dLocal (NASDAQ: DLO) is a technology-first payments platform enabling global merchants to connect with billions of consumers in emerging markets.
What does dLocal do?
dLocal is a 360 payments platform designed to handle mass online payments in emerging countries across Latin America, Asia Pacific, the Middle East, and Africa through one single API platform. Global eCommerce retailers, SaaS companies, online travel providers, and marketplaces rely on dLocal to accept more than 700 locally-relevant payment methods, as well as to issue millions of payments to their contractors, agents, and sellers in growth markets around the world.
Who are dLocal’s customers?
dLocal is focused on enterprise global merchants. Some of our customers include Amazon, Booking.com, Didi, DropBox, Inditex, MailChimp, Spotify, Shopify, TripAdvisor, Uber, and Wikimedia.
Payments in emerging markets are complex. If you are a global merchant and you want to process a payment from a user in Africa, you don’t have a lot of means to do so. The cumbersome financial infrastructure is defined by fragmented payment methods, high failure rates, dynamic regulations, and diverse tax frameworks.
dLocal is focused on making the complex simple, redefining the online payments experience in emerging markets. Through a single direct API, we enable global enterprise merchants to get paid (Payins) and to make payments (Payouts) online in a safe and efficient manner. Merchants on our platform consistently benefit from improved acceptance and conversion rates, reduced friction, and improved fraud prevention, leading to more access to and enhanced interaction with billions of people in the markets we serve.
Where is dLocal present?
We currently have capabilities in 39 countries.
Our operating countries include: Argentina, Bangladesh, Bolivia, Brazil, Cameroon, Chile, China, Colombia, Costa Rica, Dominican Republic, Ecuador, Egypt, El Salvador, Ghana, Guatemala, India, Indonesia, Ivory Coast, Kenya, Malaysia, Mexico, Morocco, Nicaragua, Nigeria, Pakistan, Panama, Paraguay, Peru, Philippines, Rwanda, Saudi Arabia, Senegal, South Africa, Tanzania, Thailand, Turkey, Uganda, Uruguay and Vietnam.
To which countries will dLocal next expand?
We are focused on emerging markets, with the goal of targeting all countries where our enterprise merchants seek to do business.
Which products, payment methods and connections does dLocal offer?
Our two main products, Payins and Payouts, allow enterprise merchants to accept local payments (Payins) and to issue payments to local contractors, agents, and sellers (Payouts). We offer solutions for both cross border payments and local-to-local ones.
We enable global merchants to connect with over 600 local payment methods.
How does dLocal monetize its services?
On Payins: We process and collect funds from local users, which we then disburse to the enterprise merchant, monetizing prior to disbursement as a percent of total payments volume. For example, a user in Chile subscribes to a global streaming provider and wants to pay with a local credit card. We process the transaction through a local acquirer in Chile, collect the funds, and disburse to the streaming service in the United States, monetizing prior to disbursement as percent of TPV.
On Payouts: We collect funds from enterprise merchants to be paid to local contractors, monetizing prior to disbursing the funds through a settlement fee. For example, a global online marketplace for people to list, discover, and book accommodations pays their hosts into their bank accounts. The accommodations service pays us in the United States or Europe, we’ll convert the funds into local currency, pay the relevant taxes, and distribute the funds to the local host’s bank account, in this case monetizing through a settlement fee.
In addition, we monetize through minimum monthly fees, installments where they are allowed, and revenue on exchange services.
Which key trends in the payments industry benefit dLocal?
The global payments industry is experiencing a rapid shift towards digital payment methods. In 2020, consumers and businesses worldwide made over 454 billion purchase transactions on global network cards, and the share of e-commerce as a percentage of total global retail payments volume expanded to 21%, compared to 16% in 2019, aided by the accelerated shift to online purchasing during the ongoing COVID-19 pandemic.
In order to capitalize on this trend, global merchants continue to seek international expansion, thus raising their need to facilitate payment transactions from a wide array of methods and channels across complex and fragmented payments ecosystems. Emerging markets are expected to continue to grow faster than developed markets overall, and we believe our opportunity is driven by this and by the following favorable trends.
Increasing globalization of commerce
Fueled by fast-paced changes in technology and the increased mobility of goods, globalization continues to be a driving force in the world economy. Yet maintaining compliance with local regulatory and market standards can be costly, burdensome, and often hard to address without the help of a partner with the adequate know-how, technology, and level of connectivity to the local payment infrastructure.
Continued rise of the digital economy
Technology has revolutionized the way we interact with one another and the way we consume information, entertainment, goods, and services. Studies conducted by the World Bank indicate 56% of individuals living in the countries dLocal operates in used the internet in 2019. Furthermore, e-commerce has been a primary beneficiary of shifts in purchasing behavior during the COVID-19 pandemic. Multiple industry observers and market participants (including Insider Intelligence and Euromonitor) believe this increase in digital commerce has the potential to become permanent, driving a two to three-year acceleration in adoption levels.
We believe that as the digital economy continues to expand globally, particularly in emerging markets, dLocal is well-positioned to serve the needs of key participants due to our inherent emphasis on e-commerce and our shared appreciation for technology and product innovation.
Middle class in emerging markets continues to expand
On the back of continued economic growth, the middle class in emerging markets has been increasing its level of spending and online transaction frequency. This group is eager to consume global goods and services previously unavailable due to lack of access or spending constraints, leading to higher growth rates for goods and services in emerging markets, as well as the associated methods used to pay for them. According to the Next Big Future, the global middle class is growing by 120 to 160 million people every year, mostly in emerging markets, and is expected to reach 5.3 billion people by 2030. As a result, a growing emerging markets middle class should continue to gain disposable income over time, raising their expectations of convenience and customer experience.
Cross-border payments in emerging markets are fragmented and are poised for growth
While e-commerce is now mainstream, cross-border transactions still present unique challenges. Furthermore, while developed countries have made significant progress, emerging markets still lack a coherent interoperability between regulatory and technical payments systems. This presents a strong e-commerce growth opportunity as emerging markets continue to make progress towards developing their infrastructure.
Facing differing local regulations, fragmented standards, inefficient infrastructure, and high fixed costs, service providers focusing on cross-border payment solutions are expected to balance the need for local expertise with the increasing merchant expectation of a single, digital, and global experience. In this context, we believe that strong cross-border business partnerships between global merchants and service providers are and will continue to gain importance.
Global enterprise merchants are establishing local presence in selected emerging markets
In order to complement operations that may have initially been run from abroad, some of the largest global merchants are seeking to establish local presence in certain large emerging markets (e.g., Didi in Brazil). Accordingly, once established locally these merchants also need to facilitate pay-outs to local vendors, employees, and contractors, and pay-ins from local customers via their preferred method of payment. As global merchants selectively expand their local presence in emerging markets, the demand for integrated digital payment capabilities becomes even more relevant, benefitting participants such as dLocal that can provide a simplified offering, broader connectivity, and better performance compared to legacy payments providers.
Highly complex and evolving local regulatory and tax environments
The challenges that merchants face are further exacerbated by the increasing impact of regulation in the payments market globally, with local regulatory frameworks that are complex, unique, and constantly changing.
Ensuring adherence to and compliance with these regulatory and tax requirements are costly and burdensome for global merchants. This presents an attractive opportunity for service providers such as dLocal that have local expertise.
What potential disruptions are foreseen in the medium term?
As we’ve already seen with UPI in India, CODI in Mexico, and PIX in Brazil, an uptick in the digitization and instant capabilities of payments is happening in emerging markets. Our solution is built to be payment method-agnostic, enabling both parties to convert with the payment method of their choice. In other words, we’re not betting on one payment method to succeed over another, but adapting our approach and solution for each individual market. Should Bitcoin become a universal payment method, as was its original intent, that could be truly disruptive to the payments industry. But as a deflationary asset, it seems that at least in the medium term, Bitcoin will continue to be viewed as an investment piece and not as a tradeable currency.
How many employees does dLocal have?
dLocal employs over 700 people across 36 countries, including Uruguay, Argentina, China, the United States, and Israel.