The emergence of cross-border payments in emerging markets has become a hot topic in the industry, offering companies the opportunity to expand their customer base and unlock new growth opportunities. Key markets in regions like Latin America, West Africa, and Southeast Asia are still largely untapped, making them essential spaces for companies to establish a strong presence in now. Investors have also taken notice of the potential in emerging markets, driving interest in companies such as dLocal, Payoneer, and CAB Payments, as well as private players like EBANX and Nium.
Companies founded in Latin America and Africa have seen a significant increase in prominence in the cross-border payment industry, showcasing the growth potential in emerging markets. These regions present unique challenges, as they are not dominated by traditional payment methods like card schemes, requiring tailored infrastructure to meet local payment needs. Payoneer, for example, has invested in building significant infrastructure in emerging markets to support the growth and demands of these regions.
Emerging markets also create demand for exotic currency pairs, which require more complex infrastructure to cater to. Companies with the systems in place to support such pairs have a competitive advantage, as they can meet the evolving needs of global money movement. However, firms solely focused on emerging markets face challenges when it comes to explaining their businesses to investors, as the quarterly reporting can be volatile and unpredictable due to local market conditions.
Investors accustomed to traditional markets may struggle to understand the unique challenges and opportunities presented by emerging markets, leading to potential disconnects when it comes to quarterly results and growth projections. Companies like dLocal have experienced fluctuations in revenue due to market conditions in countries like Nigeria and Argentina, resulting in a negative reaction from investors. However, taking a longer-term view may be beneficial for investors looking to capitalize on the growth potential of emerging markets.
Despite the challenges, companies focused on emerging markets have shown resilience and adaptability in the face of market volatility. CAB Payments, for example, experienced initial setbacks but has since seen its share price climb significantly, demonstrating the potential for growth in this space. With so much growth still ahead for the cross-border payment industry, companies and investors alike will need to navigate the unique challenges of emerging markets while seizing the opportunities for expansion and innovation.
