What Asia Can Learn from Latin America's Cross-Border Payments Revolution

Latin America already lived through the payment problems Asia is facing today: high remittance fees, currency volatility, fragmented rails. Wesley Rios talks to Breno Andrade, who helped build Visa Direct, about what Asia can learn from Latin America's cross-border payments evolution, from remittance corridors to stablecoin adoption in Brazil and Argentina.

Transcript

Wesley 0:14

Welcome to Set tle In, the show where we go inside the minds of people that are redefining the future payments. All tag lines is the best. Set on because the future payment does not wait. And this show is about having a really candid conversation with people that are on the ground building new products and payments. The operators, the bankers, the entrepreneurs, the people that are actually doing this day in and day out to be able to redefine how global money moves. So this is not about sales pitch, PowerPoint presentation, which I hate or even hype. This is much more about being a conversation one-on-one with our guests that have been out there building payment products across different regions. So my name is Wesley Rios. I am the partnership lead for the US and Latin America. I've been in payments for over 20 years, working with companies like MasterCard, JP Morgan, and City, and I've seen a lot of different payment products across different geographies. And I can say one thing: one size does not fit all in payments. And today I have the pleasure of having an ex-colleague of mine that I worked with him back in the days when I was a MasterCard out of Miami, overseeing the Latin America region. Breno Andrade has many years in payments, similar to me, but he also had the opportunity to work across both of the major networks, not just MasterCard, but also Visa. In the last eight years, he was part of the Visa team that built the Visa Direct business. So tons of experience in payments and a lot of things that we can learn from it. Breno, how are you?

Breno 2:04

Good. Thank you, Wesley, for the introduction. We know each other for more than a decade. We have a lot of uh experience on Latin America and payments, particularly. And over these decades, a lot have changed, and we were witnesses to see how all this ecosystem has evolved and continue evolving. And I'm very glad to be here with you today to have this chat and to discuss about uh payments not only across the region but also uh Asia and uh in the world. Thank you.

Wesley 2:53

You know, and one of the key things, Breno, and I I remember the days when you were part of the marketing team at MasterCard, and we were there in Breco uh office. Um and and and we always had this question, at least for the North America team, that thought that Latin America was just one region, everything was the same, right? Um, and and and and it's not, right? Brazil is so different than it is, Mexico that is so different than it is, Colombia. And one of the key things that I want to share with our Asia audience is that we hear you, you know, Asia is not the same either. People might assume that every market is quite similar, but it is not. And I guess one of the key things is uh as you build the the business across um Latin America, you know, how how do you deal with this complexity? And that's one of the things that I wanted to learn from you, uh, your experience. But before before we go into the solution, what I want to understand is what is the problem, right? Um, you build this Visa Direct, one explain what Visa Direct is so everyone really understands what it is, um, and what is the problem that it's trying to solve.

Breno 4:01

Yes, um, and you you point out something that I I have to deal with for at least two decades, uh, because I have been in regional positions um uh since 2005. I have been working with Latin America. And and for those that are not very familiar with, they see Latin America as an entity. It's Latin America as one big single uh region that uh operates pretty much the same. But the reality is not, as you just point out. It's a combination of more than 40 countries uh across the region, each one with your own ecosystem, with your own uh regulators, with your own consumer habits, uh, different um ecosystems and technologies that each one of these markets have. Uh some are very advanced, others are still in the early stage. So um there is uh a lot of differences across the region and also similarities. Um when you think about Latin America, one of the good things, and I would say different than Asia is how many languages we have to deal with, because pretty much uh we have Spanish, Portuguese, English, uh, and some specific uh countries in the Caribbean that may talk uh in French, in German, uh, you name it. But pretty much we are talking about three three languages. But other than than that similarity, uh we do have the culture, Latin culture, pretty much across the region, but on the payment system is completely different. It's a totally uh fragmented ecosystem as a region, you know with each country having their own. And what are the main main main challenge that um I I have to deal with over all these these years, you know? Uh regulations. So each one of these markets have a different uh type of uh regulation governing payments. Some are very advanced. I would name, for example, Brazil, uh where um you and I are from. Uh it's it's it's a very advanced country, and particularly uh as the remaining of the decades ago when uh Brazil was living the hyperinflation, and banks had to be very, very efficient uh in in terms of processing transactions because of uh these forces of the inflation putting putting the pressure for them to be efficient. Uh so this is one example of a country that uh outstands out there. We have countries that are very um uh conservative, like Chile, I would say it's a one country that uh it's it's very um stringent uh with with the regulation, very uh conservative in a way, but well advanced in in factor payments as well. Mexico that uh actually was the first country in the world at having a real-time payment uh ecosystem in country with spay. No, that's from early 2000s uh that was that that first um real-time payment was implemented.

Wesley 7:21

Before real-time payment was a thing, right? Before real-time payment was a thing.

Breno 7:26

So it was pioneer, no, on on that. And I'm not gonna talk about all, but you know, just each one has its own particularity. Uh so deal with uh the regulators is something that is very specific uh on each country. Um the technology that each one has, the concentration in banks, there are markets, for example, that are much more fragmented than others. You take a Panama, for example, is a country that has um you know a lot of banks. Uh there is no big concentration in in a field. We have other countries that are much more concentrated, even uh uh Brazil or Mexico, uh Peru, that they have a very concentration in in big incumbent banks, no? That now are being disrupted by the new banks and digital banks, uh and and it's forcing all the ecosystem to modernize and and and to change. Um but in spite of the technology and and and the um uh you know the regulation, there is also consumer behavior. We have countries that are very different in terms of consumer adoption of how they pay. We have countries that are very cash-driven still, whereas we have others that are converging for digital payments uh much faster and and adopting that. And incredibly, I just mentioned Mexico, for example, that is a country that started with the real-time payments, uh pioneered on real-time payments, but is still in the region is one of the largest uh uh cash users uh in the market. Why did that happen? Um consumer uh behavior and also usability. So one of the key challenges and one of the key uh uh triggers for consumer adoption is how easy it is to use the payment. Yes, consumers they do not think about which rail uh they are gonna use which payment, they just want uh these payments to be frictionless and happen and trust. So um when we work with multiple uh countries like in the region, this is a very uh important thing to take into consideration as well. That is the consumer adoption. Each country has a different um adoption, and we should always prioritize the consumer experience over which rail you are doing, which technology we are using. At the end of the day, it's the consumer adoption that is gonna drive the success of whatever you are.

Wesley 10:35

I I agree 100%. You know, I don't think any consumer wakes up in the morning says, Today I'm gonna pay with my platinum card or I'm gonna pay with my stablecoin card. They don't think about that, right? They want the convenience, the ease of paying. I mean, that's the experience. Um, and and and that's why technology to drive adoption initially become invisible in the back end, right? Um, and I know that you know with with with your Visa Direct, tell us what one is what it is, uh, and and and what what were the use cases that you were going after, right? To be able to bring this unique experience and and how did you do that, dealing with all this complexity across a different region, uh uh across a different market across in Latin America?

Breno 11:26

Yes, uh I I had a great time at Visa, uh helping to build uh Visa Direct. And and it's fascinating how how that innovation came in a traditional card payment network. So over uh the most time of the existence of the company, uh they were serving one use case that uh is the payment. And and and and the payment on on consumer-to-business. And in a traditional uh consumer-to-business transaction, you need speeds, um, and and and you know, frictionless experience. Uh, you need to have dispute resolution type of mechanisms, you know, to to resolve uh this this potential uh returns or fraud or whatever uh you name it, no situation that we need to interfere. Um and a large network was built over decades to serve that that that needs, no uh a state-of-the-art network that uh is amazing how how how the company is a mastercard built, you know, this this this these large uh networks, global networks. Um but the same way that the network could be used for a consumer-to-business uh transaction, it adds sometimes to using the reversal order. So when the consumer would have to receive a credit, would have to receive a payment, a payment either for a reversal of a transaction, or um, you know, a situation when a fraud occurred, they have to be reimbursed, uh, some some situation. So the network was was capable of doing that, but had never been proactively used in the reversal order. So one of the key uh insights and innovations that happened was to maximize and to use that that that that network in the reversal order so the uh card holders uh can receive a payment through their card credentials. And and and and that's when it started. Uh and over time it evolved because then it evolved from from being this uh network uh on the uh card credentials network. Yes, then through several uh acquisitions and in-house developments, um, so the platform has evolved to also be able to do account-to-account uh transfer that has nothing to do with uh the card payment. Um and you know, today it's it's a major uh global payment uh infrastructure and ecosystem for many movements.

Wesley 14:29

Yeah, it's interesting you say that because I remember the very beginning because MasterCard had a similar product called Money Send, which basically was push to card, right? So it's it's it was a clever way of using the existing network where today you use your card to pay a business and you actually go there to the POS, swipe your card, and you make the payment. But that goes from the consumer credential to the business. And I guess there was a sort of like a wake-up moment, say, hey, maybe we can use this in a reverse direction, use the same network and allow business to pay consumers. And in in, I don't know, back in the days, and maybe you have many different use cases, but I remember they were like, oh, how does Uber use you know this sort of push to car payment to actually pay drivers at real time, right? Instead of having to wait for like every two weeks to pay driver drivers. So so those are you know, that just really opened up a bunch of new use cases that the network actually addresses. And at Visa Direct, I think you guys even took it to the next level, right?

Breno 15:37

Yeah, uh absolutely, because then um there are such a number of uh credentials worldwide, uh, that is no hundred percent market share worldwide. So so the next level was uh you know how uh the company could expand beyond the traditional uh card network, and then through some uh acquisitions and in-house development, develop it the capability to also uh send account to account, you know. So so yes, it's it's it's it's it's uh great case of of innovation, you know, and continues evolving as the whole global uh ecosystem, new new companies coming into this uh money movement uh world, uh bringing innovative uh now all the the digital coins, no stable coins, all the crypto so completely disrupting uh this ecosystem. And why? Because there is a need. This uh type of payments, particularly the cross-border, has always been very fragmented. Yes. Uh it's it's uh uh it's not transparent, right? Into the payment, it's slow, right? Uh unpredictable, right? So of course that is a huge opportunity uh to make these payments much more uh efficient as it's happening. Still, there is a uh a long you know way to go, but already a lot of improvement has happened. Uh you can see particularly in the most developed corridors, uh is more advanced. Um, but still uh there are the non-traditional exotic corridors are the ones that are suffering still the most in terms of uh speed, predictability, cost, you know, so user experience, there is a lot of things uh to improve.

Wesley 17:50

Uh and I think you're right. I I think that the the business need is there, right? And I think that a company um they're doing business cross-border, having to deal with the complexity of cross-border payment using the traditional correspondent banking network is a nightmare, right? And and and and the next evolution of this is not only does it take a long time, anywhere from three to five days, it costs a lot of money, and you don't have a lot of transparency because you have to go through many different hops. I joke that it feels like it's a relay race in the dark. As soon as the company puts in the payment order, it just waits to see when it's gonna get on the other side, right? And that is very surprising that that's the way that things happen today, in a way that we have instant digital experience available all the time. But one thing that I always tell everyone is that payment is not just like a transaction, no, it's not just moving data from point A to point B. There is a lot more that happens when you actually make a payment product. Because with the payment, you have a relationship and you have expectation and responsibility. So in your case, you meant you mentioned you know the corridors in Latin America. For for for your cross-border corridors, what were the corridors that you saw the most activity and the uh the most need for innovation happening in Latin America?

Breno 19:28

So it's it's it's important to separate because then even when we talk about all this this cross-border and corridors, depends on which type of use case you are talking, no? Right. Let's talk about remittances because remittances are key Latin America, as in in Asia uh as well, one of the key use cases, you know, and one of the key uh uh uh c the key segments where this money uh flows cross-border. And and we think about Latin America, Latin America is primarily a receiving region of remittances. Right because Latin America exports migrants to other countries that much more than receives uh migrants from other countries. And and by far the the largest sender to Latin America is US. And and and and it depends on the country, the dependence on United States uh is even higher. Um we have a situation uh, for example, in countries like Mexico that's 96-98 percent of the inflows are coming from United States. Wow. Uh we have other countries that are more diverse, you know. So we have particular corridors. Uh Spain is very relevant for some countries like Ecuador, like Colombia as well. Um, so it's another is the second largest sender to Latin America. And and also what um is it's it's uh interesting to see is the intra-regional corridors. We have some specific corridors like Costa Rica to Nicaragua, for example, that is an important intra regional flow. We have Colombia, Venezuela, one big flow. Uh we have Haiti with Chile, Brazil, uh it's good Brazil, Bolivia. Uh some migrants that happen in inside the region. But the vast majority is coming from US. So this corridor naturally is uh more developed because it's is where the biggest uh opportunity is is where uh most of the uh initial incumbents on the remittances uh started operating um so we still have a lot of of opportunity to improve uh but it is one of the one one of the most uh advanced at no and and uh for flows out going from latin america into other countries also we do have uh us as one of of the key destinations and also you come again to europe we have uh Spain uh one of the key uh destinations from latin america but you also have some Africa uh corridors that are are interesting uh from money's outflow from from from Latin America when you go into the trade and and then the trade is a different uh you know environment here talking about important exports and and uh pretty much across the region the balance is more or less the same in terms of exports and uh and exports which gives a huge opportunity to improve uh these trade flows either through um uh local collections for the exporters from Latin America and a lot of on the agro business you know that let's say is exporting to Asia soy soybeans right from Brazil right yeah and and one of the trends now is how to collect these funds in Asia like local right uh so this is one of the the the key trends you know also uh um happening now um so the corridors on the trades are are pretty much concentrated in US China uh some Europe countries like uh Germany Italy Spain again uh a lot of you korea uh is another important trade corridor for that so different use case here are talking about large tickets we're talking about speed sometimes is not the main driver interesting in a remit in a remittances speed is typically the main driver uh people need to send it to know that the the the the parent you know the family member is receiving that money sometimes they are in necessity that they really need to get the money uh fast uh on the trade payments the predictability and the cost uh have much more weight right as as as they speed because typically they are more predictable payments right that are scheduled more in advance so here is where stable coins uh make a big difference because uh instant settlement and to have the ability to have a 24-7 settlement in a big transaction like uh these on on the trade are more valuable uh right and a big disruption is happening right now uh with with with this payment so and and and then on that point then um because the predictability and the costs are the key driver and I guess blockchain becomes a natural fit for that because it doesn't go into this sort of black box which is the correspondent banking right with many different hops right um where where from Latin America where where are you where are you seeing this um business looking to adopt blockchain and stablecoin as a way of payment uh is there one market that is getting more traction than the other or are you seeing that across the whole region at the same time yeah um I I I've seen uh some interesting uh things no uh there are markets where uh the volatility of FX high inflation drove the use of blockchain technology and it and and and and crypto not necessarily the stable coins but uh you know also uh any cryptocurrency to to be used as a way to protect uh the the value of the currency and I can say that Argentina and Bolivia for example are two countries where the adoption for consumers were very very high on that. Interesting.

Wesley 27:22

When you're talking about blockchain for B2B uh I see that Brazil is is more advanced um there was uh a big convergence uh in Brazil and migration into into uh blockchain stable coins uh transactions uh on the B2B side so pretty much you know importers uh from Brazil having to pay their bills and using uh you know stable coins for for that payment uh so i would say this these countries uh are the ones that that are standing out but across the region as i speak behaviors are changing fast and right right and adoption is growing is growing very fast yeah it seems that it's a combination of factor right behavior business need regulation all those things are sort of coming together at the same time that is really driving everyone to sort of take a a a a good look at this and see how we can actually help them drive their business um I know that we're coming up close to the end of our conversation um but you know what I what I wanted to like for for for for our audience in Asia right um what what what would be the key learnings from your experience operating Latin America that you like to share with them right from the complexity of actually building a payment business across a diverse region that it is Latin America yeah um I I would say no uh focus on interoperability first because uh creating closed loop ecosystem has been proven to over time fail uh because at the end of the day is what we said consumers uh and and customers no they they they're not thinking about payment they just want this to happen to wherever they have to send the money so if they're locked in in a closed loop and the destination is uh not in this closed loop we are doing a disservice for our consumer so think about interoperability is is this reachable is it reaching the most as we can is interoperable with all the other ecosystems that are built else elsewhere very good point all this is one uh always think about consumer experience over rails you know so um this is is it's it's uh it's key sometimes uh when we are uh developing uh uh our solutions we are too much thinking about the tech stack yes instead of wait a second right to is is this uh easy to use is this uh what consumers uh are gonna adopt because it's is is intuitive is frictionless so put put that consumer uh you know first before uh um uh you develop something and then I would say another key uh key learning it's uh it's not about uh the technology the biggest challenge is about how to align all stakeholders that's a real the alignment of the stakeholders it's way more complex than the technology per se right so are all participants on this talking the same language are all with the same objective are all with the same uh vision because if each one has their own interests separated from the collective it's gonna fail yeah yeah so yeah align the the the stakeholders beforehand and and make sure that this is a win-win for all participants on on yeah and that that that's really good point interoperability consumer experience and stakeholder alignment i mean those are the key pillars for any sort of um um successful payment product um breno you know we're coming to the end of the conversation uh you know I could talk with you for the longest time uh but we have to bring it to a closure um before uh we go I wanted to you know uh what is next you know you you you you you you you you have built this great business at Visa now you're you're looking for the next uh chapter where you know and in in working with business to be able to advise and help them grow their business in payments you know what what what are you thinking about what's next i i think well next it's i i see this is a convergence of of of payments is not one or the other is how everything is gonna come uh together there's gonna be space for traditional payment rail there's gonna be space for uh you know crypto uh digital assets uh uh transactions that's gonna be the space you know for all the tokenized assets is the convergence so I see more and more this getting for this reason I go back to my interoperability points because it's key that all this talks together because it's not a dominance of one and the others are gonna uh uh cease to exist at least not in the short to medium term no right so right um I I I personally stepped out uh you know of Isa recently I I'm fascinated with the the the the payments and where I spent the last 30 years uh of of my career gonna continue uh doing that so I I'm always also open to help uh companies that are are are wanting to to be uh competitive in this um environment uh with with uh my expertise and knowledge so for me personally what's next is is continue uh uh supporting uh the payments ecosystem and and make uh payments better uh for everyone uh yeah this includes the consumer the companies as well yeah the countries all the ecosystem sounds good Breno listen buddy it's such great to hear from you and I cherish the the time that we work together uh we went through a lot of learnings um everyone if this is show made you think about payments in a different way you know this was the whole point of this conversation a very candid open conversation with operators and that's what we want to do this is settle in because the future payment does not look forward to seeing you guys next time thank you everyone thank you