We talk with Frédéric Mazurier, CEO of Market Pay (Carrefour Group) about the business opportunities in the payments industry of emerging markets.
1. What are the key emerging markets for Carrefour Group and how does payment processing differ from the European market?
As the reference in food retail, Carrefour operates nearly 12,000 stores and e-commerce sites in more than 30 countries. A global player, Carrefour made its entry into the emerging markets of Latin America (Argentina and Brazil with 952 stores) and Asia (China and Taiwan, with 441 stores) long time ago.
In the same way as in mature markets, payment remains in emerging countries an important point of contact in the creation of the customer relationship and the economic development of the company. The rise of mobile telephony in these countries has made applications a preferred tool for contact and customer loyalty. The global non-cash transaction volumes record highest growth of past decade (43.4% for Asia and 20% for Latin America). These markets are Contactless and wallet. The payment’s experience is similar to Europe but the POS on the field is in development. In Argentina, for example, the POS have just initiated their migration to EMV.
Initiatives to promote cashless societies, technological innovation, and financial inclusion emerge as the key drivers of the significant growth rates of the non-cash transactions in the emerging markets. While the proliferation of mobile payments and digital innovation are expected to be the levers of high growth across all the regions, differences in adoption patterns and development of new use cases are likely to shape the individual regional trends. Developing economies will continue on a growth path for the next five years. This will be due to the entry of new players, the ability to leapfrog to new technologies, and the expansion of traditional payments infrastructures into the digital world.
2. What challenges do you face currently when it comes to payments processing and acceptance in Latin America for example?
There are three important challenges we see in Latin America:
- The first concerns the effective realization of the EMV migration (cards and POS). Today, the main challenges for EMV migration in Latin America are “budget constraints and lack of knowledgeable resources”. Latin American industry stakeholders recognize that there is a need to educate themselves about EMV and to leverage the lessons learned in other parts of the region and the world. Market Pay, payment institution of Carrefour Group, decided for example last year to support the migration to EMV/chip in Latin America, as a solution to prevent fraud, especially card skimming, but also as a great platform for added services.
- The second: PCI-DSS compliance. For Market Pay, it was important to help our countries in Latin America to understand the importance of the PCI-DSS compliance for security policies, technologies and ongoing processes that protect their payment systems from breaches and theft of cardholder data.
- The last: Reduce the interchanges fees. The interchange fees are very high in Latin America. The local interchange of credit and debit cards is very high compared to the international average (3% vs. 0.30% for credit cards)
3. Taking Argentina and Brazil as a specific example, what are the main opportunities you currently see and how do you plan on exploiting them?
The trend is clear: Digital is in. However, much of these technological developments require a change in consumer behavior, which is notoriously inflexible. We must remember that 70% of Latin Americans do not have a bank account, 60% of transactions made by SMEs are in cash and 47% of employees work in the informal economy. E-commerce accommodates a minority population, and digital wallets cater to an impossibly small market. Our main goal is to propose to our clients new payments products based on the new technologies.
M-commerce opportunities are huge. There is a clear opportunity to develop and promote card-on-file capabilities in mobile apps and sites.
Technology will drive credit card loyalty in Brazil. Loyalty program is a viable way to attract more customers and gather more engagement. The market for loyalty in Brazil has been expanding over recent years. The economic conditions for the country are one of the main causes.
4. What is currently missing in terms of payment means in Argentina and Brazil from a customer’s PoV and how do you see that changing in the future?
The age of digital payments in Latin America has arrived. With a large unbanked population and much of the economy still operating informally, the trends outlined here will continue to develop over the next several years. Competitors will scramble to gain their footing and find solutions that stick. Banks will fight to stay relevant in a rapidly decentralizing payments environment. And players of all persuasions will experiment with services to bring the underbanked into the digital age.
Yet as things stand, m-commerce is only available to Latin America’s credit-card holding upper-middle class. There is still a key underserved demographic: underbanked (and uncarded) smartphone holders. This group represents a huge opportunity. They are urban, tech-savvy, connected on social media, newly middle-class, and most importantly, aspirational, meaning they want copy consumption patterns of the affluent.
In the medium term, Latin America will experience a trend toward consolidation in the payments industry. Apart from Brazil, NFC POS penetration in Latin America is low (e.g. 5% in Colombia) and NFC-enabled smartphones are very few in number compared to Android-based handsets. Undeniably, the solutions most likely to succeed are those that are cheap and easy to roll out and not dependent on the installation of new hardware.
The proliferation and adoption of alternate payment channels such as contactless, wearables, coupled with modern authentication and authorization techniques, is expected to further catalyze growth of mobile payments by changing the user experience. E-and m-payments are expected to take a significant share of the total global non-cash transactions.
The growth and adoption of next generation payments, mostly through technology innovation, is likely to be driven by retail customer, with central authorities expected to play a key role in enabling a level playing field through key initiatives. Deep collaboration among incumbents, new entrants, and the regulators is needed to avoid complexity and delays in adaptability of next generation payments. Regulators can help to ensure a level playing field for all players in the new financial infrastructure by implementing changes to existing regulations, standards of practice, and creating new legal and liability frameworks.
A turbulent competitive landscape is a win for merchants and consumers. With increased competition, consumers enjoy an improved e-commerce experience, enhanced convenience and a lower risk of fraud. Merchants benefit from declining fees and can offer better customer service as greater competition pushes slack providers out of the market.
5. What influence does mobile have on your payment strategy and how does it help in the rise of Emerging Markets?
In 2017, one trend in particular will come to the forefront: the prominence of mobile commerce. Smartphone penetration in the region is roughly 45% in 2016, totalling 175 million, and is forecasted to grow by 12% annually through 2019. Argentina and Brazil have a high and an increasing mobile penetration. That creates an attractive market for the development of mobile payment. Carrefour continues to innovate and now offers customers practical mobile payment solutions in the majority of Carrefour stores, along with the loyalty benefits of the Carrefour card.
About the interviewee
Frédéric Mazurier is the CEO of Market Pay (Carrefour Group). His career has been focused on the Financial Services, oriented merchant and client vision, with an emphasis on building value through strategic product development. He was heading the business development for Carrefour Banque and bringing the innovation on the Carrefour payments world with the launch of the first Mastercard Only and Contactless card on the French (2009) and Spanish (2013) markets. He created and coordinated the issuing pan-european payment platform currently extended to acceptance and acquiring. As CEO of Market Pay, from January 2016, he is driving one of the most important European payment institutions.
About Market Pay (Carrefour Group)
Created to support the brands of the Carrefour Group, Market Pay develops and operates custom solutions to boost the business and improve the customer relations. The payment institution, which is a wholly-owned subsidiary of Carrefour Group, combines all of Carrefour’s electronic payment systems, such as Carrefour cards, POS terminals and online payment solutions, and centralises payment acceptance and acquisition services for all of the retail channels.
Market Pay enables the set-up and management of customised, secure, high-performance payment solutions. It will improve the security of payment data collected from customers of Carrefour banners and develop new payment solutions for the Group.