The Paypers publishes the article “Exploring the growing Mexican ecommerce sector”

The latest allpago news release can be found today on The Paypers, as Javier Vallaure, Director of Business Development at allpago, discusses new possibilities in the Mexican ecommerce market in “Exploring the growing Mexican ecommerce sector”.

Mexico is the second largest ecommerce market in Latin America with 18% of the region’s volume and represents an interesting opportunity as forecasts expect a compound annual growth rate of 25% until 2016. The combination of an open economy but local payment methods poses a dilemma to merchants: should they go local or operate the market from abroad? allpago international is launching business in Mexico in July 2014 and wants to help international merchants in better understanding the market in order to solve this dilemma.

Mexican ecommerce is rapidly growing and it is full of potential

Mexico’s market presents a great area of opportunity when its numbers are deeply analysed. Business-to-Consumer (B2C) ecommerce sales reached the amount of USD 8 billion in 2013, 18% of Latin America market share, positioning Mexico as the second biggest market in the region. However this only represents a fraction of the market potential. Among internet users only 18% are digital buyers. But now Mexico is grasping its own potential.

The country’s compound annual growth rate until 2016 is 25% and is the highest rate in Latin America. Brazil, the biggest ecommerce market in the region, is expected to register a growth of 14% in the same period and indicates that Mexico is the new emerging market. allpago estimates that B2C ecommerce sales in Mexico will register USD 10 billion in 2014 and growing.

The Mexican economy is deeply integrated with the US and is one of the most open economies in the world, as shows the fact that it has signed the highest number of double taxation agreements (27). Ecommerce merchants have reached the conclusion that they could operate Mexico from abroad. However the particular structure of Mexican payment methods suggest the contrary.

Mexican online payments are dominated by local payment methods

Mexican online payments are dominated by local payment methods. More than 40% of purchases are made through credit and debit cards, followed by cash and cash-on-delivery (32%) and bank transfers (15%). All of these payment methods present some challenges if a merchant operates from abroad.

Credit and debit cards are extremely relevant on online purchases. Diverging from Latin America pattern, the number debit cards is much higher than the one of credit cards: 103 million, against 27 million, which means a proportion of almost 4 debits cards per credit card. By default, most of debit cards are not allowed to process online transactions and are not allowed to process foreign currencies. This explains why this payment method accounts for only 15% of the ecommerce purchases. However this represents an open opportunity in short-term: merchants can negotiate with acquirers to open debit cards for their customers. A tedious and long process: merchant might take up to one year only with this process.

Traditionally the biggest issuing banks are also the biggest acquirers. The main acquirers and issuers are BBVA Bancomer, Banamex (part of Citigroup), Banorte, Santander and HSBC, accounting together for 75% of the total of credit cards and 82% of all debit cards contracts.

Cash payments are done either through convenience stores or when the product is delivered. Oxxo positions itself as the convenient store payment leader as it has more than 3 times the sum of stores of other direct cash brands. Cashon-delivery, has been used by nearly 4 in 10 online shoppers but only when buying physical goods.

Merchants can only accept cash, debit cards and a portion of credit cards if they’re processing in Mexico. Even an international bank transfer can be a challenge for most Mexican account holders. If a merchant decides to go local, it would need to consider the challenges inherent to the operation.

Recommendations to operating locally in Mexico

Merchants will face obstacles in Mexico, especially because the market is still incipient. Merchants should make sure that they have access to local payment methods, find workarounds for the current payment technology and comply with current ecommerce regulation.

The lack of modern technology in the payment industry in Mexico poses a real challenge for merchants. Basic features like reconciliation, chargeback notification or even tokenization hasn’t been fully developed by most of players. Growing interest in ecommerce is changing the landscape and professionalizing the sector, although at a slow pace.

The tighter anti-money laundry regulation is increasing the data compliance. International companies in Mexico need to constantly monitor new compliance requirements, especially because the Mexican government will continue to regulate the financial market aiming at spotting money laundry from drug cartels.

allpago international, after its success in Brazil, brings its expertise and pioneering solutions to the fast-growing Mexican market. Operations will begin in July 2014. allpago will offer merchants with legal and taxes know-how, local advice and an operation with the highest security standard in the industry, the Level One PCI DSS. By offering credit cards (Visa, Mastercard and American Express), debit cards, Paypal and Oxxo, allpago will cover all national payment methods and will support merchants in exploring the second largest market in LATAM.

The whole article is available in The Paypers

About allpago international

allpago international provides a full-spectrum of payment services in the LATAM region. allpago works as a payment gateway, a white label payment service provider (PSP) or a product and service reseller for merchants and payment service providers interested in the LATAM markets.

allpago’s features include one-click payments, recurring payments, instalments, dynamic descriptor and mobile payment solutions. The company’s html 5.0 code allows multiscreen and is as easy to implement into the store through the “plug and pay” feature. Furthermore, the company offers a fully integrated Risk Management Solution with more than 70 checks. allpago has recently become the first LATAM payment solution provider of the Merchant Risk Council (MRC).

Current clients include Art.com, Busuu.com, McAfee, Teamviewer, Twoo.com and many other leading payment or digital companies from various sectors.

Image courtesy of Continental Markets Group / http://www.continentalmarketsgroup.com/