Payments, a common problem among start-ups in Latin America

By Celeste North (@celestenorth) of emprende.la

Many of the new methodologies for start-ups promote putting your product or service in front of your customers as soon as possible, with the purpose of understanding their needs faster. It is also recommended that you charge from day one. This is a technique that probably works well in the US, but what about Latin America where some countries have such a low credit card penetration as only reaching 24% of the population?

For many start-ups in the region having several payment methods available for their services might be crucial and, unfortunately, most of the time expensive and time consuming, since many of the most popular services for developers, such as Stripe or Braintree, are not available anywhere in Latin America and the only way to implement them is by having a bank account in the US -which is also expensive in most cases-.

Many local start-ups are trying to come out with local services aiming to solve this problem, specially with mobile payments, which have opened e-commerce to a segment of the population that didn’t use to make transactions before, mainly because mobile penetration in the region outweighs broadband.

What most start-ups, and any service of e-commerce in general, tend to do is offer ways for the user to pay in cash. In Mexico for example, the most common thing is to pay cash at OXXO or 7-Eleven, both convenience stores located everywhere across the country. The scrappiest may even ask for a direct deposit in a bank and emailing the receipt as proof of your purchase. Unfortunately this basically kills any impulse shopping or time related sales for many customers.

Still e-commerce in Latin America is at its best, growing as high as a 30% more every year, mostly by products related to travel, tickets or computers. This presents a great opportunity for new business, but also for services devoted to help online sellers integrate payment, shipping or logistics solutions in a cost effective, easy way.

The opportunity is there. Hopefully somebody will find a way among bank requirements and a robust technology to solve payments in the region, as David Weekly answered in a panel about start-ups in Latam when asked if the lack of online payment gateways was a stoppage for new companies: “Yes, we are aware of it. If anyone has an idea to solve it, we’d (mexican.vc) love to invest in your project and become millionaires together”.

Emprende.la focuses on entrepreneurial innovation in Mexico.