Tag: contactless; digital payments; payment innovation; digital wallet; social distancing; hygiene; tap and pay; COVID; cashless

Fintechs e Oportunidades do Cartão Metálico na América Latina

View blog in English here.

As Fintechs espalharam-se globalmente durante a última década, criando raízes nos principais mercados financeiros como o Reino Unido ou os EUA. O mercado latino-americano de fintech ainda se encontrava atrasado em relação a esta tendência mundial; no entanto, é inegável que está hoje em franca expansão. Segundo a CB-Insights Research publicada em fevereiro de 2020, o investimento em fintechs na América Latina cresceu consideravelmente entre 2018 e 2019, e agora a região é o mercado mais quente de fintech. O Brasil lidera sem dúvida a região com o maior número de empresas fintech, seguido pelo México e a Colômbia. Os principais sub-sectores da fintech são pagamentos, bancos digitais (Neo-bancos), empréstimos e financiamento.

O principal impulsionador do notável crescimento na América Latina é a enorme mudança tecnológica: primeiro, pelo aumento da penetração da Internet, que ultrapassou 66% em 2019, em relação à média mundial de 53% de acordo com o Banco Mundial; segundo, pela penetração dos assinantes móveis que, de acordo com a GSMA Latino-Americana, representa quase 67% da população total da América Latina. Quase 80% utilizam os seus dispositivos móveis para aceder à Internet, com previsões estimadas em atingir 87% até 2025. Esta evolução tecnológica ajuda a aceder à enorme população não bancária e sub-bancária, para além das pequenas e médias empresas, cujos produtos e serviços digitais podem ser oferecidos.

Ao mesmo tempo, autoridades e reguladores em muitos destes países latino-americanos promulgaram regulamentos favoráveis à fintech com menores barreiras à entrada no mercado, identificando a fintech e os serviços financeiros digitais como uma forma de proporcionar um acesso financeiro alargado.

Finalmente, de acordo com a Finnovista, uma organização que impulsiona fintechs e startups na América Latina, os investidores internacionais mudaram-se para a região na qualidade de um espaço de investimento atractivo com um pico visto em 2018. Hoje, apesar da COVID-19 e da incerteza política em torno das administrações no Brasil e no México, a indústria fintech latino-americana é muito dinâmica. De acordo com a Latam Fintech Hub, angariou US$ 525M (US$ 249,3M em acções e US$ 275,7M em dívida) em 74 negócios no primeiro semestre de 2020, demonstrando que o investimento continuou apesar das turbulências.

Causar uma impressão com produtos inovadores

À medida que a pandemia continua e o impacto económico pós-COVID-19 continua a ser uma incógnita, muitas empresas fintech na América Latina podem estar sob pressão. No entanto, podem surgir grandes oportunidades para elas, enquanto a necessidade de serviços digitais aumenta repentinamente. As Fintechs poderão aproveitar esta situação única para alavancar os recursos, desafiar e diferenciar-se através de mais inovação e criatividade.

Enquanto o número de fintechs na América Latina está em expansão, as empresas de pesquisa de mercado sustentam que aqueles que causarem impressão quando iniciarem um novo negócio encontrarão o seu caminho através desta tempestade pandémica. Aqueles que serão capazes de atrair novos consumidores e de se ligarem ao seu público criando experiências únicas, se tornarão mais fortes através da adversidade. É aqui que a influência do cartão metálico pode entrar em jogo e fazer a diferença.

Neste contexto, um estudo recente do Aite Group sobre cartões de pagamento de metal da próxima geração mostra como nos EUA e na Europa os cartões de metal têm representado um meio chave para as instituições financeiras, fintechs e bancos digitais comunicarem com os seus clientes digitais, proporcionando uma experiência humana através de produtos premium.

Por exemplo, o México é um mercado favorável a observar em termos da adopção bem sucedida de produtos premium. A idade média no México é de 28 anos, tendo 41% da população entre os 25 e os 54 anos, o que representa uma base proveitosa de consumidores jovens e com conhecimentos tecnológicos. Estes jovens consumidores são atraídos não só pelos serviços digitais dos neo-bancos, mas também pelos seus benefícios globais que visam diferenciar-se, incluindo produtos específicos, tais como o formato legal dos cartões metálicos.

Cartões metálicos para impulsionar o crescimento da fintech

Os cartões de pagamento metálicos não são, de forma alguma, um conceito novo. Eles estão presentes no mercado há quase 20 anos. No entanto, a sua emissão foi originalmente direccionada para os segmentos de nível 1 e limitada aos segmentos de valor ultra-alto (UHNW).

Hoje em dia, o consumidor alvo dos cartões metálicos mudou. Isto é impulsionado por requisitos de segmentação e diferenciação, direccionados para a premiação da base de consumidores afluentes. Estão incluídos neste segmento millenials, um segmento altamente desejável para as fintechs. A Fintechs na Europa e no Reino Unido, entre outros, parecem ter contribuído para impulsionar a emissão de cartões metálicos, como um factor de forma única, integrando as mais recentes tecnologias EMV e contactless para inovar e competir com as ofertas convencionais dos bancos tradicionais.

Os cartões metálicos são atractivos para fintechs por diversas razões. O cartão metálico não só dá o “look and feel” que um cliente procura num produto, como também cria uma ligação emocional elevada onde o cliente tem a sensação de fazer parte de uma comunidade cool premium. O efeito de premiumization associado a benefícios específicos ligados à marca é a chave para uma experiência única do cliente. Os cartões metálicos são uma diferenciação que combina serviços digitais com um produto físico atractivo. Os cartões metálicos ajudam a criar um estatuto de topo de gama. Eles elevam o posicionamento da marca fintechs e a percepção que o cliente tem dela. De acordo com uma análise proprietária da CompoSecure, impulsionam volumes de transacção e gastos mais elevados, aumentam a retenção de clientes e, num círculo virtual, podem ajudar a contribuir para a aquisição de novos clientes. 

Romper o status quo

A América Latina está a seguir o exemplo das fintechs europeias, onde os casos de negócios apontam para a adopção de cartões metálicos como um motor de crescimento de negócios de êxito. As fintechs latino-americanas poderiam definir a sua própria oferta de inovação de produtos, de acordo com as suas especificidades de mercado regionais e locais e ecossistemas. O relatório do Aite Group conclui que os cartões metálicos poderiam ser um factor-chave para quebrar o status quo, especialmente numa região onde o segmento populacional de millenials é elevado, e onde a diferenciação e o “factor cool” são importantes.

Para mais informações sobre as melhores práticas de desafios comuns no âmbito da fintech e uma visão geral da emissão de cartões metálicos, convidamo-lo a descarregar o relatório completo do Aite Group encomendado pela CompoSecure LLC “A Competitive Edge for Fintech Issuers”.

Fintech and Metal Card Opportunities in Latin America

View blog in Portuguese here.

Fintechs have spread globally over the past decade, taking root in major financial markets like the UK or the US. The Latin American fintech market was still behind compared to this worldwide trend; however, it is undeniably booming today. According to CB-Insights Research published in February 2020, the investment in fintechs in Latin America grew considerably from 2018 to 2019, and now the region is the hottest fintech marketplace. Brazil is without a doubt leading the region with the largest number of fintech companies, followed by Mexico and Colombia. The main sub-sectors in fintech are payments, digital banks (Neo-banks), loans and funding.

The main driver for the remarkable boom in Latin America is the massive technology shift: first, by increased internet penetration, which surpassed 66% in 2019, over the world average of 53% according to the World Bank; second, by the penetration of mobile subscribers which, according to GSMA Latin-American, accounts for nearly 67% of the total Latin American population. Nearly 80% use their mobile devices for the internet, with forecasts estimated to reach 87% by 2025. This technological evolution helps access the massive unbanked and underbanked populations, in addition to the small- to medium-sized businesses, which digital products and services can be offered.

At the same time, authorities and regulators in many of these Latin-American countries have enacted fintech-friendly regulations with lower market entry barriers, identifying fintech and digital financial services as a way to provide widespread financial access.

Finally, according to Finnovista, an organization that propels fintechs and startups in Latin-America, international investors have moved into the region as an attractive investment space with a peak seen in 2018. Today, despite COVID-19 and political uncertainty around administrations in Brazil and Mexico, the Latin-American fintech industry is very dynamic. According to Latam Fintech Hub, it raised US$ 525M (US $ 249.3M in equity and US $ 275.7M in debt) in 74 deals in the first half of 2020, showing that investment has continued despite turbulences. 

Make an impression with innovative products

As the pandemic continues and the post-COVID-19 economic impact remains to be seen, many fintech companies in Latin America may be under stress. However, great opportunities for them may arise while the need for digital services suddenly increases. Fintechs could seize this unique situation to leverage assets, challenge and differentiate themselves through more innovation and creativity. 

While the number of fintechs in Latin America is expanding, market research companies sustain that those who will make an impression when starting a new business will find their way through this pandemic storm. Those who will be able to attract new consumers and connect to their audience by creating unique experiences will grow stronger through the adversity. This is where metal card influence can come into play and make a difference. 

In this context, a recent Aite Group research paper on next-generation metal payment cards shows how in the US and Europe metal cards have represented a key medium for financial institutions, fintechs and digital banks to communicate with their digital customers, delivering a human experience through premium products.

For example, Mexico is a favorable market to watch in terms of the successful adoption of premium products. The average age in Mexico is 28, with 41% of the population being 25 to 54 years old, which represents a fruitful base of young, tech-savvy consumers. These young consumers are attracted not only by neo-banks’ digital services, but also by their overall benefits that aim at differentiating themselves, including specific products such as the cool form factor of metal cards.

Metal cards to drive fintech growth

Metal payment cards are by no means a new concept. They have been present in the marketplace for nearly 20 years. However, their issuance was originally targeted towards tier-one and limited to ultra-high-net-worth (UHNW) segments.

Today, the target consumer for metal cards has changed. This is driven by requirements for segmentation and differentiation, targeting the premiumization of the mass affluent consumer base. Included in this are millennials, a highly desirable segment for fintechs. Fintechs in Europe and the UK, among others, seem to have helped boost the issuance of metal variant card bodies, as a uniqueness form factor, integrating latest EMV and contactless technologies to innovate and compete against traditional incumbent banks offerings.

Metal cards are attractive for fintechs for many reasons. Not only does the metal card the “look and feel” that a customer is looking for in a product, but it also creates an elevated emotional connection where the customer has the feeling of being part of  a cool premium community. The premiumization effect associated with specific brand-connected benefits is key to a unique customer experience. Metal cards are a differentiation that combine digital services with an attractive physical product. Metal cards help create a top-of-wallet status. They elevate the fintechs brand positioning and the customer’s perception of it. According to a CompoSecure proprietary analysis, they drive higher transaction and spending volumes, increase customer retention and, in a virtual circle, can help contribute to new customer acquisition. 

Disrupt the status quo

Latin America is following the example of European fintechs, where business cases point to metal card adoption as a successful business growth driver. Latin American fintechs could define their own product innovation offering, in accordance with their regional and local market specificities and ecosystems. The Aite Group report concludes that metal cards could be a key driver to disrupt the status quo, especially in a region where the population segment of millennials is high, and where differentiation and “cool factor” are important.

For more information on best practices of common fintech challenges and an overview of metal card issuance, we invite you to down-load the full report of Aite Group commissioned by CompoSecure LLC “A Competitive Edge for Fintech Issuers”

The Future of Contactless Payments in the COVID Era

The Future of Payments in the Era of COVID: Contactless Payments

We aren’t saying that cash will be a thing of the past, but we do believe that contactless card payments will soon be the de facto standard of the future. Just like Zoom has become the norm, so will contactless payments. The COVID pandemic has consumers asking why don’t we have this, and merchants stepping up the conversion of their readers to make customers more comfortable. No one wants to expose themselves to potential health risks by touching cash or a payment keypad. Recent MasterCard data shows that contactless payments increased 40% in Q1 compared to the previous quarter as the global pandemic worsened. This surge will continue according to a recent American Express survey that states 58% of consumers who have used contactless payments in the past are more likely to use them moving forward.


The Psychology of Contactless

Consumer behavior is changing before our eyes. According to recent Visa data, 31 million Americans tapped a Visa contactless card or digital wallet in March 2020, up from 25 million in November, with overall contactless usage in the US growing 150% since March 2019.  This follows the global trend, where 60% of Visa transactions outside the US are already using contactless. Consumers want to get in and out of stores quickly with minimal contact during the transaction. There is a new, COVID-caused psychological factor prevailing.

A recent Mastercard consumer survey substantiated those fears around payment transactions. Since the pandemic, half of consumers have an increased preference for contactless payments, with a third of US consumers claiming to use their contactless card more than other cards in their wallet. Nearly half of consumers wipe their payment cards clean after using them, which points to the top reason 77% of consumers prefer contactless payment: it is a “cleaner” way to pay. This focus on hygiene is demonstrated in that more than half of US consumers do not want to provide a signature at the point of sale.

The Business Case for Contactless 

The migration from cash to contactless can prove attractive economics to merchants and the banking industry. From a merchant perspective, contactless cards speed up the checkout process and improve the customer experience because it is faster, more convenient and more efficient. For financial institutions, data from A.T. Kearney and Visa show that banks could generate an estimated $2.4 billion in incremental earnings over the next five years due to increased contactless card usage while achieving an industry-wide cash-handling cost savings of up to 6% of annual consumer banking operating expenses. These estimates were based on contactless adoption statistics in markets similar to the US which showed that financial institutions on average achieved an increase of 20-30% in transactions in the three years following the acceleration of contactless cards, which translated to 5-40 new transactions per card per year.

 

COVID created an inflection point for cash to card migration and the adoption of contactless card payments, but also brings challenges for mobile payments which are complicated by the use of masks and other PPE.

 

The Digital Wallet vs. Contactless Payments

The technology for tapping a contactless card is virtually interchangeable with digital mobile payments such as Apple Pay or Google Pay. Merchants that accept a tap from a card also can typically accept a tap from a phone. So, what technology will win out? We believe cards have served consumers extremely well for more than 50 years and that adding contactless capabilities to the card is an easier behavioral change than shifting to mobile wallets. This new technology has solved a real consumer pain point and the adoption curve follows. For example, I no longer store 30+ CDs of music in my car or carry a book of paper maps because each of these were not a good consumer experience and were transformed by something significantly better. While COVID will provide an inflection point for cash to card migration and adoption of contactless, I recently tried an Apple Pay transaction while wearing a mask and found using a card for a tap-to-pay transaction was significantly easier.

The latest data from PYMTS.com indicates that digital wallets are actually decreasing in their share of eligible transactions from 6% in 2019 to 5.1% in 2020 with Apple Pay at just 0.9% of retail sales (excluding online and vehicle sales). Pew Research believes this is because of lack of trust for this digital technology. Across all generations, there were persistent concerns about the security of digital wallets and indications that consumers have more trust in traditional methods, such as physical cards.

Digital wallets have been around for more than a decade; however, recent data shows that only 15% of consumers made an in-store transaction with a digital wallet in late 2019. The number one reason for consumers not adopting a digital wallet was “no need/not interested” (36% of non-users). The Forbes article supports what we have seen from our customers: “the near-term contactless cards will have broader market appeal than contactless digital wallets given that they encourage an evolutionary, rather than revolutionary, behavior change.” In fact, A. T. Kearney states: “US consumers are interested in contactless cards as they are perceived as “fun and exciting,” secure and simple. Moreover, contactless cards are the future of payments … given how prominent contactless cards are in other countries.”

The Time is Now

The market saturation is reaching a tipping point according to Visa data. The US now has the most contactless cards of any market globally at 175 million, with nine of the top ten US issuers actively distributing new contactless cards. New analyst research predicts that contactless cards will exceed initial estimates for the year by 110 million because of the coronavirus. This figure will bring the total number of contactless payment cards in worldwide circulation to more than 2 billion by the end of the year.

In the same vein, merchants have been steadily upgrading POS terminals, shipping 47.8 million contactless units globally in 2019, bringing the total to 100.4 million worldwide, which is now 62% of all POS terminals, according to the latest researchSome issuers are seeing nearly 70% of face-to-face transactions in the US becoming tap and pay purchases. We expect this number to explode in 2020 due to the coronavirus. Card issuers are promoting tap and pay usage by raising the purchase limits for contactless purchases. For example, in April, UK merchants saw approximately a 50% reduction in the number of times customers touched the POS because of the increased limits on contactless purchases. Globally, contactless payments continue to multiply with the latest data estimating that contactless terminals will increase at a compound annual growth rate (CAGR) of 12.9% from 100.4 million units in 2019 to 184.5 million units in 2024. This means that by 2024 more than 88% of the world’s POS terminals will be contactless, up from 62% in 2019.

COVID provides a simple and effective messaging opportunity for financial institutions to drive contactless payments in addition to transaction lift. It is a crucial time in our industry because contactless promotes and capitalizes on social distancing in addition to the typical speed and convenience benefits, which are often touted as the primary drivers of adoption.

New concerns and conveniences are shaping the landscape of how consumers prefer to pay. Though unexpected circumstances are driving rapid changes in behavior, it is up to the payment card industry to continue to innovate and issuers to be ready to meet evolving demands.