International Finance

Central America is the next big thing


In Latin America (LatAm), e-commerce is booming and it is one of the fastest-growing markets in the world. EBANX, a Brazilian payment gateway established in 2012, so far, has helped connect global businesses with buyers in Latin America. It offers an end-to-end payment solution across the entire e-commerce transaction flow, without the need for a local entity. Valued at over $1 billion after its latest funding round, EBANX’s impressive list of clients includes big names such as AliExpress, Wish, Gearbest, Pipedrive, Spotify, Amazon, Uber and Airbnb. Headquartered in Curitiba, the State of Paraná, EBANX also operates in Argentina, Columbia, Ecuador, Chile and Peru among other LatAm markets. It is estimated that EBANX handled nearly $3.5 billion in volume and 150 million transactions last year.

In an interview with International Finance, newly appointed EBANX chief executive officer and co-founder João Del Valle said that the unicorn wants to be the leading payments company in LatAm. Brazil, where EBANX is based, is the largest e-commerce market in LatAm. In 2020, its online shopping revenue amounted to R$126.3 billion despite the pandemic and economic uncertainties. The e-commerce market in LatAm grew by 8.49 percent and reached $200 billion in market value in 2020, according to a study by EBANX. The region is also home to more than 650 million people and 33 different markets. Two of the largest markets in the region, Brazil and Mexico, alone have populations of around 210 million and 130 million respectively.

This shows the immense potential of the sector and hence it is attracting global e-commerce retailers into the region. The size of the e-commerce market in Latin America is immense and there is still a large part of the population that still does not shop on an e-commerce platform. This is good news for the sector because it provides scope for the online market to grow. Another important factor to consider is internet penetration in Latin America. According to Statista, as of the first month in 2021, at least eight out of ten people living in the countries such as the Bahamas, Chile, Barbados, Costa Rica, St. Kitts and Nevis, and Argentina were online.

In contrast, less than half of the population in countries such as Nicaragua, Honduras, and Haiti had access to the internet. The regional average of Latin America and the Caribbean stood at 64.13 percent. Since the pandemic has forced people to stay at home, a greater emphasis has been given to technology and people are going online to satisfy their wants.

Recently, EBANX has shifted its focus to Central America and wants to grow its presence in the region. João Del Valle believes Central America has the perfect foundation for the exponential growth of e-commerce. By bringing its technological solutions to the region, EBANX wants to attract global e-commerce giants into the region’s market. In this exclusive interview, João Del Valle discusses the launch of EBANX ONE, his vision for the company and the company’s plans going forward.

IF: Can you tell us a bit more about EBANX ONE?
The launch of EBANX ONE is an exciting milestone for EBANX, since it consolidates, in one single platform, all we’ve been doing for almost ten years regarding payments, security and technology in Latin America. ONE is a unique solution in the market that unifies international and domestic settlement, paying and payout services, for companies with local or international operations, so they can seize the full potential of Latin America by adding or switching between countries and business models, with full flexibility.

This is something extremely complex, especially in LatAm, where each country has its own regulations and norms – and this is why no competitor has anything like it. The flexibility of ONE is the big thing and the big news; it’s everything that global enterprise merchants want, because it allows them to expand to any other country in LatAm with just one click, at a speed that doesn’t exist in the market, and with the business model they prefer.
ONE also marks a revolution in EBANX’s business model: from now on, we are not only a cross-border payments company; we deal with any and all types of payment in LatAm.

All of this was only possible due to EBANX’s deep expertise in the Latin American market, which enabled the development of our own technology, with high consistency, speed and quality of execution, in addition to a unique FX solution and global payment reconciliation that addresses all the complexity of the LatAm markets.

Finally, I’d like to stress that the launch of ONE follows the expansion of EBANX to new Latin American markets, in the midst of a unique moment of financial and digital inclusion in the region. All of this demonstrates our commitment to LatAm, and to increasingly generate access for LatAm consumers.

What is your vision for the company?
EBANX wants to be the leading payments company in Latin America, giving access to the best products and services worldwide. We want to be a bridge between global companies and LatAm, helping them to best seize the region’s opportunities and pushing further the financial inclusion in the region. All of this, of course, with high levels of technology and security, with a built-from-scratch payments platform and an optimal payment performance that only our extensive and deep network on the ground can provide. With the launch of EBANX ONE and the expansion into new markets, we expect to grow our processing volume five times over the next three years.

Can you tell us about your plans in Central America?
Central America is the next big thing when it comes to Latin America: after Brazil, Mexico, Argentina and other major markets, global companies are now aiming for Central America as a great yet unexplored market, with a huge demand for digital products and services.
It’s the go-to market in LatAm. And why? Because Central America has the perfect foundation for the exponential growth of e-commerce. Its population has high levels of connectivity and digitisation, but e-commerce and digital payments are still in early stages, with few localised payment options and online stores. In other words, we have rapid digitization and a population eager to consume global products and services.

EBANX comes to Central America to help drive this process, connecting with local players and opening the region for global companies. We want to actively participate in digital growth in the region, and also learn with consumers and the local ecosystem. We have launched operations in Costa Rica, and we’ll be in El Salvador, Panama, Guatemala and the Dominican Republic within the next few months.
We believe that Central America is not only under looked by global companies, but it is still underserved in terms of digital products and services. EBANX’s entrance into the region is going to create a real impact on Latin Americans’ lives, and a real bridge to the region for businesses. We are very excited about this possibility.

Also, share your insights with regard to the e-commerce sector in Latam. Do you see the market becoming one of the fastest-growing markets in the world?
Absolutely. Latin America is already the fastest-growing digital market in the world, according to data from EBANX and AMI (Americas Market Intelligence): the region grew 18% in 2020, pushed by the digital inclusion during the pandemic, and reached US$ 210 billion in market value. This year, it should accelerate 32%, with rapid growth of online retail and digital products and services, such as streaming, online gaming, and SaaS. More than 50 million people joined e-commerce during the pandemic in LatAm, a jump of up to 30% in some countries. Mobile shopping is booming, people got used to buying online during the pandemic, and this trend will continue to be true.

Although these are very impressive numbers, there is still a lot of room to grow in Latin America. E-commerce, for instance, only represents 6% of total retail sales in the region. Digital payments have just gained traction, with the use of digital wallets and instant payments in Brazil, for example.

This is why our focus at EBANX is 100% within the LatAm region. Latin America is the place to be in 2021 for e-commerce. EBANX wants to offer the best payment solution to our merchants, so they can offer the best payment experience to their Latin American consumers.

Can you shed some light on the financial and digital inclusion in Brazil, and also Latam?
This is a unique moment in Latin America in terms of digitization and financial inclusion. The pandemic had a hard hit throughout the region, and unfortunately, it still rages in many countries. But it also pushed forward access to financial products and services, and especially to digital payments. In Brazil, for instance, millions of people had access to their first digital account, thanks to the governmental emergency aid, which was deposited in a federal bank digital account. Digital wallets have boomed: in Brazil, you see QR codes everywhere, which people use to pay for groceries, pharmacy and even for their daily bread through their cell phones. Brazilian’s instant payments system, Pix, was also launched during the pandemic, with great success. And we see the same movement in other Latin American countries where fintech companies offer new products day by day, new regulations being published to boost competition, instant payments helping to democratize financial services throughout LatAm. It’s a very exciting moment to be in Latin America.

Can you tell us about EBANX’s technology that provides seamless risk management, fraud control and compliance?
Security is a key value for us at EBANX, and this is why we developed a fraud prevention strategy, EBANX Shield, specially tailored for Latin American markets. Using in-house technology and our extensive database, we keep the merchant’s operation safe in all countries, while guaranteeing optimal payment performance. We are very proud to say that EBANX has a much lower chargeback rate than the overall market: it was 0.42 percent in 2020 in all LatAm countries, whereas the benchmark rate for the region was 1.7 percent. This means not only more safety but also more TPV to our merchants.

EBANX’s direct connections with Latin American local acquirers, banks and other players help us to deliver the best fraud prevention strategy. Here’s the importance of having Latin American DNA: there is no way of approaching fraud in Latin America in the same way as other regions, and there is no one-size-fits-all fraud prevention strategy for all Latin American countries. Each country requires a single and custom strategy due to fraudsters’ varying behavior market to market, as well as local players’ approach to fraud.

What major challenges you had to overcome in your journey from a startup to a unicorn?
I would say that the biggest challenge was, and still is, to scale the company while attracting talented, senior people to work with. As the company grows, the challenges also scale, and you need more experienced people. To attract these people, and to retain the ones who work with you, is a challenge itself. It’s an ongoing battle, to be true. EBANX has recently raised a US$ 430 million investment round from Advent International, and part of this investment is going to be used in talent attraction. This is crucial for us to keep growing and offering the best payment service in Latin America.

What is the outlook of the fintech sector in Latam? How has Covid-19 impacted it?
Covid-19 accelerated the demand for digital products and services in Latin America, due to social isolation measures. Digital payments, banking solutions, e-wallets, e-commerce, SaaS, BaaS, cloud companies, all of these industries were deeply impacted by the pandemic. And, since LatAm still had a huge gap in terms of financial inclusion, with almost half of its adult population not having a bank account, it was only natural to see a boom of fintech companies, in order to fill that gap and provide access to digital products and services. There is huge demand and room to grow – and, as a consequence, investment is pouring throughout the region. We had a record in venture capital funding in Latin America during Q1 2021, mostly driven by fintech companies.

Of course, the first hit of the pandemic was hard in the whole region, and it continues that way. Businesses had to adapt, go digital, many of them closed, and there is unemployment, on top of the health crisis. But we also believe that the pandemic brought an opportunity to give access to millions of people to e-commerce, digital payments and digital products and services, and this will definitely change the way Latin Americans buy and live.

At EBANX, we saw the lower downs in our processing volumes in late March, April and May 2020, mainly in the retail vertical. But this behavior quickly pointed out to a change: not much time later, in May, we surveyed our Brazilian consumers about purchases on international retailers. Most maintained their average spending and intended to increase it in a post-pandemic scenario. We saw the same movement in Mexico. At the same time, we had merchants that grew impressively, like online games. Today not only the physical goods vertical recovered, but it’s growing, as well as the digital goods vertical.

Latin America is a 600 million people region, with a $5 trillion GDP. We continue to believe that Latin America has a great outlook, and a fruitful scenario for companies that sell SaaS, BaaS, streaming, and digital products and services in general.

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