• The Middle and Latin American are rapidly adopting digital payments, driven by young, tech-savvy populations and advancements in technology.
• Understanding and complying with evolving regulatory environments is crucial for successful market entry and operation.
• Tailoring payment solutions to local consumer preferences and cultural nuances is essential for capturing market share.
• Collaborating with local acquirers and global industry leaders can provide the expertise and infrastructure needed to thrive in these regions.

As the global commerce landscape undergoes significant change, the Middle East (MEA), and Latin America (LATAM) stand out as regions brimming with potential for forward-thinking merchants. These areas, once considered peripheral in the world of commerce, are now at the forefront of digital payment innovation, offering merchants unprecedented opportunities for growth and expansion.

In the Middle East, a burgeoning young population is embracing digital payment technologies, and creating a demand for innovative and convenient shopping experiences. Similarly, LATAM is witnessing a surge in digital payments with innovations like Pix, A2A, driven by tech-savvy and previously underserved populations. These regions have also been a hot bed for innovative solutions from Merchant acquirers who play a crucial role in providing solutions necessary for merchants to thrive.

To understand the shifts in these markets, we turned to two leaders from key J.P. Morgan Payments partners: Sebastián Castro, Cofounder and President, from Kushki and Jamal Al Nassai, Group Managing Director - Merchant Services, Middle East and North Africa from Network International. Kushki, with its strong foothold in Latin America, is at the forefront of digital payment innovation in emerging markets. Meanwhile, Network International, a key player in the Middle East and Africa, is helping drive the expansion of seamless payment solutions across diverse economies. 

Nividha Gurwara, J.P. Morgan Payments: Let's begin by discussing the consumer landscape, as it's fundamentally where the journey of payments begins—right at the heart of everyday consumer interactions. Both the Middle East and LATAM, we see regions characterized by dynamic demographic shifts. The evolving population and changing consumer behaviors are quite notable. How are these developments shaping the payment landscape in the reg ions today? 

Jamal Al Nassai, Network International: Certainly, we're witnessing significant shifts within the industry. The profile of the end user is evolving. If we reflect on the landscape from 10 to 15 years ago, the mindset of consumers was markedly different. A decade ago, consumers primarily interacted with banks for traditional financial services. Today, with the rise of a new generation and the rapid advancement of technology and the FinTech industry, the payments landscape has transformed dramatically over the past few years. This transformation is largely driven by a focus on enhancing the user experience. Payment systems have transformed from simply processing transactions to becoming comprehensive customer experience tools that include innovation and product development at its core. Today's payment solutions do much more – they enable loyalty programs, support multiple payment methods, integrate with business operations, and create personalized shopping experiences. What was once just a functional step at point-of-sale or checkout is now a strategic digital tool that shapes how commerce takes place and how customers interact with businesses.

Sebastián Castro, Kushki: Latin America has experienced leapfrogging effects in the adoption of digital payment methods especially among younger and underbanked individuals. Latin Americans are also accustomed to A2A and payment systems like Pix, areas where developed markets are somewhat lagging. When it comes to card usage, which is a significant aspect of our partnership with J.P. Morgan Payments, it is the leading method of payment online across the region[1]. LATAM has maintained a high growth rate in card payments and it is expected to continue growing. The mention of cards in the context of demographic shifts is crucial because, for many individuals, cards represent the first point of digitalization within the financial system. Obtaining a credit card, a bank account, or a neobank wallet often marks the initial step towards financial inclusion for demographics previously unengaged with traditional banking. This digitalization process frequently begins with card usage, which is why its growth is so indicative of broader trends in the region.

J.P. Morgan: Given that each region is influenced by its own unique set of factors, I am curious about the role of technological advancements and innovations play in the Middle East and LATAM payments sector. How do these developments impact the daily lives of consumers? Could you share some examples to illustrate this influence? 

Jamal Al Nassai: The advent of fintech has introduced products that facilitate more seamless and convenient payments. Digital payments have evolved with proliferation of services like mobile and digital wallets (Alipay+, WeChat Pay, UPI, Apple Pay, Google Pay and so on) that have significantly transformed the market landscape, payment options like EPP are enabling merchants to accept installments at the point of sale and provide payment flexibility to consumers, and the Buy Now, Pay Later (BNPL) model has tapped into previously underserved markets. The industry is also progressively moving towards digital currencies and cryptocurrencies. This shift is largely driven by consumer behavior. Payments have transitioned from being a push product to a pull product, with consumers actively demanding these innovations.

For industry players, it is imperative to evolve our offerings to remain competitive. The industry is fundamentally shaped by customer experience and consumer demands, necessitating continuous innovation to stay relevant. While customers previously accepted lengthy queues for cash transactions as standard, today's consumers expect near-instantaneous payments - with even a five-second delay can cause frustration. Market expectations are high, and with the proliferation of new products, it is crucial to ensure that our infrastructure, frameworks, security, and risk management are robust.

Sebastián Castro: In Latin America, technological advancements in payments, have significantly streamlined the consumer experience. For example, tap payments have become standard for card transactions, whether through physical cards or mobile devices. This contrasts with the U.S., where tap-to-pay technology is still emerging, as seen with its recent introduction in New York's subway system. Online, the use of tokenization has become widespread, even among legacy businesses, eliminating the need for manual card number entry. A2A payments, exemplified by Pix, allow consumers to make instant payments, and small to medium-sized businesses can quickly establish accounts to accept payments.

The demographic in Latin America tends to be younger compared to developed markets, which aligns with the rapid adoption of digital, low-friction payment methods. Creating seamless digital payment experiences is essential, as they reflect trust. Interestingly, in Latin America, payment companies often emphasize their branding in the payment process, unlike in the U.S. or Europe, where the payment experience is typically more discreet.  

J.P. Morgan: Turning our attention to merchants, especially those with expansion plans, how are they viewing the Middle East and Africa and LATAM as regions for growth? What factors are shaping their strategies in these markets? 

Jamal Al Nassai: Several markets in the MEA region stand out as attractive entry points for merchants looking to expand. There’s UAE, Jordan, Saudi Arabia in the Middle East, Egypt, Kenya, South Africa in Africa and so on where Network already operates in the merchant acquiring space. While some of these markets have already established mature, advanced payment ecosystems, some are undergoing rapid digital transformation, a growing tech ecosystem and offer a large, young consumer base to cater to.

The first step for any new entrant is to understand the behavior and culture of the local customers. Customer experience is paramount, so it's crucial to grasp the needs of both end users and operators. This understanding will guide how you deliver and tailor your products. Equally important is being aware of regulatory requirements and how to meet them, as each country has different regulations and capital requirements. Regulators often implement new rules based on experiences in other markets. Some markets may require building local data centers and processing everything in-house, while others allow cross-border operations. As a new player, you need to assess your willingness to invest and scale your product accordingly. 

Payments are a continuous development, not a one-time implementation. A single well-designed product can transform the entire market offering. New entrants must understand the specific market issues they aim to address and be prepared to adapt continuously. In some markets, retail investments may take longer due to the need to adapt to changing customer behavior. For instance, if a company only focused on card payments without evolving acceptance methods, would miss out on growth opportunities.

Sebastián Castro: From a market perspective, the growth in Total Payment Volume (TPV) is a clear indication of how consumer spending is increasing in Latin America. While it's not that Latin America has been ignored, it hasn't always been a priority. However, we're now seeing a shift, with global multinationals increasingly viewing LATAM as a key growth market. There are few regions left that offer such untapped potential from a payments distribution standpoint.  

I'd highlight two markets: Mexico and Chile. Mexico is the largest market in Spanish-speaking Latin America[1], offering a rich and diverse environment. Many of our customers are drawn to Mexico due to its cultural and operational affinity with the United States, making it a natural entry point for merchants. Chile, on the other hand, is a robust market with a high percentage of banked population and widespread use of digital payment methods like cards and wallets. Over the past five or six years, Chile has undergone significant regulatory changes, making it more competitive. . Despite its smaller population compared to Mexico, Chile’s TPV growth for card payments, both online and offline, has been quite remarkable.

J.P. Morgan: Considering the vastness of the regions, with diverse markets and multiple currencies, how do merchants effectively understand and adapt to local consumer preferences and cultural nuances? What strategies do they employ to navigate these complexities? 

Jamal Al Nassai: Our experience in engaging with over 200+ nationalities in 50+ countries equips us with a deep understanding of diverse consumer behaviors. Each market is characterized by its own unique culture and consumer dynamics that directly shapes payment preferences and purchasing patterns.. For example, in certain regions, debit card usage is more prevalent than credit card usage, influencing our product strategy and implementation. Moreover, some markets are governed by Islamic law, which requires us to tailor our operations to comply with these regulations. We also observe a trend among the younger generation moving towards newer payment options. Understanding these cultural shifts is essential to provide the most effective solutions. Having trusted partners with global and local expertise is crucial in navigating these complexities and ensuring that we meet the specific needs of each market. 

Sebastián Castro: Payment methods in Latin America are highly consumer-focused and vary significantly from one market to another. They are not standardized like they are in other regions. Having a partner who understands these differences is crucial because many payment options that aren’t as significant in other plates. For example, consumers using credit card installments, such as 3, 4, 6, or 12 months is quite common in LATAM. While similar options are becoming more common in the U.S., this method is issuer-driven in Latin America. Merchants need partners who know how to work with these issuers to effectively use such payment methods. Picking an example from an operational perspective, sometimes the local banking infrastructure won't have things that standardized in other places, like refunds or voids. Kushki has built a lot of intelligence, both in its technology stack, as well as in its operational and financial stack on the ground to simplify that for our merchants. 

J.P. Morgan: When international merchants are looking to enter markets in the Middle East or Africa, how do they handle the regulatory hurdles? What approaches do they use to tackle the different challenges they might face? 

Jamal Al Nassai: Regulation plays a crucial role in ensuring both data protection and consumer protection. Regulators prioritize secure, reliable, and accessible solutions. The COVID-19 pandemic underscored the importance of electronic payment methods, and regulators are committed to ensuring that the entire payment lifecycle remains secure and protected. 

A deep understanding of customer behavior and regulatory requirements is essential. Each market presents its own unique needs; for instance, some require the establishment of local data centers, while others permit cross-border operations. New entrants must be prepared to invest in these areas and remain adaptable to the ongoing changes in customer behavior and regulatory landscapes. 

Sebastián Castro: Each market has its own regulatory environment and compliance requirements. It's essential for merchants to comply with payment method standards, such as PCI compliance for MasterCard and Visa, as well as local equivalents for regional payment methods. 

Latin American regulators have been proactive in implementing fintech laws and setting restrictions or guidelines for areas like cross-border payments, gambling, and gaming. Having a reliable local partner is invaluable to help merchants achieve compliance from the start, so they don't encounter unexpected regulatory gaps later on. 

J.P. Morgan: Merchants need to develop an understanding of the market. However, more importantly, they need to focus on scaling and growing their business. What unique value proposition do we, as merchant acquirers, offer to these merchants? How do we enable them to concentrate on business growth while we handle the complexities? 

Jamal Al Nassai: The value proposition we offer extends beyond just payments. We see ourselves not just as a payment company, but as a technology company providing comprehensive solutions for business growth and enablement. For instance, we've partnered with various entities to offer our merchants integrated financial services including lending facilities, which is crucial for the SME sector. It’s about creating integrated digital ecosystems that connect payments with multi-installment options, embedded financing and services through a single technological interface.

With partners like JPMorgan, we offer solutions that combine banking services with additional value-added services. This includes enhancing security, providing advisory solutions, and offering insights into business operations to help merchants increase profitability. Our goal is to provide holistic solutions that support business growth and help merchants understand and mitigate risks. 

At Network, we’re continuously building new digital capabilities to simplify complexities and enable merchants to focus on what matters most – growing their business in an increasingly digital world. We aim to be trusted advisors who are also business partners, helping them navigate the complexities of the market with our deep understanding of both global and local landscapes

Sebastián Castro: We're competing in the market by focusing on excellent technology and customer service. As a non-bank acquirer in the region, we have to stand out. The non-bank acquiring model has contributed globally in making payments more efficient, and we're bringing that approach to this region. Having top-notch technology that's highly integrated and customizable, and partnering with a strong bank like J.P. Morgan delivers true value for merchants. We don't see it as fintech versus traditional banking; instead, we believe in combining the strengths of both. J.P. Morgan's robust offerings and global reach, combined with our local expertise, create a unique value proposition in the region. That's why we're so excited about our partnership. 

J.P. Morgan: What qualities or approaches have enabled merchants in the region to excel in these markets? What are some traits of those businesses that you noticed that some of the other international merchants who are considering entering the market can learn from?  

Jamal Al Nassai: Successful merchants in the region are characterized by their dynamism and ability to adapt to industry changes. They have a keen understanding of customer needs and develop tailored solutions to effectively capture the market. Collaborating with payment providers that offer comprehensive, end-to-end solutions for various requirements is also a key strategy. 

Through our partnership with J.P. Morgan, we support global merchants in their growth by providing a holistic ecosystem of banking and payment services. Our extensive market knowledge allows us to guide merchants in understanding the necessary requirements. We deliver end-to-end solutions encompassing compliance frameworks, security protocols, and operational support. This integrated approach enables merchants to navigate complex market dynamics with confidence and focus on their core business growth objectives.

Sebastián Castro: The most important practice our successful merchants have adopted is not assuming that consumer and payment behaviors in LATAM are the same as in their home markets. It might sound obvious, but it's crucial because those assumptions can become costly, especially in how payment methods are used and accepted. Another key point is the operational side—things like reconciliation and settlement can be complex, especially for merchants with pay-in and payout structures. We simplify this for them, allowing them to operate on either a local or regional cross-border scheme. We support this with our technology and operations, which is another best practice.

As the payment landscape in the Middle East and Latin America continues to advance, it's clear that the future of commerce lies in understanding and adapting to the unique dynamics of these regions. For merchants, the challenge—and opportunity—lies in embracing these changes, tailoring their approaches to meet local needs, and leveraging the expertise of trusted partners. As these markets reshape the global payment ecosystem, the question remains: will businesses harness this momentum to shape the next era of commerce?