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How Adyen changed the way Brazilians pay

How do you solve the challenge of getting people trading online when they want to pay cash and see the person they are giving the money to? How do you boom in a country that is, albeit temporarily, going bust?

Netherlands-headquartered global payments company Adyen’s transactions in Brazil grew 160% in 2014, representing more than 300% revenue growth since it first entered what can be a tricky trading environment for outsiders. Brazil officially entered into recession last year.

Initially adoption was slow, but after three years of operation in Brazil, it is suddenly booming. Why?

“It is hugely different doing business here in Brazil. We have been here for three years, but we spent the first 18 months attenuating and fine tuning to the way things are done here,” says Jean Christian Mies, Adyen’s Latin American sales VP and a native of São Paulo himself.

Adyen started to process payments in Brazil in 2010 when it partnered with Groupon to launch its operation in the market. Soon after, Adyen opened its São Paulo office, headhunting specialists who understood local payments culture. Now it has 200 Brazilian clients, from global traders like Groupon, EasyTaxi and Crocs, to more indigenous businesses such as the airline Azul Linhas Aéreas, iconic cosmetic brand O Boticário, textile specialist Hering and classified advertiser OLX.

Though Brazil’s economy fell into recession in 2014, Adyen’s payment processor business continues to grow. This defies expectations, given the assumption that a payment’s processor is an indicator of consumer confidence. Brazil’s economy, according to analysts, is centred on internal consumption but Adyen hasn’t gone down with the economy’s fortunes.

The recession showed the exhaustion of a growth model that was centred on internal consumption, according to Eduardo Velho, chief economist at investment firm INVX Global.

Velho attributed the nation’s industrial slowdown to a fall in consumer and investment confidence along with rising inventories. Civil construction, manufacturing and investment also suffered badly last year. So why is a company whose success would be tied to general consumer confidence bucking the recessionary trend? 

Mies says it’s down to unblocking one of the obstacles to payments that exists in Brazilian trading culture.

“We’re growing quickly because we’re making efficiencies in electronic commerce,” says Mies. An automated platform frees the end user of all the hassle of different providers, platforms and connections.

The most socially significant advance has been to widen the possibilities of the poorer sections of society, by catering for different trading methods that are not traditionally recognized by e-commerce traders. By tailoring the system to recognize local custom and practice, the company has achieved growth by widening its demographic. 

Brazil has traditionally had high inflation rates, which would obviate against anyone wanting to pay by installments. This would have excluded large sections of Brazil’s population, in a society with a relatively high Gini coefficient of 0.59 for income disparity. The World Bank estimates that the top 20% of the richest Brazilians have roughly 33 times the income share of the poorest 20%.

In response to this, Brazilian traders had evolved their own type of installment payments system, with no interest rates. However, no global e-commerce system has been able to cater for this, until Adyen emerged.

Another adaptation that Adyen achieved was to match Brazil’s continued enthusiasm for cash based payment methods, even when doing business online. It’s a trust thing, says Mies. Much of Brazilian business culture hinges on face to face meeting and knowing people, so Adyen had to cater for the eventuality of online purchasers concluding the deal by physically entering a bank and handing over cash to a teller. A special system of boletos (payment slips) and barcodes had to be created in order to win the trust of a significant section of the population.

“We spent over a year adapting the platform to be in line with what customers expected,” says Mies. It was worth it because few existing players in Brazil can deal with global payments because they are often outdated, rickety and manual.

“It takes patience to gain trust in Latin America and the culture is very reliant on some element of face to face communication for any transaction,” says Mies.

There is some local residual mistrust of foreigners too, but Adyen has repositioned itself almost as a Brazilian company and hired staff and development skills locally.

Having helped more of the population to enjoy the advantages of online trading, can it repeat the trick for small businesses?

“There is a growing small and medium sized business culture and we have helped many of them to trade with new customers who were previously unreachable,” says Mies.

Refreshingly, nobody at Adyen has used any clichés about “thinking local and acting global”. But they appear to have done just that. Proof, if it were needed, that this is a technology company that values fresh thinking and originality.

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Nick Booth

Nick Booth worked in IT in the UK’s National Health Service, financial services and The Met Police, witnessing at first hand the disruptive effects of new technology. As a journalist and analyst, his mission is to stop history repeating itself.

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