Outlook for SaaS companies in LATAM

Outlook for SaaS companies in LATAM

In a recent meeting with our CEO, Stephano, discussing the SaaS market in LATAM and other emerging markets, he had and insight that there was a reality before and after the creation of OpenAI.

With the ultra-growth of OpenAI, which soon reached 100 million active users, a new standard was set for these companies. Before that, SaaS companies focused on regional and national growth before expanding to other countries and markets, meaning that their services were only retained in their initial region.

Nowadays, a SaaS company that is only created with a local mindset and not for global use, may have difficulty attracting Venture Capital (VC) investment and acquiring customers. This segment will naturally become more and more international, so that its -few- developers will be spread across the world, selling their software in different countries and cultures.

Thinking about the different cultures, languages and habits in Latin America, technology companies faced different barriers when trying to exploit this market. Based on this, we can name 3 major barriers that are constantly being overcome by this segment:

  • Adoption of smartphones and mobile internet connection by the population.
  • The development and evolution of broadband connection technologies throughout the Latin American region, which has opened the possibility of complex demands for cloud services, especially for small and medium-sized businesses, and
  • Payments. Based on the North American, Asian, and European habit of using credit cards, most SaaS companies only used this payment method on their checkout pages, which made it extremely difficult to attract local customers.

As a result, the growth of these companies in the region has been remarkable, since they now understand that their services can be used not only in their regions of creation, but also wherever they are needed. In addition, with the study and perception of the needs of each market, it is possible to see how SaaS companies have been developing their products using situations that could previously have been barriers to their growth, as mentioned above, but which have become an important part of their growth in the region.

B2B Payments Challenge

According to the World Bank, Latin America is a region with an extremely banked population, i.e. around 80% of Latin Americans have a bank account, while only 28% of this population has a credit card.

For this reason, B2B SaaS companies are facing new challenges: how to process and receive high-ticket payments online, without credit cards?

According to KeyBanc Capital Markets, the B2B Cloud Market represents around 80% of this industry in LATAM and its average ticket is 45,000 USD per year. Most of their payments are made manually through invoices and bank transfers, most of which are made in foreign currency through Swift. All this bureaucracy is a burden for these companies and their customers.

As a result, these companies end up driving local customers away from their businesses. This is due to a combination of factors which, in this case, would only be to offer credit cards as a means of payment and the currency at the time of the checkout page would generally be USD. This requires the user to have a minimum knowledge of foreign exchange, high tax costs in the case of some countries such as Brazil – credit card IOF is 5.38% – and exchange rate fluctuations which often make it difficult to predict the final cost to be charged. For these reasons, many companies are losing ground in the market, causing consumers to look for competitors who can offer local methods and an easier payment process.

For these reasons, both companies and end-users are demanding less complex, more transparent, faster, and simpler solutions for making payments and invoices in the region. This makes us think about the need for and importance of offering alternative payment methods, as well as ease and convenience, to end-users.

Alternative Payments Methods (APM) are introducing new possibilities.

The creation and implementation of PIX in Brazil was something that revolutionized the country’s banking system. The instant payment system, which is a simple, fast, secure, and P2P and P2B alternative payment method, was quickly adopted by the local population and replicated in similar ways in other countries, as in the case of SPEI in Mexico and PSE in Colombia.

This APM already represents more than 30% of all B2B transactions in Brazil, according to the Brazilian Central Bank (BACEN), and since its implementation in 2021 until September/2023, there has been an 18% growth in PIX transactions between people and companies. As mentioned above, these means of payment enable new realities for SaaS companies, some of which are:

  • Accessibility for local customers: Local payment methods such as boletos bancários, electronic transfers and even cash payments can make your service more accessible to Latin American customers. Approximately 70% of them don’t have national or international credit cards and may prefer local payment methods.
  • Increased customer base: By offering a variety of payment options, SaaS companies expand their potential customer base. This can include local merchants who prefer to pay by bank transfer, startups who want to use their financial resources more effectively or consumers who don’t have credit cards.
  • Competitiveness in the local market: Competing companies that accept local payments can attract customers who have this preference. To remain competitive, it is important to cater to the preferences of local customers and understand their needs.
  • Avoiding regulatory barriers: In some countries, such as Brazil, there are specific regulations regarding international payments and taxes, such as withholding income tax, possible currency evasion problems and exchange rate fluctuations. Accepting local payments can help avoid regulatory barriers and facilitate tax compliance.
  • Reduced Churn Rate: By making it easier for your customers to pay, you can reduce the churn rate due to billing problems. This results in a more stable customer base and predictable revenue.
  • Cultural Adaptation: Conveys the feeling that the company is willing to adapt to local culture and preferences, showing respect for the market and being able to build a stronger relationship with customers.
  • Broadening the cultural market: By accepting local payments, you can access geographical areas within the region that may have unique payment preferences. This allows you to reach wider and more diverse audiences.

The eFX regulation in Brazil, which allows institutions to process foreign exchange transactions of up to USD 100,000 with immediate settlement, paves the way for new solutions and business models for large-scale payments.

In the Brazilian context, the Central Bank’s recent regulation allows companies to carry out these transactions in an automated way via an e-commerce platform, integrating with the checkout process via API. This change could represent a revolution, especially for SaaS and cloud service providers, who will be able to offer their customers a more fluid and efficient payment experience.

In addition, these payment solutions have the potential to be adopted by various digital industries throughout Latin America, covering sectors such as travel, corporate bookings, digital advertising, and luxury goods. As a result, the need to adopt APMs is something that has been growing in recent years and months, causing companies that really want to increase their consumer market and add more value to their product to seek to add this type of service.


Felipe de Bois

SDR Manager at FacilitaPay and Market Analysis enthusiast.


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