If you look under the hood of nearly any large merchant’s e-commerce operations, there are likely more than a dozen different card-acceptance platforms meshed together to serve different parts of the world with banking partners doing payment settlements and managing foreign exchange.
Latin American companies have the added challenge of processing the many transactions that are not card based, like bank transfers, emerging instant payments and the cash-based ones that offer in-person payments that need to be electronically confirmed.
A merchant might need anywhere from 50 to hundreds of partners, depending on complexity and the countries they are targeting. If any of the aggregate transactions across platforms go down for just a millisecond, that transaction will fail, potentially leading to huge losses.
Why online merchants need a new breed of infrastructure fintechs
The key to growing market share and loyalty for global merchants and service providers is knocking out the friction tied to payments and the online buying experience.
For global merchants expanding to the region — from Alibaba to Amazon and Shopee in e-commerce, to tech giants offering a variety of services such as Garena, Netflix or WhatsApp — Latin America’s payments landscape is particularly daunting. In South America alone, there are at least 14 different currencies.
Across Latin America and the Caribbean, there are more than 30 countries, all with varying local customs, financial regulations and consumer protections. There’s also the issue of most global acquirers’ inability to recognize many Latin Americans’ credit scores, leading to a high rate of unapproved transactions.
While advancing quickly, these global merchants have not caught up with regional e-commerce giant MercadoLibre, which continues to lead in Latin America, pushing past a market cap of more than $90 billion earlier this year. In a Nasdaq analysis of MeLi’s most recent earnings report, writer Will Healy describes some crucial advantages for LatAm’s current e-commerce leader, including its investments in both shipments and payments, and its “secret weapon” in Mercado Pago to facilitate electronic payments in its cash-dependent markets.