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Behind the Scenes of Latin America's B2B Market: A Discussion with Paula Bellizia
Ever wondered why 80% of the cloud computing market in Latin America is B2B, yet most purchases are still paid manually? Well, we're about to blow the lid off that mystery. Join us for a riveting conversation with our esteemed guest Paula Bellizia, President of Global Payments at EBANX, as we unravel the opportunities and challenges within the B2B market segment. We delve into the untapped potential of SaaS and Cloud Mega Payments in Latin America. We discuss the necessity for local payment methods and the low card penetration in Africa, and how these factors play a significant role in shaping the future of financial transactions.
Switching gears, we bring the conversation to AI and how it's revolutionizing fraud prevention in the Latin American market. Paula shares intriguing insights on how EBANX leverages their proprietary anti-fraud engine to offer valuable recommendations to merchants. Imagine having an AI-powered weapon in your arsenal that learns from other markets and continuously enhances its services. We explore the cultural shift towards digital payments in emerging markets and the role of startups and digital native companies in this transformation. Tune in, as we spotlight Latin America - a region brimming with growth opportunities, with EBANX leading the way.
Guest: Paula Bellizia, President of Global Payments, EBANX
Host: Ian Horne, Head of Content, Money20/20 EU
Sanjib Kalita, Former Wizard, Money20/20
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Okay, welcome to the Money Pot. I'm Ian Horn and I'm your host. Today we are live at Money 2020 here in Las Vegas. I'm very excited to bring you this episode on a new SaaS and Cloud Mega Payments opportunity in Latin America Great conversation topic, by the way. Look, thank you for joining me and also my co-host, Sanjib Kalita. Sanj, what's your job title these days? I actually don't know.
Sanjib Kalita:I am the Wizard of Money 2020. You're still the wizard, I'm still the wizard. It's wonderful, I love it.
Ian Horne:Anyway, thank you to our listeners, both here at the show and also our podcast audience. If you've got any ideas for the show, of course write to us, or write us, as you say in America, at podcast@money2020. com, and if you like the show, leave us a review on iTunes or Spotify. We love our fintech nerds. We really do. Thank you for joining us. So, Paula, this is a huge topic, isn't it? Could you give us a kind of top-level overview of what you want to talk about today?
Paula Bellizia:Yeah, absolutely. So it's a pleasure to be here. Actually, you talked about the gurus of fintech. I think we also are crazy about it and it's great to be with our wizard here of Money 2020. Well, we want to talk about the great opportunity that we see today coming out of the digitalization of the B2B area, or segment of the market that we see in Latin America, but not only Latin America, but in all rising markets, as we call, africa included, india included. What comes out of this opportunity at the backbone of that is the need of infrastructure of payments that actually meet all sizes of companies' expectations around being able to consume and transform digitally. So it's about that, the opportunity that we see to really serve those all sizes of companies that are going to change the landscape on those markets.
Ian Horne:Yeah, great overview. I'll let Sanj talk in a second, but I'd rather be neglected to introduce you, paola, for our listeners, because you please tell us about what you do. You're obviously a massive name in this space. I'm aware you've got about 350,000 LinkedIn followers, so people know you. But just for the sake of the podcast, a quick introduction.
Paula Bellizia:Yeah, absolutely yeah. So I am Paola Belizia. I'm currently the president of Global Payments at E-Panx. E-panx is a Brazilian global FinTech that provides payments, infrastructure and services across 29 countries in Latin America, africa and India, expanding quite quickly, and I have a background in my career in tech. So I think what we are going to talk about here is that the convergence of those two worlds Fin, financial services and tech at the core. So it's a pleasure to be here.
Sanjib Kalita:So is there any part that you like more than the other Fin or tech?
Paula Bellizia:Oh no, I like both, but what I know is that tech actually enables Fin right.
Ian Horne:Love it. So we're talking about the improving infrastructure in Latin that's allowing this. You know, saas and cloud mega-payments opportunity. What's the situation right now, especially in terms of things like, you know, broadband adoption and internet connectivity?
Paula Bellizia:really, yeah, so well. Internet connectivity, like across the board in Latin America is growing fantastically, so like Brazil, is 70% penetration. Mexico is 66% penetration. When you go to Africa it's still 45%, but it's going to cope with the 70s, like in the next few years. And India is extremely connected.
Paula Bellizia:So I think the backbone of digitization in terms of access to internet is there. But when you think about the B2B space, which is what we want to talk here about, we know that SMBs right out of this coverage of internet access broadband, smbs are the ones really transforming right, and they are the ones consuming SaaS digital services and they are the ones really pushing for this digital transformation across emerging markets. And I love to think about that because in the past, innovation should come from only certain areas of the world and with this massive adoption of digital services, right, innovation connection and this is the case for payments as well innovation can actually come from any place in the world, right? So this is what is happening right now in terms of the ecosystem readiness in terms of digital services yeah.
Ian Horne:Yeah, and we need to look at LATAM more locally. We know that 80% of the LATAM cloud computing market is now B2B. That's not insignificant. Average contract value is about $45,000 and at least 50% of purchases are paid manually like completely manually so there's clearly a massive growth opportunity here, right?
Paula Bellizia:It is, so I was going there, so we know exactly those numbers. We have been studying that a lot, so think about that.
Ian Horne:I may have gotten from your report, Paola.
Paula Bellizia:Yeah, no, I love that you mentioned it, but it's exactly that. 80% is small business. Everything is manual. Think about it. We have been transforming payments across so many verticals, so many industries and we still have this lack of infrastructure for these businesses to be able to complete that transaction. So this manual is expensive, it's not transparent, it's very hard to track. You don't have an option in terms of, you know, for the small business, especially the small business, to have access to payment methods, local payment methods, which is super important, as we know. The card penetration Think about Africa, right On top of everything that we discovered right now or discussed, cards penetration is only like 3% on average in Africa. So you need local payment methods as well to help further accelerate digitization. So that's the challenge and, at the same time, the opportunity, right? So how come? It's extremely manual and subject to errors.
Sanjib Kalita:So you mentioned that you were in 29 countries, I believe right. So can you give us, like a contrast of the difference, the spectrum that you operated?
Paula Bellizia:Yeah, I'm not sure. So, as we were saying, so Brazil, for example, the penetration of cards is around 40%. If you think about Mexico, it's about 35%. If you think about South Africa, it's very comparable, which is around 40% as well, but if you go to any other country of Africa, it's 3%. If you go to India, it's 5%. So that's the context of, and then how people do have access to payments, consumers, they do have payments across mobile money in Africa. So Momo is like 75, almost 80% of the total transactions being paid in Africa, and of course, we know that in India it's all about UPI. So that's the context. So if you think about one payment method, if you think about only one way of people making those transactions, b2b included, it's very hard, you cannot make it. And if you think about B2B most adopted SWIFT it's very expensive. It is only one option.
Ian Horne:And there's obviously diversity within the Latin markets as well. So which particular nations are best prepared or best set up to benefit from these improvements at the moment?
Paula Bellizia:I think Brazil is leading the way right, because even before PICS, we were very abundant on Boleto. That was the primarily alternative payment method there, including for businesses. And then, with PICS, everything changed right. So, right out of the third year of PICS in Brazil, 75% of the adult population have adopted and this is actually being used for business as one of the most preferred payment methods right Transactions being made in the country. So just in September think about it 3.3 billion transactions were made in Brazil and a vast majority will be also in SMB's space. So, and very related to what we are discussing right now, right, and it's us, because 80% of the transactions of the market is actually SMB. So think about it.
Sanjib Kalita:How about in terms of like the SMBs, like a bit of the economic or the industry diversity, like, say, for example, in Brazil, who is the typical e-banks customer that's using the solution?
Paula Bellizia:It's SaaS, subscription, digital platforms as one, but that serves also the B2B space, so you can think about marketing companies that offer their services for a large scale companies in Brazil. You look at content providers as well, also in the B2B side, so this will be the ICP of customers that we have been serving. There's also one particular definition, I would say so companies that serve this space. The average ticket you said that is $45,000, right, so it's not easy to pay $45,000 average ticket by credit card right.
Paula Bellizia:And only Swift being there. So the way that we have been facing this opportunity is creating specific rails, creating specific what we call high tickets payment methods to enable those companies to easily pay and make transactions happen. So the traditional SaaS companies, like in Brazil there are thousands of them, india as well, right, thousands of companies doing that we have Australian companies in our ICP list, for example used to be small business, rapidly growing and offering their services globally speaking, and those are the ones that we see they need these evolved service in payments.
Ian Horne:In my understanding, this is a big opportunity for alternative payments methods as well. Could you talk us through that?
Paula Bellizia:Yes, absolutely so, as I was just describing right. So, first, cards it's not representative across those rising markets. Second, very few, very manual, very non-transparent, subject to errors, kind of current payment methods. So there is this space. Right For us to provide these alternative ways of payment. People like bank transfers in the rising markets as well. Right, but usually the average ticket. They go way beyond even what the initial alternative payment methods would offer. So for us to serve this specific booming area that we see we needed to adapt in terms of approval rates to create the specific rails that will enable people to pay, like thousands of dollars, tens of thousands of dollars, in an easy way, with higher approval rates, with specific, transparent way of tracking as well. Those are very important transactions to make that business continue to operate. So this is what we see as an opportunity. Very few companies actually are serving these opportunities right. We see it as a very particular space in the market.
Ian Horne:And regulation has a role here too, right? So again, this is from your report. I've clearly just plagiarized your report here, but the EFX regulation in Brazil makes it possible for financial institutions to process FX transactions up to $100,000 with immediate settlement, right? Is that helping? We're talking about these 45,000 and high ticket volumes, absolutely.
Paula Bellizia:So we are following exactly the regulation demands, right. So our rails because we are on EFX in a payment institution in Brazil we follow exactly that. So we build our solution on top of the regulation definitions in Brazil. So we process from $10,000 to $100,000 by transaction, by ticket, right? So regulation has been opening the doors for us and we have been quickly addressing that through our solutions. That's not typically the case in all countries. So we go, country by country, we analyze the regulation and we go, sometimes influencing the risk of resources to implement up to the year when we happens to manage that, and and, of course, always catching up, always being there as soon as the regulators allow those kinds of facilitation. We are there and we have been successful.
Sanjib Kalita:So we've been talking a lot about the Fin side of things. Let's talk a little bit about the tech side of things. You know what are some of the interesting tech trends or technologies that you think are going to be interest or, you know, relevant for your platform or are relevant for your platform.
Paula Bellizia:For the bank side. So we are actually built on the clouds. So we started ourselves being a company that has been enabled by this kind of technology. We are also a very data driven company. Imagine so, out of this 3.3 billion transactions that we have in the country or in Brazil, for example, we have to be able to process highly technology, in a very efficient way to all those sizes of transactions, amount of transactions. So technology that we are talking here that serves this space is also what we build our business on top of, which means highly scalable, elastic, available availability, cloud infrastructure technology that enables us anywhere.
Paula Bellizia:We used to say at the banks that we take you there anywhere. It's also because the way that we built, we've built our technology as a company thought about that since day one, Right? So and this is cloud, not to mention AI Right, Because we are also talking about billions of transactions we know the trends of behavior of our customers and of every one of our merchants, so we are able to aggregate intelligence to help our merchants also go further and beyond not only the traditional payment operations, but also sharing insights about what's next, how to get that to the next level, how to serve adjacent services as well to them.
Sanjib Kalita:What might be an example of a recommendation that might come from that AI engine?
Paula Bellizia:One thing that we have been built actually is out of the oven is our AI driven auto fraud. So eBanks has our own proprietary anti-fraud engine, and this engine is built on pure AI. So we are the ones actually making the recommendations in terms of what could be the next anti-fraud action that we might take, and then we advise our merchants on that. Actually, we build that also with parts of external vendors, but and then we compare our own technology, the way that we see the behaviors coming and the way that we advise around what next actions will be versus the market, and the more we use, the better it becomes right because of exactly the amount of data aggregated data that we use in our platform. So this is our own technology, our own cloud AI technology, helping us to build our own proprietary engines that will better serve our merchants in terms of a proactive way of managing anti-fraud.
Ian Horne:Yeah, it's really interesting and obviously eBanks, as we touched upon earlier, is a global company. Now, what do you see from across the rest of the world that you think Latin America could benefit from? Are there any other trends you've seen elsewhere that you kind of wish you could bring into Latin America immediately?
Paula Bellizia:Oh yeah. So I think, if you think about UPI, I think that was the master of the examples and I think we are very glad to see that in the case of regulators in Brazil, we actually took that as an example and we even built on top of that right the kind of services. But if we think about e-banks, of course we are looking very, very closely into the anti-fraud next services. We are looking into what's happening with Buy Now Pay Later, which is interesting because Brazil has an historical behavior of installments. Brazil has been leading the way in installments, but now, with Buy Now Pay Later, we are also learning from other markets how to take that to the next level, right in offering credit in a technology-driven way. So, yeah, we see other trends, but it's good to see that rising markets where we have expertise are the ones presenting lots of innovation on the payment space. So, which is important for us, right?
Sanjib Kalita:And as far as the impact of e-banks on some of your customers, can you speak a little bit about that?
Paula Bellizia:Yeah, so we like to think and actually that was the DNA of the company we like to think that our purpose and our mission is to create access.
Paula Bellizia:So if you think about a company coming from China and wanting to expand internationally to countries that has high complexity in terms of operations, different regulations, different tax systems, etc. So the way for them to be enabling those businesses and those continents that would be very hard if they would go country by country what we do is with one API, one single platform, we provide immediate access to billions of consumers as we expand. We also come from serving 650 million people potentially in Latin America to 3 billion people If you include Africa and India as a whole. Right, only there you're talking about 3 billion people. So the impact that we provide is easily access to those markets, deep knowledge in terms of the countries that we operate, because we have local teams that cope with the changes in regulation, taxes, all the local complexities, and then we manage the superior performance in terms of bringing more revenue and further growth through that business. So we operate on behalf of our merchants, right, somehow. So this has been interesting and we see that this is only halfway the journey more to come.
Ian Horne:Yeah, and we're looking at rapid change within a broad region, aren't we here? And how easy is it for people to get used to that? Because I think obviously cash payments are still quite popular. In Latin, they appear to have plateaued. People are starting to use digital wallets and things like that. How quick is it this cultural change that's needed to help people really tap into the new resources that are there?
Paula Bellizia:Yeah, and this is a great question, because there's one thing, demographically speaking, that is important across rising markets right, we are a younger population. If you think about Africa, for example, I think more than 40%, if I'm not mistaken. That's the number 40% of the population is below 25 years old. What happens with that is that people are actually adopting new technologies and new forms of payments much faster than in other regions, right? So that's why Mobile Money was a leapfrog in Africa, and people are solving their changes locally in a different way, so they are adopting. Of course, the regulators sometimes are slower, but we see that demographics plays a role. Look at PXVite so, 70%, again 70%, three years out of the journey and it's already changed completely the landscape, completely. And if you think about India, only 30% of the population has adopted PXVite, which is yet at the beginning of the journey, right? So, yeah, it's happening.
Ian Horne:Yeah, absolutely. I mean, we sound just about this earlier as well, but I guess there are certain types of companies that are adapting more quickly to this type of change.
Paula Bellizia:More companies.
Ian Horne:Yeah, which types of companies are really reacting best to this?
Paula Bellizia:I think the startups, of course, the SaaS companies, all the digital native companies, they are born already. They're being born already with those behaviors in mind, so, and they are helping change the big corporations as well, right, and we keep talking about. I've talked a lot about small business, but even the biggest corporations, they have space to continue to be transformed in terms of payment methods. They also don't have alternatives. They also cope with the lack of transparent and highly complex current systems. So there is a space for the small business and the startups, which are the ones adopting also changing the corporate world.
Ian Horne:And I think this is probably a good place to wrap it up. But, paola, thank you for joining us. That was a really fascinating conversation and obviously a huge opportunity in Latin America, so real pleasure to have you here.
Paula Bellizia:No, my pleasure, Thank you. Thank you very much for your time.
Ian Horne:No, no worries, honestly our pleasure. And thank you, sanj. Also, I should finish on a note here. I've been given a cue card to read out at the start, with an intro and an outro, and I've successfully managed to read both the intro and the outro at the start, so I'm just going to do the outro again. I'm going to own this mistake and finish with the actual outro. So anyway, thank you everyone for joining me. Thank you to all our listeners, both here at the show and our podcast audience. If you have any ideas for the show, write us at podcastatmoney2020.com. If you like the show, leave us a review on iTunes or Spotify and make sure it's a good review. We love our FinTech nerds and that, of course, is you. If you've made it this far, thank you for joining us. Thank you.
Paula Bellizia:Thank you.
