Online Payment: 122 million potential customers in Mexico

Daniela Reyes, Product Manager, manages ACI’s Global Coverage network of over 400+ acquiring banks and alternative payment method providers.

What does an international shop need to consider with regards to its payment strategy when expanding into the Mexican market?

DR: The first question the merchant needs to answer is, what kind of payment brands do I need to offer in this market to reach the majority of Mexican consumers? In Mexico cash on delivery takes 31% of the market. Therefore, convenience store payment is key to maximize their reach to Mexican consumers. Is there a specific provider? In Mexico we highly recommend Oxxo. This popular payment method is a must mainly due to Mexicans not having a bank account as it is not the popular norm. The norm is to go to a convenience store with their invoice which they received via email and pay with cash. This payment process is seen across LATAM in general (similar to Boleto in Brazil).

The second most popular payment method are international credit cards, ie. Visa and Mastercard. This is due to local consumers buying on international sites mainly from the United States. For merchants, offering credit cards is easy as local entity is not required and many US acquirers also operate in US and Mexico (i.e. First Data), making a cross-border setup attractive, especially for online retail, travel and digital goods.

Do Mexicans also use local credit cards?

DR: Local cards are used but seldomely. In 2016, statistics indicate only approximately 3% of the Mexican population used local cards to complete online purchases.

International credit cards on the other hand show approx. 27%. This is due to local banks mainly issuing international cards such as Visa and Mastercard as many local shoppers prove comfort in shopping on international websites.

How important is Mobile Payment in the Mexican market?

DR: One thing that is increasing in popularity in Mexico is the way they use mobile devices. Actually Mexico is the leader in the latin market for M-Commerce. Prosa is owned by the main banks in Mexico. And they are the ones that are launching the M-Commerce initiative.

PayPal operates in Mexico, but they are not so successful there as in other markets. Something that is launching is Apple Pay, Samsung Pay, Google Pay.

In some countries installments are very popular? Do Mexican like to pay in installments?

DR: Installments in Latin American in general are quite popular. Currently, Brazil leads the necessity to provide installments, however in Mexico the consumer behavior is seen as very similar.

Do I have to partner with a local bank if I want to offer cash on delivery?

DR: If you want to get paid out when using cash on delivery, the only way to do that, is to set up a local entity in Mexico. The retailer would need a local bank account in Mexico. It is not something you do over night. Things can take time to get up and running. What we recommend, is to start off with credit card and we get Oxxo up and running through our local providers. We have a local provider called Prosa. Prosa is the main gateway in Mexico giving access to all the acquiring banks and major payment methods like Oxxo.

How long does this take?

DR: This process can take longer if it is a higher risk merchant as the KYC process is a little bit more detailed. If it is a retail merchant, it can take anywhere between one and two months. Higher risk merchants can take three to four months.

Who does the merchant end up contracting with?

DR: The merchant needs to contract with the acquiring bank or an alternative payment provider. Due to the merchant receiving their funds from the acquiring bank or payment provider, choosing the right partner is crucial.

To find the best fitting acquirer for the merchant’s business, ACI likes to ask 5 magic questions:

1. What is the vertical the merchant is servicing i.e. online retail, travel, gaming, digital goods, etc.?
This question is important due to the consumer payment behavior varying per vertical. i.e. Oxxo is key for online retail, however not a necessity for online travel merchants.

2. In which country does the merchant have a local entity?

This helps ACI understand if the merchant has the requirements to partner with a local acquiring partner or an international acquirer with a cross-border offering.

3. In which country is the merchant looking to operate in?

Consumer behavior varies per market. Recommending the right payment method is key for the merchant to be successful in the market, increase conversion rates and increase in revenue.

4. In which currency is the merchant looking to receive their funds?

Each acquiring bank and payment provider have different capabilities. This includes in which currency they are able to settle funds. The last situation ACI would want to see is for a merchant to invest time in speaking to an acquiring bank who does not settle in their currency of choice.

Therefore, asking this question in the beginning is key to ensure the acquirers recommended by ACI are of value.

5. What is the approximate transaction volume the merchant is looking to process?

This question might be uncomfortable to answer at first, however it is important due to some acquiring banks and payment providers having a threshold or requirement for the commercial agreement.

Which information do you use to consult PSPs and merchants?

DR: We have a specialized team of payment experts whom constantly keep up with the market trends by:
Speaking to the key players in the market of interest (including top acquiring banks, alternative payment providers, local PSPs and directly with merchants to gain their experience first hand.

We also attend varias webinars from consulting firms at least once per month across the globe.

Lastly, we receive eCommerce reports daily from our key partners and consulting firms specializing in eCommerce.

What is the advantage of the PSP using ACI?

DR: PSPs normally compliment ACI due to :

- ACIs payment gateway accessing over 400+ payment providers globally
- ACI not charging interchange fees
- ACI not charging interchange fees to merchants or PSPs, instead ACI provides the freedom and flexibility of merchants negotiating directly with the acquiring banks and payment providers.
- Many of ACIs customers thank us for the 1:1 guidance we provide when it comes to international expansion and onboarding.

Which challenges do you see for trading with Mexico in the future?

American politics plays an important role on how international trade will continue in the future with neighboring country Mexico.  Prior to Trump’s presidency, international trade was only increasing. However, now with talks of border controls, this could be seen as a game-changer.

Which industries have the best potential to expand into the Mexican E-Commerce market?

Travel, digital goods and retail are the Top3 verticals in E-commerce in Mexico right now. To get in into the market quick and easy partner with an international acquirer that does cross-border and offers credit cards, and second phase partner with a local provider that can offer Oxxo to cover the full market and maximize revenue.

 

About ACI:

ACI Worldwide, the Universal Payments (UP) company, powers electronic payments for more than 5,100 organizations around the world. More than 1,000 of the largest financial institutions and intermediaries as well as thousands of global merchants rely on ACI to execute $14 trillion each day in payments and securities. In addition, myriad organizations utilize our electronic bill presentment and payment services. Through our comprehensive suite of software and SaaS-based solutions, we deliver real-time, immediate payments capabilities and enable the industry’s most complete omni-channel payments experience. To learn more about ACI, please visit www.aciworldwide.com. You can also find us on Twitter @ACI_Worldwide.

About Daniela Reyes:

Daniela Reyes, Product Manager, manages ACI’s Global Coverage network of over 400+ acquiring banks and alternative payment method providers. Daniela and ACI as global payment experts helps ACIs clients expand into new markets by providing key market insights, insider tips and recommending the right acquirer or alternative payment method(s) that fits the merchant’s needs to increase conversion rates in the market of interest.