You have got quite some competition in the online payments market. Could you please specify some features that set you apart from other similar payment services providers?
The online payments space is quite crowded with companies offering services to merchants looking for an option to process payments online.
PayU’s solution is unique in that we focus on providing the best choices in high growth markets – Central and Eastern Europe, Latin America, India and the Middle East and Africa. Our local operations in each of our markets allow us to fully understand consumer and merchants’ needs, so we can create functionalities and products that meet or exceed them. This also allows our merchants to increase their conversion, minimize fraud and offer alternative payment methods.
PayU has a presence in 16 growth markets throughout the world. What are some key regional / local differences in online shopping behaviour or payment preferences in these markets that you would like to point out?
Each market where PayU operates is distinctly different and the trends and behaviours of merchants and buyers constantly evolve. Here are a few examples of current trends that are critical to understand to capture the entire market: in India, only 2% of the population has a credit card, so it is important to offer alternative payment methods. An important feature in Brazil is offering a buyer protection, using an escrow account. This allows the buyers to have confidence in their purchases, because there is a time period before the merchant receives the payment. In Turkey, 85% of the credit card payments are made with instalments. Mexico is a market that offers a lot of opportunity, but has a much higher fraud rate than other Latin America countries (even the acquirers allow up to 3% of fraud). In South Africa, using loyalty points is a growing trend in online transactions. Finally, a trend we are seeing in most of these high growth markets is the leap to mobile payments. As many people do not have access to a persona computer, but do to a mobile, we see and expect to continue to see a higher percentage of transactions made via mobile.
PayU offers solutions to meet these challenges and opportunities seen in each of the local markets.
What are the general challenges for foreign merchants entering these ecommerce markets?
The primary challenge for foreign companies entering these markets is to understand the local behaviours to ensure they can capture the potential of entire market. Some of the most important considerations merchants should be aware of are: using a local acquirer, offering local payment methods, having an optimized checkout for the market, understand the local fraud dynamic and know the local government regulations.
In Russia, currently, cash payments are the most common payment method, but where do you see opportunities in terms of alternative payment methods and credit or debit card transactions?
Currently, in Russia almost 95% of the population has at least one debit or credit card. Even though Russia is still considered a cash-based market, today more than 21% of cardholders are making online purchases, which means that the Russian market has a huge potential for the growth and development in the next 5-10 years. Apart from debit and credit card transactions, we see a market with a large variety of alternative payment methods including local E-wallets, cash-in terminals, online banking and mobile commerce which currently handles about 50% of overall online transactions. In order to make one step forward towards the increase of the online credit/debit transactions banks and PSPs, the industry needs to demonstrate a more stable flow of work and continue to increase the development of a secure fraud prevention system, thus giving online shoppers the confidence to pay using their credit or debit card.
On the ecommerce front, India has come a long and impressive way. How do you see the Indian online payments / ecommerce market evolve in the years to come?
The Indian ecommerce scene has changed dramatically in last five years, with 2014 seeing an unprecedented growth. There is no doubt that the growth has been driven by rapid adoption led by the increasing use of smartphones, tablets and speedy access to internet through broadband, 3G, etc. However, one of the key reasons behind it is the trust, which has been generated through secured online payments that have encouraged more and more users to engage in online shopping in India.
There is no doubt that ecommerce and online payments will continue to see dramatic growth over the coming years. The Indian market has already displayed immense potential which has led to some of the most well-known ecommerce players and the success of their online business. International investors have also taken an active role in supporting the growth of the industry. In addition, new initiatives such as the Indian government’s ambitious ‘Digital India Program’ which comprises of various projects worth about 1 Lakh crore (1.57 billion USD) to transform the country into a knowledge economy, are ensuring that the industry gets solid support and a fertile ground to flourish in the time to come. India’s overall ecommerce potential is substantial; coupled with an ideal demographic for growth (young population, rising standards of living and upwardly mobile middle class) and rising internet penetration, strong growth in ecommerce and online payments is expected over the coming years.
What do you think of innovation driven by banks opening up as proposed in PSD2? What does this mean for scheme organisations?
The notion of a payment institution was introduced in a previous PSD directive, while the PSD2 project introduced a definition of a TPP, a third-party payment service provider. PayU was the first company in Poland to receive a payment institution license a few years ago. TPP regulations in PSD2 serve rather as an answer to the previously unregulated presence of TPP businesses on the market. This seems as the right approach, as it means that all entities on the European e-payments market will be treated equally and subject to supervision.
It is likely, the solution suggested in PSD2 will make it easier for customers to make the most of various payment channels in the future and – most importantly – it should increase their security requiring TPPs to obtain a special license and be under the control of national supervision institutions. This will create an opportunity to boost the quality of customer service and extend the offer and flexibility of customer-dedicated products. At this point, it is also worth noticing that some products are and will always be reserved for banks, which – in our opinion – is of the essence for end users who put much trust in these institutions.
From your point of view, which are the factors that indicate when a country is ready to move to a cashless society?
All payment systems, governments and regulators want to move consumers away from using cash to electronic payment systems, with reasons including tax purposes, monitoring payments and more. However, it is very difficult to indicate that a country is ready to move to a cashless society, as we still see cash playing a role in developed markets such as Europe and the US. Undoubtedly, that role in which cash is used has changed and will continue to change.
Some of the indicators we see in the growth markets that are showing a change in behaviours are based on opportunity and trends. We are continuing to see an increase of the percentage of the population that has a formal banking product, an important first step in moving away from cash. When speaking about online payments, the lower the risk of fraud (or perception thereof), the more transactions we see processed with credit cards. In addition, mobile and its ability to have one touch payments and transactions, will incentivize more people to move toward card payments.
Which of today’s alternative models are going to disrupt the payments ecosystem tomorrow?
The payments ecosystem is complex and constantly evolving, especially when it comes to high growth markets. Although there is an existence of some alternative models like Bitcoins, P2P payments, P2P lending or NFC payments, none of these has fully caught on across the globe. We also see potential for alternative models regarding mobile payments. Buyers want to pay for their purchase on a computer, tablet, mobile or any other device in the same fast and seamless way, without sacrificing security.
However, a solution that is really going to disrupt the payments ecosystem will be something more along the lines of something that changes the way we buy and sell. Something that creates a new value proposition and process that has not before been used. We will have to see what comes in the next few years, but I do not think I have already seen it.
About Peter de Caluwe
Peter started his career at Tyco, a company selling payment terminals. After five years, he moved on to a Visa/MasterCard acquirer and became responsible for the top clients and product portfolio. Peter joined Ogone in 2003 as Chief Operating Officer and later became Chief Executive Officer, helping Ogone grow from a startup into a global payments service provider that was acquired by Ingenico in 2013. In April 2014 Peter became the CEO of Naspers newly created payments segment - PayU.
About PayU
PayU is an online payment service provider dedicated to creating a fast, simple and efficient payment process for merchants and buyers. They are focused on and continue to focus on matching merchants’ needs with the way consumers shop and pay. Whether someone wants to make a payment online on a computer, tablet, mobile device, e-wallet or even offline, their over 250 payment methods are designed to make it fast, simple and secure. Their presence in 16 high growth markets in Asia, Central and Eastern Europe, Latin America, the Middle East and Africa enable them to be experts in these countries and provide the best solutions locally.
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