Podcast: Play in new window | Download
This episode was recorded at the Money 20/20 event in 2019. On this episode, PaymentsJournal’s editor-in-chief, Ryan McEndarfer, sat down with Steve Villegas, the VP of Partner Management and head of the U.S. Office at PPRO.
PaymentsJournal:
Welcome to the PaymentsJournal podcast. I’m your host Ryan Mac, and on today’s episode we’re going to be talking about cross-border and e-commerce. To help me with this conversation, I have Steve Villegas, the VP of Partner Management and head of the U.S. office at PPRO. During our conversation, we’re going to be taking a look at why U.S. merchants need to look locally and expand globally and how local payment methods help facilitate the needs of economies across the globe. This episode is being recorded at the Money 20/20 2019 event. There’s a lot of information to unpack, so without any further delay, let’s start the show.
So Steve, thank you so much for joining me on today’s episode. For our first question here, I’d love to take a look at this phrase and what it is that it means to you at PPRO. Why do U.S. merchants need to look locally to expand globally?
Steve Villegas:
Hi Ryan. First of all, thanks again for having me. When you think about merchants expanding and what that means for a global expansion, most U.S. merchants are very familiar with cards. They all accept credit cards, all of us here domiciled in the U.S. are very familiar with them. But when you expand and look globally, around 77% of all e-commerce is transacted with something other than a credit card. It could be a local payment method specific to wallet, or specific to a bank transfer method, or maybe a local card that’s not a credit card per se, but it’s associated with some type of bank network. So if U.S. merchants are really looking to go global, even across border, if they’re looking across to Canada or even Mexico, which are not too far from the U.S., those countries have some of the dominant payment methods they’re using other than credit cards. In those environments, it’s going to be very important for U.S. merchants to take advantage of that marketplace and sell goods and services in that marketplace. They have to be able to accept those particular payment methods that are generally accepted by consumers in those countries.
PaymentsJournal:
Wonderful, thank you for that explanation. I think that helped set up this next question as we take a look at PPRO specifically. How have PPRO’s recent expansions and acquisitions helped to position the company in the global marketplace, and could you shed some light on what those acquisitions were?
Villegas:
Sure. Just a little bit of background: PPRO is a 14-year-old company that started out of Europe, which is where we’re domiciled predominantly, but now we have offices all over the world and here in the U.S. We have a couple of offices down in Latam – Mexico, Brazil, and Colombia – as well as an office in Singapore, and we’re getting ready to open up an office in India. When you think about supporting the ecosystem, what PPRO does today is supply local payment methods in these various countries – those payment methods that are preferred by the particular consumers in those areas. It could be bank transfer methods, which are predominant in Europe, like SOFORT, or Giropay, or an iDEAL or bank contact.
In Latam, it is cash-based methods like OXXO in Mexico or Boleto Bancário in Brazil. Over in Asia, it could be wallets like Alipay and WeChat Pay, which are very dominant in the Chinese markets. There are a ton of others that we support, and we supply those to our partners, which are mostly acquirers and PSPs that are supplying services – mostly credit card services – primarily to merchants. But then we also connect with them to provide them access to these local payment schemes. From a global expansion standpoint, we’ve continued growing our offices every year, growing our footprint, and adding more local payment methods.
Today, we have over 150 payment methods and we’ll add another 40 to 50 this year to be somewhere around 200 by the end of the year. Our long-term view is that we’re going to be in the top 100 countries in the dominant payment methods of each of those countries. Both globally from a cross-border standpoint as well as locally from supplying local opportunities and connecting and accepting payments for local merchants. In 2019, we made an acquisition of a company called allpago. Allpago is predominantly focused on the Latam market with offices, as I mentioned, in Mexico, Brazil, and Colombia with expansion into Argentina, Peru, and Chile. That really gave us two things. It gave us direct access to a lot of the local payment methods used there as well as access to card processing in the Latam markets.
We traditionally have not done card processing as PPRO, but with this acquisition, we have inherited that and will continue using those rails and look to expand our card acceptance across the globe in various jurisdictions based on where our partners need access to card processing. We will continue to focus in on expansion of this next year. India and Africa are on the horizon and extremely interesting. We see a ton coming out of India where we will connect to RuPay, to Paytm, and provide our partners access to the local markets in India and Africa. We have a relationship with M-Pesa, which is one of the first local payment alternative payment methods that has come out of Africa. It’s very different from anything that we’ve seen in that marketplace, where it’s using mobile phones as the way to interact and transact for consumers and merchants in those regions. So, we’re continuing the global expansion and look forward to supporting all of our partners around the globe as we continue to connect with these local payment schemes.
PaymentsJournal:
Wonderful! That’s certainly fascinating news there. So, you talked a lot about the local payment methods being offered by what I’ll call this “new” PPRO that are enabled by all these acquisitions. Beyond those local payment methods you’re going to be able to offer to the market, what other solutions can we look forward to with the expansions and acquisitions that PPRO has been going through?
Villegas:
Because of the way local payment methods are built, there’s a lot of opportunity for technology to be enabled. We enable some of that technology where most of these payment schemes are native to their countries and may not have a particular use for things like refunds. We think about refunds here in the card world, in the U.S. e-commerce, and we’re used to being able to get refunds immediately and return products. That doesn’t exist everywhere around the world, so if a merchant is selling goods and services in one particular country, their consumers may expect to have refunds. Some may or some may not. But it’s good to have and certainly the merchants will expect it. We’ve enabled technology such as building refund capabilities, and many of these payment capabilities that are generally not native to those payment methods.
Then there are other things like fraud watch, and other technologies that allow us to look at the more specific payment methods locally. There are other elements that we will continue to look at from a technology standpoint, whether it’s in looking at the types of payouts that may be done. Open banking is coming into Europe, where we will play a big part in providing access to banks. We are connected to over 2,500 banks in Europe today, so we’ll use that from a technological and connectivity standpoint. What we really look at from an enablement standpoint is that we’re becoming a “network of networks” to some degree. On one end, we are supplying the PSPs and acquirers – the largest ones in the world – with connectivity and access to all the local payment methods. At the same time, we’re connected directly to over 150 payment methods globally, and that will continue to expand as we look at every jurisdiction. So, we’re really servicing both sides of the equation and e-commerce markets. That will continue to expand and we’re even looking at card present.
Today, we do support some card present. It’s minimal, but certainly if it’s over an e-commerce rail, and you think about what a QR code does, think about Alipay, WeChat Pay, and even iDEAL that has a new QR code, many of these are moving to what may be a card present transaction, but it’s really over the mobile network. It’s a consumer walking up and scanning a QR code and order to make a payment on their phone. There’s never a card presented, but it is technology that has to be done in the back end. Those are things that we’re looking at globally and how we continue to enable those and support the ecosystem as everything eventually becomes card not present. Consumers won’t be pulling out cards that are in a wallet, they’ll be using technology that’s enabled through their mobile device, or could be enabled through their vehicle, or some other way to provide that payment.
PaymentsJournal:
Certainly very interesting there. For my next question, which you alluded to a bit in your last response, could you help me understand how local payment methods help facilitate the needs of economies across the globe?
Villegas:
Sure. When you think about what’s happening in the various economies, much of certain regions still deal heavily in cash. I don’t think that’s the case for most Americans. I rarely have cash in my wallet. It’s easy to because my 13 year old son needs money, but even then we have other methods of paying for things. But generally speaking, when you go around the world, especially when you look at second and third world nations, many economies are dealing heavily in cash. Sometimes it’s because the local banks and institutions aren’t completely trusted. Sometimes it’s a generational thing where it’s just a matter of “this is how we’ve always done things and here we are transacting in cash.” When you fast forward into thinking about how to use services economies, it becomes apparent that if you’re going to sell goods and services, you want to be able to offer credit cards and you want to be able to look at the other available local payment schemes.
I’ll use Mexico as an example, where somewhere over 65% of consumers are unbanked. That means they’re carrying around cash. How do they pay for things in the e-commerce manner? Well, they use payment methods like OXXO or 7-Eleven, where they actually buy something online then physically walk down to a local convenience store to pay for it with cash. They typically have a voucher or a printed receipt, which they take into that convenience store, scan the barcode, and then show that it’s paid to complete that transaction. Likely within a couple of days or however the shipping works, they are getting the good or service that they paid for. Then there’s other local bank methods. As I talked about earlier – about wallets things like Alipay and WeChat pay – if you want to sell to a Chinese consumer, you have to be able to enable one of those methods or UnionPay as an alternative card offered in China.
Those are predominantly consumers in China using one of those payment methods, and you’re not going to be able to offer them something that they aren’t used to. That stands for anywhere you go around the world depending on the preferences of local consumers. Another example is iDEAL in the Netherlands, which is a local payment method that connects to banks in the Netherlands. All of the consumers are very familiar with iDEAL. The majority use it, with over 70% of the commerce transactions being conducted using iDEAL. So if you don’t offer iDEAL in the Netherlands, you’re typically not going to maximize the sales that you could if you had offered it. When you think about those economies and about consumers and what their preferences are, the merchants selling those goods and services have to be able to enable those payment methods to both maximize their sales and ensure that they’re relevant in those economies.
PaymentsJournal:
I find that extremely interesting, particularly looking at how increasingly complex the world of payments is becoming and that global aspect. For example, you pointed out that Mexico is very cash heavy while China comes with a digital and mobile focus. Given all these different ways that people like to pay, how is it that a merchant and a payment service provider can keep the customer experience simple and seamless?
Villegas:
Sure, I’ll dovetail on what I just mentioned regarding global economies. The other thing I’ll mention is when you think about e-commerce growth, before I jump into the complexity, the world is continuing to become increasingly card not present. Economies around the world that have traditionally been cash have been retail-focused, not e-commerce focused, but that’s changing. Now, you’re seeing economies that are rapidly changing and moving into e-commerce as a larger share of the retail sector. Along with that, you’re also seeing growth of e-commerce and local payments and a rise of double digits in many jurisdictions. We might be in a low digital double digits here in the U.S., but you have economies that are growing at 30% to 50% from the e-commerce sector. I mention that because certainly keeping things simple for consumers is important, and not having them jump through hurdles because they want the same experience that they’ve had. It really comes to the companies that are handling those payments, whether it’s the merchants or the PSPs, to consider what that looks like.
What we run into and the service we provide is being able to enable, and PPRO enables all these payment methods through one integration. We work with one contract because we handle all the contractual elements about the payment methods and also facilitate the reconciliation and payment settlement to our partners directly for all of these transactions. We try to simplify that because standalone, if a merchant or PSP goes direct to all these payment methods, the amount of integration work, upkeep, contracts, the reconciliation and settlement, and all of those pieces, ends up being tons of work. If you’re trying to then cobble together your front end that you’re supplying to the merchants and whatever shopping cart they have, and the manner in which they’re working, it can create a lot of complexity, challenges, and headache in the long-term. And certainly payments are not going to become more simplistic. When we talk about things moving to card not present, if you walk into a store today and swipe a credit card, in the future, think about the complexity of Apple Pay or using facial recognition to make a payment through a mobile app.
There’s technology in the background that’s always working, and that’s only going to get layered with more complexity when you think about new payment methods being added, new ways of paying, and consumer behavior continuing to advance. All that being said, complexity is going to keep advancing, and really it requires merchants and PSPs to look at the ecosystem and figure out who to partner with. Going alone doesn’t work because when trying to build your own solutions, you could take years just trying to build one solution, and it’s outdated within five. It’s really important that each company and ecosystem looks at how to partner with the right companies. What are the solutions the company is offering? Where is technology headed? Are they prepared to take advantage of that technology in five to 10 years based upon their current systems? If not, how do their enable that? Certainly some companies will work that through acquisition, others will work that through partnerships, and others may stand on the sidelines until they’re forced to make those moves out of fear of losing market share.
So, there are a ton of things coming that I’m excited about where we’re headed in the payments industry, specifically in e-commerce. I didn’t even touch upon things like cryptocurrency, which we also support, that’s down the road as well and continues to be one of those ways to pay that is controversial to some degree. But there’s certainly an element of consumers around the world that are even using crypto. All of these things need to be taken in consideration when looking at the global commerce, global economy of e-commerce, and where we’re headed as a world.
PaymentsJournal:
Excellent. Well, I certainly agree with you. I think there are certainly a lot of things that the industry, merchants, and payment service providers need to keep in mind. The complex just keeps getting even more complex. Steve, thank you so much for speaking to me about PPRO and cross-border e-commerce, and I hope to have you back on the podcast soon.
Villegas: Ryan, thank you very much for the time. I appreciate it and look forward to speaking with you in the future.