce and online purchases, there are a lot of processes to go through including filling in a form with your name, address, email address, and fiscal number, which is obligatory in Brazil, and finally your payment data. Now, this is annoying, time-consuming, and really an obstacle for the consumer.
It is also important to note that in Brazil, 70 per cent of all online purchases go through mobile phones. So the mobile platform is specifically very important in Brazil because we have lots of people that simply don’t have computers or access to the internet.
How does the Brazilian payments sector compare to that of the rest of the world?
In the payment world, we either pay with cards or use alternative payment methods or APMs. In Brazil, everything is an alternative payment method because it’s much different from other countries. Even Visa and Mastercard have rules that only exist in Brazil. For example, allowing people to pay with instalments, which has existed here in Brazil for decades, and is a very important part of how consumers finance.
Another challenge is that many credit cards in Brazil are not enabled for cross-border purchases. So, if a Brazilian cardholder wants to buy something from the US and have it shipped to Brazil, the card will probably not go through.
To get the credit card to work, a consumer would have to call the bank or go into a public banking app and enable purchases from this specific country. But this is an obstacle because many consumers don’t know about these details, and they try to buy something, and the payment doesn’t go through and they have no clue – they think maybe the website doesn’t work well, etc.
So these are the kinds of particularities we have in the Brazilian market when it comes to payments.
Now we have Pix which is an instant payment system in Brazil, and accounts for between 30 per cent to 40 per cent of all online transactions – it is growing fast.
Pix is becoming the number one payment method and a lot of functionality and new technology will be added to Pix.
Plans for the future
I believe that the future of payments is ‘instant payments‘. It’s becoming an economic factor, which has potential economic benefits facilitated by these immediate transactions – and will be the lifeblood for transactions not just in Brazil but around the world – including developing countries. Countries that have embraced it have witnessed transformations in how consumers, businesses, and governments manage finances.
In terms of PagBrasil, we do not intend to expand globally: for the future, we want to be able to get closer to a situation in which payment happens seamlessly and define the path of invisible payments in the country.
Why instant payments?
In 2022, global real-time transactions surged by 63.2 per cent, reaching an impressive 195.0 billion.
In Brazil, merchants and consumers pay more than $70billion to utilise cards This is immense and is a cost for the whole economy.
And then you still have the problem that in Brazil, credit card payment settlement is only up to 30 days. And it can take 30 months for you to get all the money. Merchants can’t wait so long for the money. So they have to anticipate the payout. And this generates a cost for interest.
And that’s why merchants want instant payments.
That is why Pix is so important in Brazil and in terms of future trends, the next big thing that will come in Brazil is ‘Automatic Pix’ which is a recurring Pix functionality for recurring payments.
Pix is less expensive than credit cards. And for the merchants who are promoting Pix – they want to get rid of the cards and utilize Pix.
Upshot – consumers and businesses want efficient, cost-effective, and immediate payment solutions. I’m absolutely sure that in the future the cost of payments will go down significantly, which will make the whole economy more efficient. And that means the settlement becomes instant too, so the money flows faster. This will be like a lubricant for the economy and will have an impact on Brazil, as it already has an impact on financial inclusion, cost efficiency, and the overall competitiveness of the economy.
And that’s why I’m a strong believer that instant payments will be the future trend in payments.
The post Em Conversa: Facilitating Seamless Payments in Brazil With PagBrasil appeared first on The Fintech Times.
