If you peek behind the hood of practically any big merchant’s e-commerce operations, you will probably find more than a dozen separate card-acceptance systems intertwined to service different areas of the world, with banking partners handling payment settlements and foreign exchange management. Latin American businesses also have the issue of processing a variety of non-card transactions, such as bank transfers, developing rapid payments, and cash-based transactions that require electronic confirmation.
Depending on the intricacy of the transaction and the countries targeted, a merchant may require anywhere from 50 to hundreds of partners. If even one of the aggregate transactions across platforms goes down for a moment, the transaction would fail, potentially resulting in significant losses.
Why do online retailers require a new generation of infrastructure fintechs? For worldwide merchants and service providers, removing the friction associated with payments and the online purchase experience is critical to increasing market share and loyalty.
Latin America’s payments landscape is particularly difficult for global merchants coming to the area, from Alibaba to Amazon and Shopee in e-commerce to internet titans offering a range of services like Garena, Netflix, or WhatsApp. There are at least 14 distinct currencies in South America alone.
There are more than 30 nations in Latin America and the Caribbean, each with its own set of local customs, financial legislation, and consumer safeguards. There is also the problem of most worldwide acquirers failing to recognize the credit ratings of many Latin Americans, resulting in a high proportion of disallowed transactions.
Despite their rapid growth, these worldwide merchants have yet to catch up with regional e-commerce behemoth MercadoLibre, which continues to lead in Latin America and just surpassed a market capitalization of more than $90 billion.
Will Healy of Nasdaq explains some key benefits for MeLi, including its investments in both shipping and payments, and its “hidden weapon” in Mercado Pago to ease electronic payments in its cash-dependent markets, in a Nasdaq study of the company’s most recent financial report.