By Esther Paniagua
Reprinted from Opinno. Original article here.
In countries like Colombia, and in general in Latin America, the percentage of those with banking service is much lower than in highly-developed countries. This is where a payment system that allows people access to e-commerce without having a credit card can make a difference.
Until recently, PayPal and MercadoPago reigned supreme in this market, but in 2002 the Colombian economist [and Endeavor Entrepreneur] Jose Fernando Vélez, winner of the TR35 Colombia award, came in to change this. He and his partner [and Endeavor Entrepreneur], Martin Schrimpff, realized there was demand for a service that would bring together the best of both while adding other integrated services. Thus, they began working on what today is a solid company that is competing head-to-head with the giants in the Latin American market.
PagosOnline differs from PayPal, as Vélez explained, in that it offers alternative payment methods (such as payments with checking accounts or savings accounts and cash payments) and that its service follows a “more personalized” customer support that is integrated into the platform. According to Vélez, this is a necessary addition in Latin America where people are not so used as elsewhere to downloading a manual and doing it all by themselves.
Another peculiarity of PagosOnline is that they offer their payment processing service via the Internet in two modes: gateway and aggregator. The first is aimed at large companies that already have collection agreements with financial institutions and are charged a flat fee per transaction and deal directly with banks. With the aggregator model, however, the customers are individuals and small businesses that do not have direct agreements and could have difficulty obtaining the necessary permits to sell online. In this case, PagosOnline has agreements with financial institutions that provide volume to small businesses. The economic benefit they get comes from the difference between the rate they charge their customers and what the bank charges them. “Having many customers [over 6,000] brings much better commissions than I could have for each of them. That allows us to be very competitive,” said Velez.
In addition, PagosOnline is “the only company in Latin America that offers the service aggregator, similar to PayPal or MercadoPago, the gateway model, similar to Braspag in Brazil and a fraud module, similar to Cybersource” said Velez. “Given that electronic commerce is still in its early stages of development in Colombia, we had to expand our portfolio of services.” By offering three modes, PagosOnline is in an advantageous position against the competition because it can cater to various customer segments. “In Colombia, almost all airlines and department stores are our customers in the gateway model, which MercadoPago cannot,” claimed Vélez.
“We also differ from PayPal and MercadoPago in that we do not require user registration to make payments, which for certain customers is more convenient because no registration is required both in e-commerce website and in the payment system, ” said Velez.
According to Vélez, his payment platform is also the only one certified in Colombia with the PCI DSS global standard that handles credit cards securely over the Internet. Finally, Vélez highlighted another differentiating factor, “We are the only ones offering a fraud guarantee to businesses that assumes losses up to a certain amount.”
All these services have made PagosOnline “a well-known company in Colombia,” according Constanza Nieto, CEO of Globaltech Bridge and TR35 Colombia judge. In 2010, PagosOnline recieved “one of the most important investments in the Colombian Internet sector, generating significant economic returns for our shareholders and preparing the company for its internationalization”, said Vélez, who was also recently listed as one of the 100 most successful managers of 2011 by the Colombian magazine Gerente.