CCAvenue Payment Gateway: Why Mexico can't replicate the success of Alipay India?

Online payments have become one of the most common forms of payment in many countries, with India's Paytm leading the way. However, the same business model has struggled to succeed in Mexico. Why is this? In this article, we take Mexico as a case study to explore the development of the online payment industry overseas. Let's take a closer look.

On 18 November 2021, Paytm, the Indian payments giant known as "Paypal India", was listed on the Bombay Stock Exchange and the National Stock Exchange of India. The company, which was founded in 2009 and underwent rapid expansion in 2014, has grown from a small team of less than 20 people to a business with thousands of employees, providing a path to success for many aspiring entrepreneurs.

Gupta was a product manager at Paytm before it went public in 2014 and was inspired by Paytm's success story. He moved to Mexico and co-founded UnDosTres with his classmates, hoping to enable Mexicans to make online payments quickly. In Mexico, even for everyday tasks like paying the water bill, people often need to withdraw money from an ATM and then queue for hours at an outside office.

In addition to needing cash for everyday purchases, Mexicans hesitate to use online payments even when shopping on e-commerce platforms.

According to the 2020 McKinsey Global Payments Report, nearly 86% of transactions in Mexico are made in cash. Even online shoppers who order products on platforms like Amazon or Mercado Libre prefer to pay at the nearest OXXO.

With 17,000 shops in Mexico, OXXO is both a traditional Mexican chain and a key driver of e-commerce growth in Mexico. More than 60% of the local population do not have bank accounts and have to deposit cash with OXXO in order to shop online. People living in remote areas are unable to receive home delivery and have to wait for goods to arrive at OXXO before they can pick them up.

These remote residents face another challenge. "In medium-sized Mexican cities, OXXO is not everywhere; you have to walk at least ten blocks," says Gupta. "A family of four needs to recharge eight times a month; they pay two to three bills a month. Therefore, they need to walk ten to twelve times a month, which consumes a lot of time and energy."

Despite the inconvenience of using cash, Mexicans still prefer cash payments.

In India, the popularity of digital payments has been fuelled by changing government policies, the lack of a unified identification system and initiatives such as the "Digital India" programme, currency reform and electronic payments. Many Indians do not have bank accounts, and some clever people make money by helping others to open accounts and download apps. This reflects Government policy support for app development, even in the face of significant resistance.

While outdated banking infrastructure is one factor hindering the growth of online payments, digital fraud is also an ongoing problem. According to Mexico's Financial Consumer Supervisory Authority, an average of 463 digital transaction frauds occur in the country every hour.

In India, there are penalties for credit card fraud above a certain amount. In Mexico, however, dealing with these frauds is a game of "kick the can down the road", and individuals need to find their own ways to reduce the risk of fraud.

When UnDosTres was founded in 2015, 40% of every $100 of transactions on its platform were affected by fraud. To mitigate this, Gupta employed third-party detection tools to manually review user information by delaying transactions or detecting authentication issues. Eventually, the fraud rate dropped to between 121 TP3T and 151 TP3T. however, these numbers are still unsatisfactory for an online payment app and have not resolved the trust crisis.

While cash and fraud are factors, let's get back to the fundamental question. What does it take to use an online payment app in Mexico?

You will need to link it to your bank account, or deposit cash directly. However, if you go to OXXO to complete this step, you may as well just complete the purchase and pick up the goods there, as these "repetitive" steps make online payments less appealing.

Whether it's buying OXXO goods or using cash, it all boils down to the problem that "very few people have credit cards". The general perception that Mexicans "prefer" cash hides a deeper crisis of trust in banks. They do not trust banks and therefore do not open bank accounts.

In Sandra L. Suárez's paper "Money for the Poor: The Politics of Mobile Money in Mexico and Kenya", she analyses mobile payments in Kenya and Mexico. While more than 501 TP3T of the population in Kenya uses mobile payment platforms, in Mexico the percentage is only 21 TP3T. Both countries favour similar conditions for mobile payments to take off - high rates of financial exclusion (only the rich have bank accounts), high mobile phone usage and high remittance rates leading to a latent demand. However, Mexico's growth has been inhibited, and she believes that banks are responsible.

The regulatory path of mobile money can be reflected in two different models: the mobile network operator (MNO)-led model (Kenya) and the bank-led model (Mexico). The bank-led model has not been able to stimulate the rapid growth of mobile money due to regulatory barriers, and banks are not interested in the "poor" (high rates of financial exclusion).

According to financial expert Barbara Magnoni, the lack of trust doesn't just come from the bank side. "I don't trust that I can use the app accurately - if I press the wrong button, my money could disappear." For UnDosTres, 50% users have never made a digital transaction on the platform.

In order to make the "online wallet" truly valuable, Paytm, the "Paypal of India", has ventured into e-commerce, insurance and gaming. Having learnt its lesson, UnDosTres recognised the reality that "most Mexicans don't have a bank account" and stopped trying to cater to low-income groups, focusing instead on Mexico's middle class.

Meanwhile, in response to the crisis of confidence, UnDosTres has taken an "extreme" approach. It collects user data to provide more "personalised" reminders, such as whether bills are paid on time. By personalising the push notifications, Gupta believes it reduces customers' trust in UnDosTres.

Of course, this is just his personal opinion. Are Mexican users really willing to exchange their information for more personalised push notifications? Perhaps they haven't realised the seriousness of the information leak. Some critics argue that UnDosTres' approach will only further reduce trust in the platform.

Prior to the pandemic, the Central Bank of Mexico launched Cobro Digital (CoDi), a real-time mobile payment platform using QR codes. Within the first year of implementation, it attracted 6.4 million users, well below the target of 18 million. To date, the platform has seen just over 1 million transactions, just 30% of the expected target.In this context, digital payments in Mexico seem like a distant dream.

This article was originally published by @InpanderChurn on Everyone's a Product Manager and may not be republished without permission. The accompanying image is from Unsplash and is licensed under CC0.