Last year, at the age of 25 and while serving as chief executive officer of fintech firm AstroPay, Sebastián Kanovich felt the frustrations that many retailers, brands and consumers face while trying to do business online and globally: cross-border transactions are a hassle.
So the executive cofounded (and now serves as chief executive officer at) dLocal, which describes itself as “a cross-border payments platform that focuses on enabling e-commerce businesses in the U.S. and Europe to expand into emerging markets.” Here, Kanovich explains the origins of the firm, its goals and business trends he’s seeing in the cross-border market.
WWD: Why did you spin off dLocal from AstroPay?
Sebastián Kanovich: Growing up in Uruguay, I often had to look for creative ways to pay for products that I wanted. International businesses often don’t account for customers in the developing world, and when I wanted something online, I had to look to merchants based in Brazil or Argentina who adapted their sites for regional customers. Most U.S. web sites were out of reach for me, and even though I had a Visa [credit card], it didn’t work for international transactions.
At some point, I did get a card that was approved for international payments, and even ended up sharing it with my grandmother. Most of the country, as well as the whole Latin American region, was in a similar situation. This made it difficult to pay online for physical and digital goods, which, in turn, tremendously inflated the prices for international goods at local retailers.
I knew that payments in emerging markets had to change so that we could level the playing field for people everywhere and make e-commerce a truly global experience. I joined AstroPay, a company that provides a pre-paid credit card to consumers in Latin America, enabling them to pay for international transactions. Then last year, at age 25, I cofounded dLocal to give e-commerce companies, marketplaces and other online businesses a viable way to succeed in emerging markets.
Many e-commerce companies would like to expand their sales into emerging markets, but lack the expertise, knowledge and infrastructure to safely and easily establish a presence and accept the multitude of locally relevant payment options that are prevalent in these markets. DLocal was created to solve cross-border payment challenges for e-commerce businesses, enabling them to securely sell their products and services to more than two billion consumers in emerging markets, including Latin America, Eastern Europe, India, China, Turkey and more.
WWD: How do merchants and retail companies use dLocal? What are the benefits?
S.K.: With just one API [application program interface] integration, dLocal offers a stress-free payment integration for its partners, and supports more than 200 local country-specific payment methods. DLocal also caters to specific consumer preferences in each market, with support for local cards, installments, bank transfers, e-wallets, direct debit and cash payments.
This allows merchants to reach all the potential buyers in a local market rather than just a fraction of them, and eliminates the need to set up local entities or undergo heavy operational and tax burdens, which can slow or simply prevent companies from selling their products and services in these growing economies.
This local approach to handling payments has helped simplify market entry and lift payment conversions by as much as 40 percent. For many of our merchant customers, working with dLocal has become a game-changer, as they’ve tried to enter some of these markets before, but ran into many obstacles including limited consumer reach and inability to repatriate their earnings back to the U.S. or Europe.
WWD: What are some key trends in payments that you see emerging this year? And long-term?
S.K.: Looking at payments through a global (rather that U.S.-based) lens, 2017 is not going to be a year of leap-frog innovations, but rather a year of incremental improvements focused on country-by-country wins. As mobile infrastructure continues to expand and the Internet reaches an additional two billion people in markets where access was previously nonexistent, we’re bound to see a spike in demand for online and mobile purchases.
At the same time, the payment methods landscape will only become more fragmented, requiring payment platforms to optimize between multiple payment options, acquirers and processors, handle currency conversions cost-effectively and transparently, and account for numerous legislative nuances across multiple markets. Decades-old payments systems won’t cut here.
Merchants will have to find partners that understand the changing global landscape, able to develop deep local know-how in a diverse set of markets, and have the technical prowess to build a flexible, modern, globally ready payments technology platform that can play well with numerous ecosystem players, easily integrate with merchants’ internal systems of record, as well as process a serious flow of cross-border payments securely while delivering high approval rates.
Additionally, while we can expect a significant shift towards several common payment methods, it will happen gradually and may take as long as a couple of decades. In the meantime, merchants and payment platforms will need to support their global presence with a localized payment strategy, because even in developed markets like Slovenia, Poland, and Estonia, credit-card access is hardly universal.
WWD: What is your biggest goal for dLocal to achieve?
S.K.: Our dream is to close the remaining digital divide gap through borderless payments. In doing so, we hope to level the playing field worldwide by providing equal access for people in countries that need it the most. We want to create a world where people in emerging markets have the choices that many of us in the U.S. and Europe take for granted, such as: tracking down the least expensive way to buy certain things, then buying them in a matter of a just a few clicks; taking an online course or listening to a paid podcast to improve our earning potential; making extra income by freelancing for a business that could be on the other side of the world, or renting a room in our apartment to a traveler from another country.
Now that reliable Internet access is becoming a reality for most populations around the world, giving people the ability to pay for goods they need or desire, as well as receive payments for services they can render is the missing link. Without localized payments that work seamlessly for both consumers and businesses, none of this is feasible.
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