As digital payments become more prevalent across Latin America, the region is experiencing a shift toward innovative payment systems, particularly account-to-account (A2A) payments. To gain insight into this evolving landscape, we spoke with Uri, the co-founder of Belvo. In this conversation, Uri sheds light on how A2A payments are transforming the region, the challenges they face, and the potential for further adoption.
Table of Contents
- The benefits of Account-to-Account payments
- Adoption across markets: Brazil and Mexico
- The challenges ahead for A2A payments
- Why A2A payments are gaining popularity
- Emerging use cases and future potential
- Conclusion: the future of A2A payments
The benefits of Account-to-Account payments
A2A payments have become a popular alternative to traditional payment methods due to their cost-effectiveness and security. Uri explains that processing payments via credit and debit cards can be expensive, with high fees and increased fraud risk. In contrast, A2A payments offer a cheaper and more secure solution, particularly in markets like Latin America, where both cost reduction and fraud prevention are top priorities.
“In Latin America, you can benefit from both reducing costs and increasing security,” Uri says, emphasizing how A2A payments can simultaneously cut expenses and mitigate chargeback risks. Countries like Brazil, Mexico, and Colombia have already seen success with solutions like Pix (Brazil), SPEI (Mexico), and PSE (Colombia), which enable users to transfer funds instantly, securely, and at low cost.
Adoption across markets: Brazil and Mexico
When discussing the rollout of A2A payments in Latin America, Brazil’s Pix system (Recurring Pix, Pix Biometric Payments or Smart Transfers) stands out as a success story. Launched by the Brazilian Central Bank, Pix enables quasi-instant payments with robust security measures, as users must authenticate through their bank account. Its popularity has surpassed that of credit and debit cards for digital commerce, setting an example for other nations.
“The most important factor in Pix’s success is the push from the regulator,” Uri notes.
The Brazilian regulator’s clear agenda, along with stringent deadlines for financial institutions, played a crucial role in ensuring widespread adoption.
Mexico is following a similar path with SPEI, a system similar to Pix in functionality. Additionally, direct debit, known as “Domiciliación,” is another prevalent method in Mexico. However, unlike Brazil, SPEI has faced challenges in scaling due to complexities in its implementation.
The challenges ahead for A2A payments
Despite the successes in Brazil and Mexico, A2A payments still face hurdles, particularly in user experience and recurring payments. While A2A solutions can efficiently handle one-time payments, they struggle with supporting subscription models like Netflix or Spotify, which require recurring transactions.
“Today, any type of recurring payment either uses the card rails, which are expensive and prone to fraud, or requires the user to make a manual payment every time,” Uri explains.
Belvo aims to address this gap by developing a platform that facilitates variable recurring payments, enabling businesses to automate these processes efficiently.
Why A2A payments are gaining popularity
For businesses, the appeal of A2A payments lies in two key factors: cost and user experience. By reducing fees and improving the payment process for customers, companies can see higher conversion rates and improved revenues. In regions like Latin America, where payment costs are high, this cost-efficiency is a game-changer.
In addition to cost savings, the reduction in fraud associated with A2A payments is a major benefit. In high-fraud regions, the assurance that a payment will not be returned or disputed gives merchants greater confidence in accepting digital transactions.
Emerging use cases and future potential
Uri highlights several emerging use cases for A2A payments in Latin America. Utility companies and telecom providers are beginning to adopt these payment methods, which help streamline collections and reduce reliance on large teams dedicated to processing payments.
Digital wallets and banks are also leveraging A2A payments to facilitate automatic credit card repayments. In Mexico, for example, the inability to repay a credit card using another card has created a need for automatic A2A solutions.
Looking to the future, Uri sees enormous potential for A2A payments to revolutionize cross-border transactions. “How do we enable account-to-account payments internationally? It’s a very interesting question,” he remarks. Although A2A payments are currently limited to domestic transactions, solving this challenge could unlock significant opportunities in global finance.
From Belvo, we see use cases where the adoption of these payment methods is having a direct impact on the ROI of many companies. This is the case of Alvos, which in just two months has exponentially increased its credit recovery capacity.
Conclusion: the future of A2A payments
As A2A payments continue to grow in popularity across Latin America, the potential for further adoption is immense. The efficiency, security, and low cost of these systems make them an attractive alternative to traditional card payments. With countries like Brazil and Mexico leading the way, other regions may soon follow suit.
Belvo is at the forefront of this transformation, working to address the remaining challenges and unlock the full potential of A2A payments. As Uri points out, “Step by step, we can get more market share with these rails.” The journey may be long, but the future of digital payments in Latin America looks promising, with A2A payments playing a central role in the region’s financial ecosystem.
