The world of payments products and behavior has advanced tremendously over the past 15 years, but that wave of innovation has had an unfortunate side effect — the incredible amount of fragmentation and oddly isolated behaviors. Ruben Salazar, head of innovation and products for Visa Latin America and the Caribbean, and YellowPepper founder and CEO Serge Elkiner joined Karen Webster recently to discuss the problem – and why Visa just announced a deal to acquire YellowPepper.
Salazer said all of us can observe the industry’s fragmentation in our own consumer lives. When we want to send kids an allowance, we open Venmo. When it’s time to shop in store, we open up Apple Pay and when we want to pay the electric bill, we send an ACH payment.
“I have several apps and all of them technically do the same thing, but I have one account for one use [and] I have another one I use for other cases.” Salazar said. “The idea is to start making a better container that has the P2P experience, the NFC experience, the QR payment experience and everything else inside it. We need to add a layer here.”
He said that need to add a layer is what inspired Visa to cut a deal to acquire YellowPepper, a Latin American FinTech, two years after making a strategic investment in the firm.
YellowPepper has developed a rich set of application programming interfaces (APIs) to enable issuers, processors and governments to quickly and securely access multiple payment rails for many payment flows through a single connection. And its proprietary alias directory makes it easy for firms to actually reach each other over those rails. Salazar said those are key to building that better container.
Elkiner and Salazar said they started such efforts in Latin America because YellowPepper has a large and quickly growing customer base there. But with Visa’s scale behind it, YellowPepper’s platform — which offers quick integration to any set of rails a bank needs — has a very global future.
Building Better Connections
Banks are ultimately the best-positioned place where all of these payment rails are centralized, Elkiner said. After all, they already mostly own customer relationships and have done all the know your customer (KYC) necessary to onboard clients.
Thus, they’re positioned best to provide consumer authentication, control payment credentials and are the most experienced players in this kind of portfolio management.
But traditional banks are facing increasingly stiff competition from neobanks and digital start-ups that are pushing in on the margins and eating into those consumer relationships, Salazar and Elkiner noted. What banks need is an upgrade that offers payment experiences that are elegant and multifunctional across all the rails and mechanisms (like tokenization) that users might want or need to access.
Elkiner said YellowPepper’s platform allows them to make that offering — without having to rip out their legacy systems or engage in a major rebuilding project.
“A typical program can be launched 90 to 120 days taking the administrative work into account,” he said. “The actual tech is a one-month integration. The elegant part — banks don’t have to change their core; we just add the layers they need to work. We let them put value-added services on top, all in an efficient way and cost-beneficial way to them.”
As important as offering access to any and all rails in a brand-agnostic way, YellowPepper also makes it much easier for senders and recipients to connect via their alias databases.
In the old world of sending funds, one needed an account number to which to transfer the money. But Elkiner said that’s friction, since most people don’t actually know their account number or routing number off the tops of their heads. And even if they do, handing out a bank account number rightfully makes some people a bit queasy.
The alias database, on the other hand, is built on data that people might actually have and are willing to give out, like phone numbers or email addresses. That makes the search-and-send process simple and smooth as opposed to a friction-filled slog.
Growing The Network Of Networks
Visa’s vision over the past several years has expanded beyond merely being the world’s largest card network. It now aims to be a “network of networks” that will make it possible for anyone in one corner of the globe to move money to another however and whenever they want.
“This is on a smaller scale is how we’re going to build on the promise of that world network,” Salazar said. “Regardless of the rail someone wants to use, YellowPepper is there to integrate. [With] all these transactions of money movement, we can add significant value. We can add the alias director, we can add tokens, we can add B2B connect, we can add Visa Direct.”
And that baseline of connectedness makes it possible to keep adding on value-added services, Elkiner said. That’s also what ultimately makes for the portability of the YellowPepper project.
Elkiner said that while the operation is expanding throughout Latin America region, the specific balance of value-adds varies from place to place. But what YellowPepper has learned 15 years into the business (and a few strategic pivots later) is that for all that differentiation, there’s an essential need in every market.
“It’s very variable, but I think that there are core things that are very similar as well,” Elkiner said. “A bank is a bank, a consumer is a consumer and the consumers have needs that are very similar in terms of [being] able to pay. Merchants, even local ones, are having to adapt as well to these new consumer habits and consumer experiences.”