Payments Dialog

Payments Dialog Ep. 2: Payments and Delivery in Latin America with Mathias Fonseca

In this episode of Payments Dialog, Spreedly founder and CTO Nathaniel Talbott talks with Mathias Fonseca from food delivery (and almost anything delivery) specialist PedidosYa. They chat about the Latin American market, accepting payments, and the challenges of fraud.

Written by
Peter Mollins
Publication Date
October 16, 2018
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Every geography has its own unique payments ecosystem and particularities. That means that in order for a merchant to accept payments in a different region -- as they grow internationally -- they need to adapt to local preferences and requirements.

But managing multiple payment gateways and endpoints can be a major challenge. It's not simply that there is a cost of maintaining the systems. But more critically, the challenge can slow down major business initiatives like expanding to new markets, acquiring companies, and more.

Payments in Latin America

That's why Spreedly works with so many merchants and marketplaces in Latin America. It's because the challenges of managing diverse payment methods across the region is a major impediment to expanding businesses.

In this episode of Payments Dialog, Spreedly founder and CTO Nathaniel Talbott talks with Mathias Fonseca from food delivery (and almost anything delivery) specialist PedidosYa. They chat about the Latin American market, accepting payments, and the challenges of fraud. Have a watch!

Below you'll also find a rough transcript of the discussion.


Rough Transcript

Nathaniel: So I'm here with Mathias from the PedidosYa. Yeah, and really excited to talk to him today about Latin America and dig into some of the payments infrastructure the payments landscape in Latin America.

And so I I'd like to just open up and start out by asking you to tell me a little bit about yourself and your background and PedidosYa. And kind of what what PedidosYa does?

Mathias: Right. Thank you. First of all, thank you for inviting me. This is great. Having the opportunity of sharing what we are doing here. It's you know, it's something that everybody doesn't know it's so complicated and so complex the payments world, the fraud world, so even between software developers.

It's like I saw you send somebody an amount I get charged on the card. There's more to it.

I'm a software developer, I lived in Brazil for a while, so my main languages are Spanish and Portuguese. I mean as a software developer, you have to speak English because everything.

I've been working in PedidosYa for five years now. Previously I worked in software factories. PedidosYa is my first product center company I am very very proud of what we are doing.

We grew a lot these years the market is changing and we are doing lots of
new things every day. So it's great. Maybe about the company I think you don't know it but in the U.S. There are similar companies PedidosYa focuses on mainly on food delivery, but currently we are expanding a little more to make everything come to you. It's like you are in your couch at home on your cellphone and you think of anything and our objective is to get it to you

As I said our main focus is food so we we have a lot of experience in food delivery, but right now we are making groceries pharmacy, drinks, for example if you have a party and with in terms of alcohol or ice we can deliver it to you.

Nathaniel: Awesome. That's really cool. I'm gonna like I have a few questions too about delivery because it fascinates me but before we dig into that though, I want to ask a little bit about, you know, Latin America. Tell me tell me a little bit about you know how y'all take payments there?

What would you see as major differences between the payments landscape in Latin America versus the US?

Mathias: Well to answer that question. Let me tell you a story. So that I put you in context I'm not from the capital of Uruguay. I'm from the countryside and last week when I was talking to Peter about doing this interview. Something very funny happened. I think I should I went to a countryside to visit my family and I went to a Mini supermarket and I when I went to when I got my things I went to the cash register. Gave them my card and they just like no no. No, we don't take it.

It's like I'm not trying to pay with Apple Pay. It's a credit card. And I didn't have cash in my wallet so when I went to the cash register show that the card that 'new thing'.

No, no. I don't trust. Things where I don't get my money right away. I like seeing the bills.

This is a business owner. I said like wow, I don't have cash. So he said something. He said I can open like an account a trust account in the market. He had like a notebook and each sheet will have a name of a person and there he kept like a balance

So you get your your debt I could take the things and go to my home later another day, maybe or next month. I could go to the market and pay. So I think it's a great example of how this is Uruguay but I think it happens in Latin America we are still only be scared about technology and not feel seeing things happen in real life, you know

We have a lot of personal trust and we don't trust in digital things. It's like when I say, yeah, okay, let me transfer give me your bank account and I can transfer money to yours. It's like oh no, no, give me money, so it's a continual struggle to convince people to to move on, you know.

Right now we are in 30% online payment sure. That's average in Latin America in some countries. Like Chile, for example, you're great. But here in Uruguay it's like 25% or 30% because of how people are you know I'm talking about customers and business owners. The restaurants don't want to accept credit cards and the customers don't want to put their website.

But I think good good things are happening. We are showing people how easy it is to not have cash to just wait for their delivery guys. Take your food that can eat you don't have to make. First of all Uber is helping with that here only except credit card. So it's it's like Uber is extremely better than taxis here so you have the customer you win the customer there and when you create the account in Uber there's not an option for cash.

So you have to put your credit card and everybody is like oh no what we do, but they want to use Uber so much that they end up putting the credit card in there. I think that's great for us because it makes the person get to know.

Online payments are the future.

Nathaniel: So I guess the question I'd have is you know as you're doing your trying you're trying to build a delivery company and yet you end up running smack dab into this payments all these payments challenges. I mean how much how much of your job do you feel like is doing delivery? Logistics and how much of the job is doing payments at this point?

Mathias: Yeah, well yeah the company PedidosYa belongs to a group of companies. It's called a DeliveryHero they are based in Berlin and we are like companies all over the world Asia, Europe, Middle East, Latin America, we are doing like the same or similar things

And so we're a big team. We have people specialized in delivery. You have teams. I have no idea what they do. For example, there's a team specialized in optimizing their routes for the deliveries know where to have our bikes to wait for orders and where to put them before they deliver. After they deliver if they go back the restaurant there's a lot of logistics that I don't know.

When I started the company we were like 20, so I was able to answer all the questions that you have

Right now we are, counting the delivery guys the riders as we call them we are like 2,000 people or more. I'm focused. I'm very focused on payment. The checkout part of the user experience, user journey. But we do a lot. There is a lot of optimization of what the user does.

I mean one year ago. We were just giving a list of restaurants to a user and that's all. We started showing more pictures, you know, you want to see the food that you're gonna eat so we started sending our own photographers to the restaurants and take real pictures of the food.

We also had groceries, pharmacy, so the menus that we show had to be different. You know, you know supermarket you have like 500 products you can't make them a list, right. So there's people here specialized in things we were tracking what the user does when he when he leaves an order unfinished. Why did you do that?

So my job here is to focus on when the user already chose what he's gonna eat or what? My job is to make the money move, you know. When we started with the payments team we thought our goal was going to be like charge a certain amount of money but and something incredible happened it was fraud.

Now we changed my email signature to payments and fraud because our team right now it's very focused on preventing fraud. Trying to realize if the user that it's trying to buy it's a real person. Somebody with the intention of eating that or reselling it or trying to test a card.

We are unfortunately, we are a pretty good target for people trying to test cards because we have like very little amount small amount. So we have a lot to do we did. We already did a lot. We have many things pending. But I really love much of it's like continuously changing and very dynamic. All our code can change from one day to the other when a new developer enters the team, I say like forget everything about requirements. You know what permanent things? We have we are always trying things changing things.

When we find that a fraudster discovered a weakness we go back to improve it. It's very dynamic. So like since a significant portion, I'm assuming a significant portion of your transactions are cash on delivery.

Nathaniel: Do you do you have fraud issues there as well? Where does most of the fraud lie is most of it lying in online transactions or the cash?

Mathias: Well, most of the fraud transactions are online because they said it's somebody testing a card or maybe doing some testing a lot of cards. The real life fraud its the it's real it happens, but it's a smaller.

Nathaniel: So I'm curious like backing up a little bit to the wider delivery market. Was home delivery of food from restaurants and these other goods was that already a common thing in your markets? In the US we now have a services delivering a wide range of things, but when I was growing up, it was strictly restaurants and each restaurant sort of had their own delivery setup.

This new wave of online delivery stuff popped up. What did what did things look like in Latin America for delivery?

Mathias: Well there I had to like separate the answer by countries. Here in Uruguay for example distances are shorter we are a very small country and the capital is very small. So everything is like five minutes or ten minutes from you. So delivery well, yeah Restaurant delivery always existed. So many different tastes you. Yeah, it always existed delivery of other things here in Uruguay It's amusing because when you think about toilet paper, it was like it's really easy to you to get to go five minutes you get to a supermarket. But in other countries in bigger countries, like Brazil, Colombia. It's a lot of distance that you have to cover. So the delivery of other things are very existed

What we are doing now is trying to create a new way of getting your things. Yeah, but I mean one of the good things about my job is that I'm a user. So, but when one interesting thing about the restaurant delivery. For example you mentioned the restaurant have their own fleet of motorbikes, right one thing that we are changing is that we provide the logistics, it's like a Uber for food

We have our bikes and we send them to the restaurant and take the food to houses. Another thing that we are changing not in Uruguay, it's very common in Asia for example our partners in Asia. It's what we call cloud kitchens.

You know the main reason why restaurants exists is that you you want to you want to eat the main reason why the restaurant I think has tables in it. It's because you want to eat your food fresh. So you put tables at the restaurant because it's like two meters from you three meters.

But we are optimizing so much the logistics to to get you to get food to you that. We are able to create restaurants that don't exist. They don't have a space for you to go and eat there, right that's something that appeared things to do there for delivery applications you have restaurants there. They are extremely small they are like one table or maybe two tables and just two chairs maybe. And they are full of delivery guys at the door because they are always making they are extremely optimized so that you can get your food.

In the same time that you would receive the food in the restaurant 10 minutes or maybe less. I think it's going to come to Latin American and the US. These cloud kitchens are like restaurants that they don't have a sign. It's only a kitchen and the chef opens the door and there's a guy waiting in the motorbike and you get your food in five minutes. And that's it's really useful in Asia because you have millions of people living in a city right if you if you have the opportunity to squeeze a restaurant in Berlin in a populated area, you capture to serve a lot of people.

So maybe maybe somebody a restaurant owner or a chef doesn't have to invest so much and they have the opportunity to show what you are doing they are doing to share their food. That's for me it's a great idea.

Nathaniel: One of the reasons that I get to talk with you is y'all use Spreedly and I'm particularly curious about you know. How does the ability to use multiple gateways? And interact with multiple payment backends, like how does that affect your payments flow? Why is that important for the kind of work that you all are doing?

Mathias: When we started around 2015 I think, our first idea was like well, let's integrate with a payment provider. Let's choose one and go with it. We failed because we for example PayPal it's not an option. There's no penetration because of because of what I said about putting your credit card on the internet.

I think the younger people are starting to trust that also to wait for it and want it but the larger percentage of people. In the Gateway world so we couldn't find a gateway that covered all of our countries. They're like nine countries. We didn't find a provider that covered all of the cards that we wanted to accept.

Maybe we found one that only accepted Visa, MasterCard, American Express. We wanted to accept local cards or maybe smaller regional cards, so we ended up with an ecosystem of 10 or 11 providers, depending on the country depending on the card.

Each provider is better or worse with a type of card issuer operation type credit debit. In some countries you have different payment methods, for example Chile. It's very common to make a transfer. I think in the U.S. It's called Direct Debit.

In Uruguay not common. In Brazil there they are they have a lot of options. More options and he had more more fraud. So we have we had to adapt to each country. So it became speaking in terms of software technically it became a mess because you have to Consider all the different kind of response messages that you get you have to keep in mind all the possible states that are payment has. For example some providers allow authorize and capturing in two steps, some don't. Some of them allow partial refund.

So it's a jumble. What we what we are trying to do that's why we got to know Spreedly is to unify that. To try to get the opportunity to sleep at night.

Everything can break down from one minute - yeah, I mean. What went down when whose fault is it right now? It works like 20 actors because you have all the payment providers of the different providers in some cases we speak directly to issuers. So I my phone is this loaded with lots of contacts.

At peak hours at like dinner, weekends or days with rain or an important match. So when people are enjoying their meal I have like on the phone two phones.

One of our goals short term would say is to try to reduce the number of people that we have to contact when somebody goes wrong and to reduce or maybe standardize what we say to the customer because we have like different array of possible errors and getting to know Spreedly it's pretty nice pretty good for us because it solves a headache for us and allows us to think of new things.

Nathaniel: Well, thank you so much for coming on and chatting with me I find the different markets fascinating. I think we all wish that we could just pick the one provider when we start out at these things and then you get into payments. It's endlessly fascinating just all these different things that people do to exchange money and to issue
goods but it's complicated. It's great to hear some about what's going on in Latin America. So thanks for coming on.

Mathias: Thanks to you it's a pleasure. It's okay. I love sharing.

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