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Crossing the Chasm: Making 1-click & recurring payments work in LATAM
Michel GolffedVP of Growth @ dLocal
Alex LeePlatform Services - VP, Product
Management @ Ellation
Agenda
1. Lay of the land: card payments in LATAM2. Orchestrating recurring payments in LATAM3. Subscriptions4. 1-click payments5. Looking beyond cards to generate revenue6. Ellation case study
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Lay of the land: Card payments in LATAM
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LATAM: A highly fragmented region for card payments
▪ Single model vs Dual model (Auth & Capture)▪ No dual model in Colombia▪ Dual model with a redirect in Chile▪ Authorization for 1 BRL in Brazil
▪ Descriptor▪ Dynamic descriptor in Brazil▪ Hard descriptor in Mexico▪ Unique descriptor in Chile
▪ 3D Secure▪ Enabled for Debit cards in Brazil▪ Started to being used in Mexico, Colombia▪ No use in Argentina
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LATAM: A highly fragmented region for card payments
▪ Installments▪ Range from 2 to 48 installments▪ Interest rates paid by user in Argentina▪ “Meses sin intereses” / months with 0 interest in Mexico▪ “Parcelado Loja” in Brazil
▪ Debit & credit cards▪ Debit cards in Brazil start to appear for e-commerce▪ Not enabled in Chile except through
Webpay/Redcompra▪ All cards available in Mexico
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Key to success
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Understand country nuances
Develop workarounds
Implement local processing
Orchestrating recurring payments in LATAM
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LATAM realities for recurring payments
▪ Transformation in the last 5 years▪ Recurring payments evolving country by country▪ Different options and features
▪ Card payments for recurring▪ Without CVV▪ With token
▪ Auth for validating card▪ First transaction – with or without CVV?
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How can you process a recurring payment?
• PCI requirements – no CVV• Depends on your acquirer or processor
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With acquirerCard data without CVV: PAN, expiration date, cardholder name
Through int’l or local processor• Card data without CVV• Token
Card validation
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Problem: $0 Auth – practically non-existent in LATAM
Solution:• Switch to 1 USD (or BRL, MXN)• ‘Void’ the transaction upon completion• In select countries (Colombia, Peru, Uruguay) and with some processors
(e.g. MercadoPago in Chile) need to use a single model – auth & capture combined
• Make the payment for minimum possible amount• Refund immediately
1st recurring transaction
With local processor• Process 1st transaction with
CVV to validate card• Processor stores card data
to execute subsequent transactions without CVV
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With local acquirer• Transact without CVV on day 1• Requirement – have to be directly
integrated with acquirer or use a processor who’s directly integrated
Digging deeper: Subscription payments
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• Monthly payments• User not present
What’s in your user’s monthly card statement?
• A good descriptor is key for successful subscriptions (not just in LATAM)
• Test your descriptor with your local processor
• Different options depending on country and processors• Dynamic descriptor on a transaction basis – Brazil• Hard descriptor – everywhere else
• Name of processor• Name of merchant
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BOURLESQUE BEER COMPANY $23.19Dining
WWW.PAGOBRL.COM 8616 $145.73Professional Services
Subscription processing: Timing is everything!
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• Reduce “Insufficient Funds” errors• Know cards’ billing cycles• Know customers’ paydays
• Set hour and day for subscriptions• Work with your processor on best scenario• 3 AM batch may cause problems with acquirers
• Fraud risk alerts• Maintenance services on acquirers/issuers
• Enable recycling before subscription due date• Standard: 5, 3, 2, 1 days before expiration date
Subscription processing: error handling & recycling
• No Account Updater (Visa) or Automatic Billing Updater (MC) in most LATAM countries
• Available in some countries, but not implemented• Deprecated PANs• Expired cards
• Error handling to react to a failed recurrent transaction • Reattempt on another day for insufficient funds • Contact customer for expired credit card or bank authorization needed • Implement fallback process asking the user for alternative form of payment
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Digging deeper: 1-click payments
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• Card saved on user’s profile• User pays with saved card at checkout
1- click or 1-click’ish: depending on country
• Brazil, Mexico, Argentina, Colombia – 1 click payments work fine
• Peru, Chile, Uruguay• CVV required• Find workarounds to reduce friction at checkout for returning users:
• Store data when 1st transaction occurs• Present saved card on subsequent visits → card brand + last 4 digits• Ask CVV only
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Beyond cards: making recurring payments work
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Source: Tecnocom, emarketer, AMPICI, OMT, CNC, Comscore
Consumer payment preferences in LATAM
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52% 28% 15%
local credit & debit cards
cash international credit cards
5%
bank transfers
Use prepaid options as a workaround and APMs for failed transactions
• Keep your eye on the goal: revenue
• Give option for prepaying 3, 6, 12 months of the subscription
• Save failed transactions with APMs• Access cash payment options – represent
28% of consumer choice• Successful Saas and digital media
merchants do that already
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$$$
Direct debit: excellent for subscriptions
• Implement a scheduled direct pull from any bank account in Argentina, Mexico, Colombia, Brazil
• Requires integration with a major local bank or processor in each country
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• Processing time: A few working daysArgentina example:• Send pre-authorization of new debits in T• Send batch file with debits in T+1• Debit from client account in T+2• Receive confirmation in T+3
• Frictionless process after initial set-up with users:
• Bank account number• Tax ID• Online authorization
Recap and summary of best practices
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Understand country nuances
Develop workarounds
Implement local processing
1. Good dynamic descriptor is key
2. Enable local cards, direct debit and cash for better reach, conversions and as fallback
3. Find the right day and time to execute recurrent payment
4. Implement recycling
5. Consider quarterly / annual prepayment with APMs
Implementing recurring payments in LATAM
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Merchant’s perspective:
Our mission & business
● Mission: Create experiences for passionate communities to connect through the content they love
● Top 10 SVOD
● 40M+ registered users, 1M+ paying subscribers worldwide
● Global reach: 8 regions & 8 languages
● Focus on Fandom – Lovers of Anime, Sci-Fi, Horror, Fantasy and Adult Cartoon Humor
● Passionate community
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Our brands
The place for Japanese Anime● INTL OTT AVOD/SVOD● eCommerce, Manga, Licensed products,
Events, Original content creation● Recurring Mnth/Qtr/Yr & one-offs
The place for Anime, Sci-Fi, Horror, Fantasy and Adult Cartoon Humor● US OTT AVOD/SVOD Mvpd● 12 channels – Rooster Teeth, Shudder,
DramaFever, Funimation & 8 others● Recurring Mnth & one-offs
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Why we’re implementing local acquiring in LATAM
✓Customer base - Rapidly growing with a loyal base✓ Low approval rates - impact on free trials, 1st time convert & recurring✓ International CCs - local cards population and customer preference✓ Young demographic - Addressing clusters like the underbanked✓ Being local - localized to local customer experience✓ Results - Fellow merchants’ experiences✓Operational efficiency - better data, optimization & regional visibility
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Brazil
UruguayArgentina
Chi
le
Peru
Colombia
Mexico
Our LATAM coverage
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Mexico
Colombia
Chile
Brazil
ArgentinaUruguay
Perú
Voice of our LATAM Customer
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Recurring Payments in LATAM: Thought Points
Your products• Differentiated free-trial
• Differentiated products
• Differentiated pricing
• Treatment per payment method
！Accommodate non-recurring methods
Operational• Issuer approval
optimization
• Issuer processing windows
• Card updater
• Retry cycles changes for pay days
Regulatory• Changing country
regulations for compliance, PII and other data
• Changing card scheme regulation
• Changing payments models
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Get your metrics straight!
Global metrics – cut for country, payment methods and user segments
• Acquisition• Monetization• Retention & CLV• Save - involuntary churn mitigation• Recovery - voluntary churn
recaptureHow to optimize
• Iterate to target levels• Levers: issuer performance, rollout
alternative methods, etc.
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The LATAM difference – asynchronous payment methods
• Checkout flow funnel• Pre-bill/post-bill date engagement- to
- conversion• Engagement during “clearing” period• Customer retention on asynchronous
methods• Conversion to asynchronous method
Suggestions for LATAM expansion strategy
1. Business case - know your direction, business, customers, & products
2. Execution timeline - Country launch backwards
3. RFP process • Goal – Exit success criteria • Process – Outline RFP cycle • Vendors – Identify the players• Assessment factors – Business
philosophy, Tech, Coverage• Deeper-dives
4. Support functions aligned – Legal, CS, Marketing, and Business
5. Product requirements – front-end and back-end, metrics & reporting to facilitate
6. Approval7. EXECUTE … LAUNCH … MEASURE …
EXPERIMENT … (rinse and repeat to objectives)
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Crossing the Chasm: Making 1-click & recurring payments work in LATAM
Don’t forget to submit your session evaluation!
Michel GolffedVP of Growth @ dLocal
Alex LeePlatform Services - VP, Product
Management @ Ellation
