EXCLUSIVE: "Payments with Pizazz" - Ralf Germer, PagBrasil in 'The Paytech Magazine'

Riotous colour, vibrant music, sensuous dance and a unique, restless energy, Brazil’s get-up-and-go is filtering through into how it does payments, says PagBrasil’s Ralf Germer Brazil has taught the world a thing or two about joie de vivre – from its famous carnivals to fluent and flowing football. And, when it comes to moving money with speed and versatility, it’s demonstrating the same flair and flexibility in payments.Thanks to the growth of fintech companies and government-led initiatives, plus a favourable regulatory environment, digital payments have taken off in Brazil, boosting financial inclusion across a population of more than 200 million and achieving a level of ease in business-to-business (B2B) transactions, in particular that the rest of the world would dearly love to emulate. Such positive trends were well-established before COVID-19 hit, but the pandemic sent digitisation into overdrive, and, as a result, the vast majority of Brazilians now have access to cutting-edge financial services. PagBrasil, a fintech that focusses on payments, has been a key player in this transformation. It has helped to create a strong online payment infrastructure for the Brazilian market through a range of products that support both multinational Latin America, with a thriving e-commerce industry and a growing number of options when it comes to transacting. And the country’s unique characteristics have contributed to the speed of its progress, compared to elsewhere. “Demographics and culture have contributed to this change,” he says. “A large part of the population has enough income to consume high volumes. We’re talking about at least 40-to-50 million inhabitants with purchasing power that’s equivalent to Western Europe. Brazil is also a very dynamic country, with a young population that is receptive to new technologies and e-commerce products and services.” Naturally, e-commerce cannot succeed without efficient online payments, which is why fintech innovation and government sponsorship have been vital in paving the way for Brazil’s digital economy. Germer says that the long-term plan is for invisible payments, where everything happens seamlessly in the background, but e-commerce transactions have some way to go before this is achieved. “However, change is on the way,” he adds. “Fintechs like PagBrasil are optimising the payment process, improving consumer Fancy footwork: Brazil's payments innovations are as dazzling as its culturee-commerce businesses and the everyday needs of consumers. One of the main catalysts has been the introduction of Brazil’s unique Pix payment system, and, as it approaches two years since launch, PagBrasil’s CEO and co-founder, Ralf Germer, reflects on its impact so far, as well as other developments. Although German by birth, Germer is well-placed to describe both the Brazilian national character and the country’s commitment to e-commerce and digital payments. He grew up in Sao Paulo and has wide international experience. Around 10 years ago, he spotted a weakness in Brazil’s payment infrastructure that was also an opportunity. “I saw a payments obstacle that we needed to overcome,” says Germer, “because Brazilians wanted to pay with domestic methods that don’t exist outside of Brazil – even credit cards such as Visa and Mastercard were not enabled for payments with foreign card acquirers.” PETRI DISH OF CHANGE Over the decade since, Brazil’s payment rails have come a long way, and Germer says it is now a payments leader in consumer experience and choice in small but important steps. The Brazilian market is quite different from others, it’s very diverse and we are developing lots of important alternative payment methods such as Pix. "Pix is a real-time payment system that was launched at the end of 2020 by the Central Bank of Brazil, and it’s been enthusiastically adopted. In fact, the growth rate is one of the fastest for any instant payment system.“In the last quarter of 2021, Pix overtook other transactions in Brazil,” says Germer. “And not only e-commerce business, but all other transaction types, like credit cards and debit cards. Pix payments are now number one in Brazil, and about 40 per cent are B2B transactions, so it’s succeeding in the business sector as well as with individuals.” The key advantages of Pix are around-the-clock availability, transaction speeds of less than 10 seconds, no fees for personal users, convenience and security. PagBrasil has integrated it into its platform, which also includes payment methods such as Boleto Flash, PagBrasil’s solution for boleto vouchers – a popular local payment method.“Optimising payment journeys is crucial,” says Germer, “particularly in a complex and diverse market like ours. Consumers can drop out at plenty of points when making a purchase, but most people exit when the payment has to be made, often because their preferred payment method isn’t offered or the system isn’t working. For an e-commerce company, this is very expensive.” Ensuring payments acceptance is a challenge, says Germer.

“In Brazil, even with credit cards, it’s a complex picture. You have local methods such as Elo and Hipercard, not just Visa, Mastercard, Amex and other familiar names. And then you have instalment payments, which are financed by the merchant.”Merchant-financed payments involve technology and functionality that’s different from other countries, and if a payment service provider or a bank wants to serve Brazil, it needs to be compatible, which is why many international companies struggle to access the Brazilian market.This is great news for Pix, of course, when it comes to competitive advantage, and Germer says there is plenty of potential for it to evolve to meet new needs and preferences that are reflective of the diversity of its Brazilian marketplace – a key reason why PagBrasil doesn’t need to focus on anything beyond that.

“We decided many years ago to become a specialist,” he says, “because there is so much opportunity at home, in Latin America’s biggest market.” Germer says it’s very important for merchants to be flexible and inclusive, and that when they switch from a semi-optimised payment solution to a PagBrasil one that enables them to meet these expectations, their conversion rate can go up significantly. “Sometimes, the increase is as much as 30 per cent,” he says, “because the payments process has been optimised. We offer a wide choice of payment methods and can tailor solutions to a merchant’s requirements. Omnichannel payments are important because Brazilian consumers are discriminating; they know which companies provide the best customer service. “For example, if you buy something in an online store and then want to return it to a physical store for a refund, you need to identify the initial payment that was made in the online store. There is also a convergence trend in Brazil between the physical and online worlds. Companies that were once only physical are blending with the digital world, and vice versa.”

As with any evolving payments infrastructure, and now especially with the growth of mobile commerce, fraud is an ever-present problem. Digital payments in Brazil are no exception and face added risks. “Like every country, we have fraud issues,” says Germer, “but ours are more acute. Brazil has one of the highest fraud levels in the world. One reason for this is that Brazilian consumer protection legislation makes it very easy for consumers to do chargebacks. With online transactions, you don’t have to argue, you don’t have to prove, you just say ‘I didn’t receive the goods’. The consumer almost always wins.

”Fraud prevention is taken very seriously in Brazil, particularly credit card fraud. Germer says that countermeasures take account of the peculiarities of the Brazilian market. For instance, Brazilian fiscal numbers need to be checked with each transaction, to reveal if there is any history of fraud or other irregularities. “It’s important to be aware of these checks when working in the Brazilian market,” says Germer. “When we’ve tested the fraud prevention systems of providers, we always found that the Brazilian ones deliver better results.

We use a solution called PagShield, which combines our own technology with that of a Brazilian fraud prevention specialist.”

RESTLESS FOR INNOVATION

Looking to the future, Germer expects recurring payments to grow in popularity, following the success of the subscription model in other parts of the world.“Some companies, including PagBrasil, are now working on subscription solutions,” says Germer, “and because there is incredible potential in Brazil, I believe we’ll see a boom before long. Brazilians are huge fans of Netflix and similar services that are ideal for subscriptions.” When it comes to physical products, Germer cites the example of a subscription solution offered by one of PagBrasil’s customers, a coffee company that sells high-quality products over the internet.

Because the business is built on repeat orders, it was a prime candidate for recurring payments, but only if customers had enough control over orders, he explains.“We created a subscription solution that allows customers to change orders easily,” says Germer.

“When new coffee flavours are introduced, or customers want to experiment with the existing range, it’s simple to amend the subscription. This flexibility is an improvement on traditional subscription management systems, which are more difficult to adjust as demands change.” Innovation is what most characterises payments in Brazil. As the economy resets after the pandemic and e-commerce continues to grow, the future for payments here seems overwhelmingly digital. “I even did my first metaverse payment last week, albeit a test,” says Germer. Surely a sign of things to come. 

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This article was published in The Paytech Magazine #12, Page 16-17