Em Conversa: Digital Payment Adoption in Peru with PayU GPO

As of April 2023, there were 1,000 active fintechs in Latin America (LatAm) with a vast majority focusing on financial inclusion, tackling the issue of 70 per cent of the population not having access to formal financial services. Em conversa looks to uncover what the future of fintech could look like in the region, following a $2.1billion valuation in 2022.

Peruvian financial habits are vastly changing from what they have traditionally been. The advent of rapid digital transformation in the finance world has resulted in many within the country looking to digital wallets and digital payments. To understand how fintechs are catering to these changing demands, we sat down with Federico Balige, LatAm CEO of PayU GPO, the paytech.

Can you tell me more about the company and your role within it?

PayU GPO stands at the forefront of online payment services across more than 50 high-growth markets, including Latin America, Africa, and Eastern Europe. Our mission is to offer cutting-edge financial services that meet the evolving needs of over 450,000 merchants and millions of consumers. At PayU GPO, we are committed to empowering individuals with financial services, aiming to create a world free of financial boundaries where everyone can prosper.

As a provider of online payment services, we utilise hundreds of PCI-certified payment methods and platforms, processing approximately 10 million payments daily. Our expertise also extends to developing innovative solutions that enhance access to credit and banking services for consumers and small businesses, especially in areas traditionally underserved by conventional financial institutions.

In my role as CEO of PayU GPO LatAm, I am responsible for leading all business operations across Latin America from Mexico to Argentina. This includes overseeing daily activities and collaborating with our broader leadership team to develop and implement our strategic vision, ensuring we continue to deliver exceptional value to our customers and stakeholders.

What are some payment trends we’re seeing in Peru?

The landscape of payment methods in Peru is undergoing significant transformation, propelled by technological advancements and shifts in consumer preferences. Key trends shaping this evolution include:

• Digital payments: They are gaining momentum within the region and the adoption of digital wallets and mobile payment solutions like Yape is expanding.
• Diversification of payment methods: The market is witnessing a broadening of payment avenues, including QR codes, bank transfers, and cryptocurrencies. Electronic payment platforms are emerging as comprehensive solutions, offering a variety of payment methods through a single interface. Payment gateways are becoming increasingly important, enabling the seamless integration of diverse payment options into websites and apps.
• Market transformation: The Peruvian payment market is experiencing a digital revolution, influenced by technology, changing consumer habits, and government initiatives promoting financial inclusion. Our research indicates a significant increase in the use of PayU GPO for e-commerce payments in Latin America—from 15.3 million users in 2019 to 29.3 million in 2022.

Other emerging trends include:

• QR code payments: Their convenience and ease of use are making QR codes increasingly popular among both consumers and businesses in Peru.
• Mobile payments: The widespread adoption of smartphones has led to a surge in mobile payment services, allowing users to conduct a variety of financial transactions with ease.
• Digital wallets: The steady growth in the use of digital wallets reflects their convenience for storing payment information and facilitating both online and in-store transactions.

In summary, Peru is swiftly moving towards an ecosystem of advanced, diversified digital payment solutions, marking a shift towards a more interconnected and tech-savvy economy.

What is PayU GPO doing to improve the payments sector in Peru and Latam?

In Peru, PayU GPO has taken significant strides to include a vast segment of SMEs into the online marketplace — a sector that forms the backbone of the Peruvian economy, constituting around 99 per cent of its companies. Recognising the pivotal role these businesses play, we introduced a payment gateway solution designed specifically for SMEs. This initiative offers over 850,000 SMEs in Peru the opportunity to tap into a new sales channel with global reach, empowering them to expand and evolve their operations.

In the fast-paced e-commerce landscape of Latin America, PayU GPO has emerged as a vital partner for businesses aiming to succeed online. Our consistent growth underscores our commitment to fulfilling the increasing demand for transactional processing in this vibrant region.

We provide merchants with the flexibility to accept a diverse array of local payment methods, thereby enhancing the consumer checkout experience by catering to their preferred payment options. Additionally, our emphasis on data protection and transaction security fosters trust among merchants and consumers alike, ensuring a safe online shopping environment. Our deep understanding of the unique challenges and needs within local markets enables us to deliver customised solutions, ranging from specific payment timings to adherence to regional regulations.

Empowering SMEs

The surge in SMEs entry into the market comes with its own set of challenges, such as limited access to affordable financing, complex administrative procedures, and a high inflationary environment. To overcome these obstacles, many SMEs are pivoting towards e-commerce to boost sales and maintain competitiveness. This shift from traditional to digital sales models signifies a major transformation for SME operators, geared towards efficiency and growth.

At PayU GPO, we’re committed to empowering SMEs to realise their potential through accessible and cost-effective payment infrastructure. The introduction of our new self-onboarding tool democratises access to selling online. This initiative simplifies operational processes, promotes expansion, and lowers financial hurdles for emerging businesses by equipping them with the essential digital tools for success.

Moreover, we’ve recently integrated local payment solutions like Yape and Pago Efectivo QR for the Peruvian market, enhancing the appeal for global retailers by improving conversion rates. These localised payment methods are crucial as Peru progresses in its digital transformation journey, offering users a streamlined platform for transactions that integrates seamlessly with various payment gateways.

Our collaboration with the e-commerce platform Shopify marks another milestone, set to benefit over 2,000 businesses in Latin America by offering comprehensive e-commerce solutions through a single, manageable integration. This partnership facilitates payment testing, reduces cart abandonment, and streamlines refund management, thereby transforming the online shopping experience.

We view Peru as a key market and remain dedicated to continued investment in its payment infrastructure, underscoring our commitment to fostering growth and innovation in the region.

How does the Peruvian payments sector compare to that of the rest of the world?

Despite the growing adoption of digital payments, cash remains the primary payment method in Peru. Many Peruvians, especially in rural areas and among the unbanked population, still rely heavily on cash. This contrasts with other economies where cash usage is declining rapidly.

Furthermore, Peru faces significant challenges regarding financial inclusion, with a sizable portion of the population lacking access to formal banking services. This has implications for the adoption of digital payment technologies, as efforts to expand financial services to underserved populations are ongoing but face hurdles such as infrastructure limitations and low levels of financial literacy.

What are some unique challenges associated with the region and Peru in the payments space?

In Peru, the payments sector is confronted with a myriad of challenges that reflect the unique and diverse nature of the region. A significant portion of the population remains unbanked, lacking access to essential financial services such as bank accounts, credit, and insurance.

This issue is exacerbated by a pronounced disparity in financial access between rural and urban locales, as well as among various socioeconomic groups. Additionally, the payments industry grapples with a complex regulatory landscape, where ambiguity in regulations can stifle innovation and introduce legal uncertainties for businesses operating in the space.

Adoption of electronic payments

One of the primary hurdles to the adoption of electronic payments in Peru is the prevailing reliance on cash transactions and a widespread mistrust of digital payment methods. Cultural norms and habits further entrench these challenges, as a deep-seated trust in the tangibility of cash and a preference for in-person transactions hinder the transition to digital payment solutions.

Despite these obstacles, the Peruvian payments market holds considerable potential for expansion. Companies that navigate these challenges successfully stand to capitalise on the numerous opportunities presented by this dynamic and evolving marketplace.

The region’s distinct characteristics present both challenges and opportunities. Cultural inclinations, such as a preference for cash and face-to-face transactions, can slow the embrace of digital payments, especially in comparison to areas where electronic payments are more firmly embedded in everyday activities.

The regulatory environment significantly influences the trajectory and speed of innovation within the payments sector. The Peruvian financial regulatory framework, overseen by entities such as the Superintendencia de Banca, Seguros y Administradoras Privadas de Fondos de Pensiones (SBS), plays a pivotal role in shaping the payments ecosystem. This includes setting licensing requirements for financial institutions and payment service providers.

Regulators are tasked with the critical mission of accelerating digitisation and financial inclusion. All while they have the responsibility of fostering competitive practices that benefit consumers. A key initiative in this endeavour has been the creation of the Billetera Móvil (BIM) platform by the Peruvian government. This initiative aims to bolster financial inclusion by offering a digital payments infrastructure that is accessible to all citizens, including those without access to traditional banking services.

Plans for the future (roadmap and growth plan)

As we continue our expansion, we are committed to serving small and medium-sized businesses in Peru. We will do this with our efficient self-onboarding process, which is easy to use and only takes a few minutes. Through a deep understanding of the competitive landscape and our target market, we will continue delivering cutting-edge payment solutions to our merchants, catering to their needs and enabling the implementation of omnichannel strategies.

Within this realm, we will expand our market share and offer complementary solutions like merchant cash advances, which extend credit to merchants based on their sales history.

Final thoughts

Indeed, payment systems serve as a cornerstone for driving economic growth and development across Latin America. Advancing the region requires a balance of facilitating business operations, stimulating consumer spending, fostering international trade, fostering innovation, and supporting government revenue collection efforts. This in turn will boost the economy.

As a payment facilitator, PayU GPO plays a pivotal position as the entry point, bearing the responsibility of spearheading digital payment adoption among merchants. By expanding the reach and accessibility of digital payment solutions, we are actively broadening the customer base and accelerating the region’s economic progress. Therefore, continued investment in the development and enhancement of payment infrastructure, with PayU GPO playing a central role, remains imperative for driving sustainable economic growth and prosperity throughout Latin America.