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Insights and Expertise

Why cross-border The company was completely unaware of the fact that the
Latin American payment and banking landscape differed
expansion requires greatly from Europe. Processing options and potential
fees vary largely country by country, and there was a
much lower success rate on card payments. Less than 7
a payment and percent of Paraguayans owned a credit card in 2017, and
more than 90 percent of businesses still used cash, while
digital payment was still in its infancy.
banking strategy The client realized that they needed to put a lot more

planning into this project. New payment methods and
mainly local cash meant that an increased amount of
due diligence, testing, training, new fraud protection
rules and revised pricing were needed. Many other
operational, technical and financial aspects also needed
to be reconsidered.

Eventually, we presented various payment processing
options and potential fees throughout LATAM, country
by country, considering all aspects of the operations and
integration, but this definitely turned out to be a larger
mission than what was initially planned. It was fortunate
that the client didn't spend the marketing budget first to
test the waters, and then look for payment and banking
options, as we have seen happening many times before.
Classic business teachings do
By Viktoria Soletsz not fit the new environment
PSP Angels The problem is more common than we think, but it
lies in the traditional business approach. The classic
very successful company reaches the point teachings exclude planning for cash flows first and focus
where it is time to expand: the domestic market on acquisition instead. However, collecting funds locally
is maxed out and the revenues feel stable. Time and transferring them back to the head office is no longer
E to grow! Usually, the first step is setting a mar- straightforward and can make or break any expansion.
keting budget and creating a local landing page in order
to test the market and wait for the first foreign customers Businesses are starting to realize that the days are long
to arrive. gone when they could just trust their banks and payment
providers to "make things happen" and they did not need
However, this classic approach is no longer working. Why to strategize for these flows on their own.
do so many companies miss the obvious point? How will
these new clients actually pay for the offered goods or The majority of global expansions fail because businesses
services? still do not understand that they cannot use the same
The Paraguay expansion providers, banks and payment methods abroad as
they used locally. According to Stripe, "around 65 to 70
One of our clients was a large online business that had percent of international expansions fail or underperform,
great success in the European market. They only offered often because companies assume that the same strategy,
card payments, but their providers were reliable, and the banks and payment methods that worked at home will
payment success rate was well over 90 percent. Realizing work abroad, despite clear evidence that customers and
the opportunities far beyond Europe, the group focused infrastructure demand localized payment solutions." (See
their attention on expansion into the booming Latin https://stripe.com/ie/resources/more/challenges-of-international-
American market. expansion-what-to-know-about-risks-taxes-and-payments.)

They launched a pilot program targeting a smaller country, Today's payment and banking structures are built for a
which they randomly picked off the map (Paraguay), going single jurisdiction, and foreign regulations and various
with a modest marketing budget to test the waters. The customer behaviors are not discussed or considered
goal was to quickly find a local LATAM payment partner enough. But what can we do?
who accepted major cards, covered all countries and kept
similar success rates and fees.

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