Clip is helping Mexican businesses go cashless
Clip CEO Adolfo Babatz joins Yahoo Finance Live to discuss taking Mexican businesses to a cashless system, financial inclusion with digital payments, credit card usage, and the outlook for the digital payment push in Mexico.
Video Transcript
- Right now, digital payments taking the world by storm. You're probably familiar with the names in the United States mixing up the way you pay for things at the store, but our next guest is making it possible for small businesses in Mexico to go cashless.
Let's bring in Adolfo Babatz, founder and CEO of digital payments and commerce platform Clip. It's great to have you on the program, Adolfo. I wanted to ask about what the landscape for digital payments looks like in the markets that you serve. Are you seeing a demand for more financial inclusion through your types of products? And what is your growth looking like in 2022?
ADOLFO BABATZ: Hey, Brian. Thank you for having me here.
So the outlook is pretty amazing. Here we have a mostly greenfield opportunity, compared to other places, like the United States. Here, the vast majority of merchants do not take digital payments. Actually, only about 15% of the total that could take actually take it.
And with Clip, we provide payment acceptance right now. Two out of [AUDIO OUT] merchants that come in the Mexican payment system that are new come through us. And 80% of these merchants are new to digital payments. They only took cash.
So what we're seeing in emerging markets-- not only in Mexico, but also in places like India, Brazil, Southeast Asia-- is a huge demand for digitalization services-- one of them, of course, being payments. But not only that. It's also financial services, e-commerce, and other stuff.
But we are seeing quite a huge demand of these type of services. To give you one data point, we have become, already, the largest payment acceptance provider, in terms of number of merchants, by far in the country. And it has to do with this. This is a greenfield opportunity. Many people do not have access to these services. They have been overseen by traditional institutions, and we are actually providing them with a product and services that really help them with their business, that really help them grow their sales.
- To what extent do you think that's been accelerated by the pandemic? And how much of that has proven to be sticky? The thinking is that it was already moving in that direction, but once you get past a certain threshold, there's no going back.
ADOLFO BABATZ: The pandemic did accelerate it a little bit, Akiko, on this, especially on what we call remote payments. These are what, in the industry's jargon, is card-not-present, meaning you don't have to be physically present to do a transaction-- e-commerce and things like that. But still, we also saw a huge increase in face-to-face transactions. It's not only the remote piece, but also the face-to-face.
And actually, what we're seeing right now across all the system in Mexico and in Clip is that the card-not-present, or the remote payments-- still growing a lot, but it's not growing as fast, and we're seeing a huge increase in face-to-face transactions. And this is because merchants are using the services more and more and more, and consumers are also demanding that their cards are accepted and used, that they'd normally pay with cash.
So COVID was a shock, if you want to call that. It was growing very nicely. COVID gave us, as an industry, a shot of adrenaline that really kicked in the digital payment piece, and now it has become mostly permanent.
That being said, there's still a huge market ahead of us because the vast majority of businesses still take cash, even in places like the United States. But in Mexico, it's even, of course, more pronounced.
- Adolfo, when we talk about the competitive landscape in this growing space, we know that the central bank of Mexico is working, as is a number of other central banks, on the possibility of a central-bank-issued digital currency, a digital peso, if you will. Is that something that threatens your business, if people are going to the central bank's digital wallet, as opposed to using payments like Clip?
ADOLFO BABATZ: No. We provide payment acceptance to the merchant. It doesn't matter what the payment method they use. They can use a card. They can use an SMS. They can use a digital coin. They can use coupons. They can use payments in installments-- buy now, pay later, in US industry jargon.
It doesn't matter. We take anything. And eventually, when government-issued coins take off, we will take that.
And the best example of this is India. What we saw in India is the rise of UPI, which is this digital payment system. And it has benefited everyone, because what happens, Brian, is it takes cash out of the economy. So the tide is so large, it just lifts everyone, and there is more digital payments in the system as a whole.
So I'm really looking forward to have government-issued coins, because hopefully, it will take a lot of cash out of the economy, and that will benefit everyone. So no, for us, it's amazing. It's amazing news.
- Well, Adolfo, we'll continue to track the progress. I hope to have you back on the show again soon. Adolfo Babatz, founder and CEO of Clip.