Our Africa Head of Expansion

Two of the largest economies in Africa, Nigeria and South Africa are good examples of the fragmentation in emerging markets. When we look at these regions, we need to look at them holistically before tackling the payments side. When you combine these challenges and try to successfully expand into the country, you can understand why operations are complex.

Nigeria faces liquidity issues with access to USD, and tight foreign exchange controls. You'll have limited access to USD, and most cards are limited to Naira payments only, so there are no cross-border transactions. This has created a lot of competition, with many players in the fintech space, as well as banks, trying to vie for the attention of consumers and businesses.

On the other hand, South Africa is more industrialized than Nigeria and doesn't have the same FX liquidity issues; exchange control is strict. So there isn't a liquidity issue, but rather restrictions on accessing USD, and taking it out of the country.

Both countries stand apart from their neighbors in Africa, as they are not mobile money or cash-led economies like Kenya, Ghana, and Egypt. Local credit and debit card schemes, and bank transfers are currently the preferred payment methods in both regions.

How does dLocal navigate the regulatory complexities of these markets, for itself and its partners? How does dLocal assist with solving these regional challenges?

When we look at these high-growth markets, we look at the areas where no light shines on them, dLocal is the flashlight uncovering the information that is otherwise shrouded in pitch black. There isn’t a guidebook for the regions we operate in.

We then look at the gray areas, what are the complexities we already know about, and how can we distill them for our merchants? As an example, in Nigeria, licenses are straightforward, but time-consuming, with long process times.

In South Africa, there are two licenses needed, and the process is more simple. However, a challenge to navigate here is the competition from legacy and traditional systems in place.

Here, partnerships are imperative. Disrupting decades-long, traditional payment systems takes work. So we do the work with banks, PSPs, and regulators.

Importantly, for all these high-growth markets, we continuously engage with regulators, stay updated on government policies (which are always changing), and being ahead of the game is important.

Ultimately, dLocal has two constituents: merchants and the consumers. If we solve problems for the merchants, it has benefits for the consumers who are citizens of a particular economy. And that economy will be positively impacted by what we are selling. We work with our partners to ensure we're not just building castles in the air. We're building solutions that work. And I think that's what makes our merchants happy. Our partners know they can trust dLocal, look to us to find solutions, and they know we don't make promises we can't keep.

Right, it's not like we give them access to the product and then say Okay Bye - we're continuously keeping an eye on all movements in the market, from all angles.

Have you had a personal experience with lack of access because of APMs not being offered?

Two examples. So, before dLocal went fully operational in Nigeria is when these issues started getting out of hand. I subscribed to a popular media streamer, using an international card. It was expensive, at the time, between $USD9-14. It was the same price as the USA, but if you're looking at subscription costs in the context of the economy and environments, it's a lot.

There wasn't a localized price, all streaming and eCommerce merchants were cross-border. In Nigeria, they were restricting access to dollar usage. It went from USD$100 per month, to USD$20 a month, to zero. So the price of these subscriptions wasn't relative to the value it was giving me in Naira.

When these companies localize their payments and pricing, I can see the immediate impact on the pocket. All global companies should think, how many more thousands of subscribers are out there who just want to pay, they just want to use the service but they are locked out.

The above experience is the norm for emerging market consumers, and underscores the huge latent demand when the barriers of pricing and payment methods are removed. Localized payments are a win-win-win for platforms, merchants and consumers.

What would you tell someone that wants to expand into Nigeria and South Africa, but doesn't know where to start?

• Do thorough research: the on-the-ground reality is often different than what you read online
• Understand the impact of regulations and the local economy on your specific business
• Consider whether it's worth the time and cost to localize yourself, or better to find a capable local partner
• Look for partners who have built the necessary networks and infrastructure, and can handle collection on your behalf in a compliant way