Luz Adriana Ramírez
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Providing SMEs with Tools to Grow Faster

By Jan Hogewoning | Wed, 11/04/2020 - 05:24

Q: How is Visa supporting SMEs in this pandemic?

A: Micro-entrepreneurs are the backbone of national and local economies. In Mexico, 99.8 percent of business are SMEs and they contribute 42 percent of the GDP. Cash is by far the dominant payment method in Mexico. Only 15 percent of private consumption is done through digital payments. SMEs are critical to advance the penetration of digital payments.

In April 2020, the Visa Foundation announced a 5-year, $200M commitment to support small and micro businesses, recovery around the world with a focus on women’s economic advancement and inclusive economic development. Also, Visa committed to support 4M micro and small businesses in Latin America to expand their business and digital reach.

Visa Small Business website is providing technology and tools to help these businesses grow faster through a digital transformation. We focus on three main stages of the life cycle of these businesses. The first is digitalizing the business. We provide connections to Visa partners that enable small businesses to embrace different methods of convenient and secure digital payments.

The second stage is promoting the business, we support them in selling through online marketplaces such as Canasta Rosa, one of our recent partners. The third component of the platform is educational material, we offer tips on how to effectively use resources like social media to reach customers and stand out online.

Utilizing the power of our network along with our partners, we will be providing secure ways for SMBs to pay and be paid digitally, move online to respond to consumer demand for remote and e-Commerce, and skills training building the know how to prosper in a digital world.

 

Q: How important are SMEs in accelerating the adoption of digital payment methods?

A: We consider the accelerated adoption of fast and secure digital payment methods essential for economic recovery and adaptation to the new normal.  COVID-19 has been a catalyst for trends we’ve already been seeing – including the massive acceleration of e-commerce, touchless payments and next-generation consumer experiences. According to a study, in the region only a third of SMBs have a point of sale terminal and only 20% of SMEs in the retail sector are enabled for online sales. This rapid adoption of digital payments is putting SME’s at a disadvantage if they are not prepared.

Our priority is to help small businesses find new ways to conduct business amid this massive shift to digital-first commerce and touchless payments, to recover and to be more resilient in the future.

 

Q: What impact is COVID-19 having on the use of different payment methods in the country?

A: In the Latin American and Caribbean region, we have seen an acceleration in the adoption of digital payment methods like never before. Not only because people were locked in and sought e-commerce options, but also because contactless payment methods rose in demand because, according to a poll carried out by Visa on the sentiment of consumers in the region, they perceived digital payments are more convenient, secure and safer, because of its nature, they reduce contact.

In this poll, Visa observed three main trends that support this digital transformation. The first is that money is tight but experiences and relationships remain fundamental. The pandemic is making people reassess the value of things, realizing the importance of health, experiences and relationships. Spending on health-related products and streaming entertainment products has risen by 58 and 55 percent, respectively. The second trend is that people expect availability of alternative payment methods over cash. Seventy percent of consumers say they are using less cash, with 54 percent using their cards more. The third trend is social shopping. People are finding innovative ways to buy things, like shopping through social media platforms. Approximately 82 percent of consumers have seen innovative ways to purchase products and services. More than 80 percent say that they would like to use WhatsApp as an alternative payment method. People now expect brands to respond swiftly and responsibly to this need.

Overall, the need for staying safe is pushing consumers to online shopping, tap to pay, digital wallets and additional digital payment experiences. And as these experiences gain more ground and shift the ways consumers think about everyday transactions, we’ll very likely see incremental shifts in the payments landscape. 

The consumer wants to purchase wherever they want, at whatever time they want and use whatever device they want. Visa is continuously working on payments technologies to ensure that this happens in a secure, convenient and frictionless way.

 

Q: What role will fintech play in the accelerated adoption of payment methods?

A: The use of fintech solutions was already growing and playing a significant role. Visa has spent several years investing and cultivating relationships with startup and fintech aiming to expand disruptive solutions to improve customer experiences and continue adding value to the ecosystem.  Collectively, taking advantage of digital and technological solutions we can advance closing gaps on financial and digital inclusion of our country.

Recently Visa announced the acquisition of YellowPepper in Latin America. This will accelerate the adoption of Visa’s “network of networks” strategy significantly reducing the time-to-market and cost for issuers and processors associated with accessing innovative and interoperable solutions, regardless of who owns or operates the payment rails through one single connection.

In September 2020, we announced a five-year partnership with Cacao, a Mexican fintech enabler. We will support its expansion to key markets in the region. Through these partnerships, fintech of all sizes can innovate faster and accelerate their time to market, making use of Visa’s capabilities. This will allow them to focus on developing, deploying and scaling programs without having to worry about complexity, costs and the time it would take to set up house card issuing capabilities.

We also have the Visa Everywhere initiative. Here, we invite startups to participate in a contest where they present their different ideas and projects. If they are accepted, we bring them into our ecosystem. This helps them grow much faster. The ultimate objective is to provide a better consumer experience. This year edition, Visa collaborates with partners to find opportunities for fintech while looking after the needs of SMEs.

Fintech can access our net capabilities, our APIs and use them jointly with their innovative solutions. We also partner them through an alliance of financial institutions and merchants, fostering a common ecosystem.

 

Q: What alliances do you have with delivery platforms?

A: A good example is our partnership with Rappi, which started in June 2019 and continues evolving. This is taking advantage of simplified accounts that have no major requirements, which Rappi offers to users through RappiPay. User can start shopping within a day with a digital card and receive a contactless physical debit card the same day wherever they are.

 

Q: How is Visa working to further strengthen personal data protection?

A: At Visa security is inherent in our DNA. Our efforts on this topic to protect customers against threats are focus on four data-centric strategies: protect data, devalue data, harnessing data and empower consumers (with data).

We work on improving our encryption techniques, as well as enforcing rules that restrict how and where information is stored, particularly in merchants’ systems. We have deployed tech such as tokenization, which transforms sensitive account data into a form that cannot be used by criminals. The sixteen-digit account number is replaced by a unique digital identifier (the token), allowing payments to be processed without exposing actual account details. Furthermore, we have what is called a Cyber Fusion center, which brings together the latest innovation to coordinate cyber-defense operations, sharing information and enabling rapid response. This center harnesses more than 6PB of data to develop detection models, visualize the threat and provide a more effective response.

 

Q: What other trends are accelerating digital payment adoption?

A: In Mexico, company payrolls have been digitalized for a while now.  Normally, this means through a debit card. Most private companies are sending payroll into a debit card account. The massive reception of money on debit is a great lever. Now, opening a new banking and payments account instantaneously is possible in just a couple of minutes from a smartphone. The challenge is that we, as the ecosystem, ensure that the receiver does not withdraw their payroll at the ATM. One way to reduce this is to continue building the acceptance infrastructure to ensure digital payment. Today, 50 percent of points of sale already have near-field communication (NFC) technology that allows contactless payment. Visa has been supporting merchants in this process for many years. The other option is to continue supporting merchants in growing their e-commerce capabilities. Many merchants, international as well, are offering services to the Mexican consumer in this manner. Increasing the customer approval rating for online purchases is another key to furthering this trend. Technologies allow now using a phone to pay, or even better, being able to pay

Mass transit is a huge opportunity to penetrate the cash segment. Another collaboration we have had for a bit longer is between Visa and the Global Resilient Cities network. This program aims to support cities in creating and implementing solutions for digital transformation and inclusion. We work together with a team of experts to find innovative strategies and solutions to face challenges related to urban mobility, financial and digital inclusion.

 

Q: What are other benefits of electronic payments?

A: For merchants, cash is expensive to manage, having digital payments is not only secure and faster, it provides more transparency in day-to-day sales. In the case of the consumer it provides security, flexibility, speed and control when it comes to financial transactions. 

Digital payments advance digital inclusion. The ability for all to benefit from online tools and innovative technologies, can help millions in developed and under-developed regions take full advantage of the digital economy.

With growth of digital payments, merchants, governments and communities thrive by increasing efficiencies and enabling economic growth. According a research there are potential benefits and costs of significantly increasing the use of digital payments. In Mexico City, if a viable cash level is reached; net mixed benefits (governments, consumers, merchants) could reach more than USD$ 12,000 M.

For Visa, opening up access to opportunities and platforms accelerates safe, convenient commerce anywhere. It is the very foundation of our mission to help individuals, businesses and economies thrive.

 

Q: What are your key objectives for 2021?

A: 2021 will be a challenging and complex year for the global economy that will require ongoing progress and work. Visa was founded on the idea that safe, fast and reliable digital payments should be available to everyone, everywhere. To drive local impact, this will be fostered through strategies like improving customer experience, building stronger SMEs, ensuring safer/smoother commerce, strengthening e-commerce, expanding contactless technology and creating more alliances in the fintech ecosystem.

In collaboration with our partners, through secure innovative digital payments solutions, we will continue contributing to create a more sustainable payments ecosystem and inclusive, equitable world for everyone, everywhere.

 

Visa is a global payments technology company guided by the mission to connect the world to enable individuals, businesses and economies to thrive.

Photo by:   Visa
Jan Hogewoning Jan Hogewoning Journalist and Industry Analyst

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