Paytechs are embarking on a strategy based on differentiation. And they have found an ally in the point-of-sale (POS) terminal.
Digital payment companies in Latin America are increasingly focused on developing new services in a market characterized by intensifying competition. Apart from processing transactions, POS terminals can be used to store valuable data for businesses—whether they operate a warehouse or a restaurant—and to automate tedious but crucial processes.
On the one hand, the merchant benefits from having acquiring tools with which to manage their account balances, control inventories or create catalogs for e-commerce; on the other hand, the paytech attracts new users, with a comprehensive service offering.
It makes no sense to limit the operations of a POS, which is practically a computer, to accepting cards and approving transactions, says Christian Alvarado, strategy, marketing and commercial manager of Izipay, a Lima-based payment processor.
Izipay, which was bought by Peruvian conglomerate Intercorp in April, is the country’s leading provider of physical payments thanks to its mobile terminal solution, says Alvarado. In alliance with Arisale, a sales technology company, the firm is setting up smart POS under the slogan Gestiona tu negocio or Manage your business.
“They provide solutions in terms of productivity, computing power, information, which helps them with making decisions for customers and obviously, fulfill their obligations with tax agencies. Everything is online, so there are a lot of collateral savings,” says Alvarado.
POS terminals were used in more than US$52 billion of sales transaction across Latin America during 2021, a figure that is expected to double to US$111 billion by 2025, according to data compiled by Statista.
In fact, electronic payment products are the fastest growing solution in the region. An estimated 10.8 million users made their first online purchase during the e-commerce boom triggered by the pandemic, according to a 2021 Finnovista survey. The same survey showed that there are some 1,524 fintechs in Latin America, and the bulk of them—some 601—are paytechs.
This atomization in the market is driving payment fintechs to come up with digital solutions for their customers’ everyday problems, in order to increase their value proposition and attract new users.
First step to e-commerce
A smart POS is a piece hardware that can store a business’s product catalog, run daily cash control and even take orders in a restaurant, thereby automating key processes for SMEs and unlocking their potential for selling virtually.
“If you already have your product catalog ready for the POS, for your physical world […] you press a button and if you want to sell via e-commerce, everything you have in the physical world is published in the virtual one,” says Alvarado.
In the coming months, Izipay plans to provide industrial tablets that can be installed in restaurant kitchens and take orders in real time, as part of a strategy to complete its ecosystem of solutions for SMEs and integrate them with its POS. It also plans to provide scales for warehouses and markets, giving them a more precise control of the inputs sold or used.
The payment company’s business model is based on POS licenses that range from US$12 to US$37 per month, depending on the amount of data the seller stores in the firm’s cloud. It currently has 600,000 clients in Peru.
The growing POS trend is also attracting fintechs that have ventured into credit and are looking to expand their offerings to small businesses and retailers.
“It’s important to support small business owners with their operational and financial aspects and the daily review of their business. That’s why this added value is indispensable for retailers, in order to provide comprehensive and differentiated solutions,” says Juliana Peña, head of sales at BPC, a global payments technology company.
Smart POS: The power of partnerships
In neighboring Chile, local fintech Klap is also placing Android smart POS in stores and leaving the door open for other business partners to incorporate additional solutions to their terminal.
“We make our hardware and technology available so that our partners, the software companies, can install their applications or the merchants themselves can install their applications on our device,” says Javier Gómez, payments manager at Klap.
Adding third-party applications to terminals in order to facilitate the running of a business seems to be the way forward for payment fintechs; especially if they want to compete with bigtechs such as Apple, which has also ventured into acquiring through products such as Tap to iPhone.
Gómez says that, with a sales management application, a businesses can take its cash register anywhere and process payments with its POS.
Klap says it has more than 70,000 affiliated stores and a 15% market share in the grocery category in Chile, carrying out more than 202 million transactions annually. This volume of data allows acquirers to capture valuable information from merchants, something that fintechs such as Clip and Tribal are using to tailor their loan offerings to SMEs.
Izipay has yet to offer loans but doesn’t want to be left behind.
“We’re convinced that this is a regional and global trend that’s also going to take root in Peru. And we certainly have to deliver that functionality at some point,” concludes Alvarado.