A C C E P T A N C E B R E A K I N G T H R O U G H T H E D I G I T A L A G E T O E X P A N D T R A N S A C T I O N S F O O T P R I N T

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Lester Atkins
5 years ago
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1 ACCEPTANCE B R E A K I N G T H R O U G H T H E D I G I T A L A G E T O E X P A N D T R A N S A C T I O N S F O O T P R I N T

2 New Dynamics in the Acceptance Market in Latin America Marcos Peralta Senior Principal Mastercard Advisors LAC Central Division

3 The acquiring opportunity in LAC is significant due to #1 The potential for cash displacement Penetration of card payments by region % PCE, 2016 Emerging Markets Mature Markets Early stage 14% 19% 23% 34% 43% 48% Middle East & Africa Eastern Europe LAC Western Europe Asia Pacific North America Source: Euromonitor, Mastercard Advisors analysis

4 The acquiring opportunity in LAC is significant due to #2 Underlying transformation in all markets Colombia Venezuela Mexico Brazil Argentina Peru Paraguay Chile 0% % POS billed volume credit & debit 20% 40% 60% 80% Others 100% Source: Lafferty Merchant Acquiring Latin America 2017, Mastercard Advisors analysis

5 The acquiring opportunity in LAC is significant due to #3 The growing adoption of new technologies Traditional terminals Contact based or contactless Wired or Wireless ecommerce Gateways Mobile POS Magstripe dongles Contact based Contactless Emerging Instant messaging Mobile apps (P2P / P2M) QR Codes Biometric

play in the value chain 3 Build a solid entry go-to-market and operations

6 There are four pillars or strategic questions to be answered in order to capture the opportunity 1 Define the geographical approach 2 Think where to play in the value chain 3 Build a solid entry go-to-market and operations strategy 4 Leverage value added services to avoid price compression and commoditization 6

7 1 Define the geographical approach Underlying economics of target market? High MDR High Interchange Low MDR Low MDR Multi country High or single country? Low Interchange Interchange Niche approach or market wide? Leverage of SME and corporate client base? Leverage of issuing business? Complementarity with digital play? Cannibalization or growing the pie? High MDR Low Interchange 7

8 2 Think where to play in the value chain Where to play? Merchan t Payment Facilitato r Acquirer processo r Acquirer Issuer processor Decision criteria 1) Control of funds Issuer 2) Ownership of merchant agreement 3) Control over pricing 4) Control over vendors 5) Cost efficiency of operations 6) Cost of implementation 7) Timeline of implementation 8

3 Build a solid entry strategy GO TO MARKET MODEL TARGET THE RIGHT SEGMENTS Large volume vs high margin

CUSTOMIZE OFFERS Up to 40% of revenues can come from cross-selling Acceptance Top up Insurance

Revenue sharing with partners OPTIMIZE SALES CHANNELS All players going to digital merchant acquisition

9 3 Build a solid entry strategy GO TO MARKET MODEL TARGET THE RIGHT SEGMENTS Large volume vs high margin Traditional vs new categories Large urban vs new geographies Digital vs present CREATE BUNDLES & CUSTOMIZE OFFERS Up to 40% of revenues can come from cross-selling Acceptance Top up Insurance Commercial Cards / Loans Installments factoring PRICE EFFECTIVELY MDR Rental Fees Value added services Revenue sharing with partners OPTIMIZE SALES CHANNELS All players going to digital merchant acquisition and life cycle management OPERATING & TECHNOLOGY MODEL MATCH TARGET SEGMENTS AND PRICING STRATEGY TO COST MODEL Low cost vs. differentiation / flexibility Digital vs Digital + Physical DEFINE PROCESSES TO BE OUTSOURCED Transaction processing Fraud Management Terminal Driving and Merchant Support DEFINE TECHNOLOGIES TO BE LEVERAGED 9

10 4 Leverage value added services VAS in the acquiring business Financing / Installments Rewards Program Discounts / Top up Data monetization Fraud management DCC Local Market Intelligence Offers reports to merchants to help them evaluate their position in the market and their potential opportunities Already 1.5K Merchants Functionalities Transactional report for merchants Offers central dashboard view at a store level tracking performance level such as sales Tracks market behavior: overall revenue, market share, and customer spend at competitive locations Reports & Analytics I am understanding better my clients It is increasing my sales when applying the data I receive 10

11 Final remarks The opportunity in LAC is significant due to cash displacement, market transformation and new technologies Capturing the opportunity requires a deep understanding of the context at the country level as well as a clear discussion on the strengths and challenges of your starting point and why you are considering a acquiring play

12 Questions? 12

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EMV: The Next Generation of Payments

Carolyn Balfany Group Head, Product Delivery EMV: The Next Generation of Payments 2012 MasterCard EMV Video Page 2 EMV Chip Transaction Flow Card Authentication Cardholder offers card to reader Cardholder