Rather than enter a market blindly or rely on expensive and limited talent, Payment Service Providers (PSPs) should look for a smart way to understand the risks, requirements and opportunities when entering a new market.
Throughout the lifetime of almost any PSP, the question will inevitably arise, where and when to expand next. Although simple to ask, answering it requires a sophisticated understanding of all the potential risks and opportunities of that market.
For most people, much of the argument will be driven by the opportunities, as they are simple to find, understand and benchmark. For example, In Brazil, research from AMI has shown a significant reduction in the proportion of unbanked Brazilians from 40% in 2017 to 12% in 2021, combined with the rise of instant and contactless payments over cash, e-commerce and cryptocurrencies. The Central Bank of Brazil has also highlighted that the adoption of PIX has been the fastest adopted instant payment system in the world, with 83 million individual users after six months, almost 40% of the population.
In theory for PSPs, this means a much higher potential to digitally onboard millions of new customers and provide excellent services, making Brazil a great opportunity to gain new customers and increase revenue. In practice however, there is a reason why Brazil has only recently become a good opportunity for financial services providers. This is best highlighted by David Velez, the founder of Brazilian fintech giant Nubank who was initially told he was crazy to enter a market that was so difficult to do business in.
In reality, risks matter just as much as opportunities and risks that are unknown or unmanaged can be the death nail for any new market entrant. However, apart from going in blind, the conventional solution has typically meant relying on expensive, local talent or even more expensive legal counsel back home, both of which are a limiting factor to geographical growth.
The key to breaking away from these limits lies in a smart way to gauge the risks and opportunities in new markets. To do this, firms need oversight of current and future regulatory developments in that market, regulated payments activities, the licencing regime, the relevant authorities and which relevant laws firms are subject to, including specialist areas such as anti money laundering (AML) and data protection. Building such an overview for all key jurisdictions can be highly arduous but essential, as it ensures no stone has been left unturned.
VIXIO’s country guides offer this in one digital format. For example, our Brazilian country guide specifically mentions upcoming data-related risks for PSPs including pending data breach regulation and the negative potential consequences for privacy claims, due to the authority’s delayed response.
Additionally, combined with our Horizon Scanning tool, firms aren’t just able to enter a market but keep up to date with all the relevant regulatory developments, allowing them to stay and thrive. And with guides covering 43 markets, as well as best practice guides for large markets like the EU on PSD2 and cross-border payments, PSPs with VIXIO have the tools to know the risks and opportunities to make the most of entering a new market.