Big tech’s incursion into the financial industry doesn’t worry PagoNxt. The fintech owned by Spain’s Banco Santander sees the expansion into payment processing by companies such as Apple opening up new opportunities for collaboration in what is a fast-growing market.
The creation in late 2020 of PagoNxt, which incorporates Santander’s payment operations, is part of the bank’s strategy to expand in digital payments—one of the fastest growing verticals as a result of the pandemic and the boom in online shopping.
Santander’s goal of becoming a service platform that prioritizes financial technology and digital trends brings it into direct competition with companies such as Google, Stripe or PayPal, with value propositions based on simplifying operations that have traditionally been handled by banks, such as acquiring, domestic and cross-border payments, and remittances.
However, PagoNxt, which houses Santander’s merchant acquiring business, Getnet, and its Superdigital wallet, is more interested in alliances than rivalry with big tech.
“This may open up opportunities in certain markets, in LatAm or Europe,” Daniel Pujazón, the company’s policy lead, told iupana from Madrid. “It could lead to potential agreements.” Nevertheless, competition in the payments arena is hotting up.
Last month, Apple announced plans to introduce the Tap to Pay feature for iPhones to enable merchants in the U.S. to to accept Apple Pay, contactless credit and debit cards, and other digital wallets, without the need for additional hardware or a payment terminal. The Cupertino-based company will also make the functionality available to payment platforms and app developers, starting with Stripe, which will be the first to offer Tap to Pay to merchants.
Though it’s unclear when or even if the feature will debut in Latin America—Apple told iupana it has no information on the matter—Pujazón says an expansion of the service outside the U.S. could open up opportunities for Getnet, specifically in merchant acquiring for iPhones.
“I think Getnet’s big advantage for adapting to different environments may allow us to reach agreements with Apple or any other company that is providing services where Getnet’s services or any of PagoNxt’s verticals fit in,” he says.
Cashless future in Latam
Though the use of cash remains dominant in the region, the growth of electronic payments is undeniable.
In a 2020 survey of seven Latin American countries, more than 50% of banked adults said they had reduced cash payments or abandoned them altogether, according to a report by Minsait Payments.
Pujazón said that thanks in part to initiatives such as Pix in Brazil and CoDi in Mexico, the use of cash as a means of payment is declining, which opens up possibilities for platforms that are setting up shop in the region.
“We are making very clear commitment to electronic payments, the whole world of e-commerce. We have a very relevant positioning in several markets and we are exporting this positioning through acquisitions or agreements with certain companies,” says the executive.
“Our goal for the next few years is to be [one of] the top three payments provider in Latam,” adds Yann Lafargue, global director of marketing and communication at Santander Digital.
To this end, PagoNxt plans to become a bigger participant in the acquiring segment, especially for e-commerce, where it controls more than 30% of the market in Brazil, making it the leading vertical in Latin America’s biggest economy, according to Santander. Lafargue said PagoNxt is growing in all its markets which also include México, Chile, Argentina, Uruguay.
In 2021, Getnet accounted for more than 15% of total payment volumes in Brazil and Mexico and began commercial operations in Chile and Uruguay.
Superdigital, meanwhile, will be used as a spearhead to capture customers in the unbanked and underbanked segments, which represent a vast portion of the population in Latin America, where almost half of the population is thought to lack access to financial products.
“In Superdigital we are going to have more launches in countries such as Peru, Colombia and Uruguay. There’s a roadmap to be in seven countries within the next few months,” says Lafargue. Currently, the wallet is available in Brazil, Mexico, Argentina and Chile.
Analog regulation versus digital reality
While building collaborative environments with the likes of Apple is an enticing possibility, it doesn’t address what Santander CEO Ana Botín has described as the “unequal conditions” between banks on the one hand and fintech and big tech on the other when it comes to regulation. PagoNxt sees a mismatch between the existing regulation and the reality of digital companies and sees a need for more flexible rules that adapt to changes in the industry.
Pujazón recently wrote that while a big tech firm can provide payment services with a basic license, PagoNxt on the other hand—a standalone company within the Santander group—has to meet banking standards to provide the same service.
“It’s not that [tech companies] are above the law, but they are living in that mismatch that exists between analog regulation and digital reality,” Pujazón says.
In mid-February, Mercado Pago began operating as a payment initiator in Brazil using a license obtained prior to the roll out of open banking. It’s an example of how countries can take a more flexible approach to regulation: Brazilian law has adapted to a changing scenario and allowed new companies to enter the market.
PagoNxt eyes open data
PagoNxt looks favorably upon the advance of open banking, which it expects will give rise to new business models that benefit the consumer. However, the firm would like to broaden the concept to include open data.
Open banking is gaining ground in the region. Brazil is leading the way with implementation, though some market participants don’t see it achieving its true potential until more users agree to share their data.
In Mexico, the outlook for open banking is less clear, given delays in publishing the rules that will govern the system. HSBC has expressed doubts about whether open banking will produce profitable business models.
“Data has to be looked at from a customer perspective and not from the perspective of a particular vertical,” Pujazón says, adding that it’s necessary to develop strategies that put the customer at the center.
“Let the customer be the one to decide with whom they are going to share their data and for what purpose,” he says.