In emerging markets, the digital wallet represents much more than a novel payment option.
It is a digital passport to the digital world. And in that world, a card can go anywhere, but software — not so much.
As digital payments grow in popularity, this lack of cross-border interoperability has attracted attention, including that of infrastructure provider TerraPay President Ruben Salazar Genovez, who is leading a new effort to do something about it.
“We have huge respect for all the technology and the architecture and the user experience that our partners have been building in their domestic spaces,” Genovez told PYMNTS’ Karen Webster. “But the reality is that today, it’s very easy to travel with a piece of plastic, but it’s very difficult to travel with a piece of software. And so, we want to enable these wallets to be able to provide the same user experience and the same sort of payment capabilities when they travel abroad. And that is a gigantic task.”
TerraPay’s infrastructure connects more than 100 digital wallets reaching more than 2.1 billion users, and the company is leading the Wallet Interoperability Council, initially announced Aug. 20. It has partnered with five leading wallet operators — Airtel, bKash, M-PESA, Nequi and Sama Money — to facilitate seamless cross-border transactions between users in Bangladesh, Colombia, Kenya, Senegal, Tanzania and Uganda. The council seeks to address the growing demand for global wallet interoperability, enabling users to make international payments and remittances more easily.
If you think that looks like the beginning of a network for digital wallets, you’re right. Genovez told Webster that more companies from more countries and more digital wallet providers will be joining the core group soon, looking for an outcome where all participants in the digital wallet ecosystem win.
That includes interoperability on the acquiring side, allowing the acquirer to accept multiple payment brands, creating efficiencies not only for the merchant, but also for the consumer.
“We are big believers that in interoperability, everybody wins, but the biggest winner is the consumer because the consumer is using this, and the capabilities that exist in this piece of software allow them to use it everywhere,” he said. “It’s a very challenging task to go build something that the payments networks took 60 years to build. But the conditions exist, and the scale exists, to build it.”
Genovez referred to digital wallets as “containers,” a term that includes the need for document storage and payment options. He said he envisions a future where “in the same digital container, you have all your financial tools. You may have a card credential, you may have your bank account, you may have your store value funds directly in the same container.”
Rather than look at the council strictly as a revenue opportunity for his company, Genovez emphasized the collaborative nature of the initiative. The consortium approach is designed to be inclusive.
“We are not being very prescriptive from TerraPay’s point of view in terms of the technology,” Genovez said. “We’re starting with the consumer pain points.”
Those pain points have led council members to grapple with how to provide the same user experience and payment capabilities when their customers travel abroad. Additionally, they face the complex task of ensuring compliance with local regulations and international laws in cross-border environments.
Noting that the council has already met several times, Genovez said it is starting by understanding the different technologies that exist at each wallet operator and working to establish a standard language for how to process all types of transactions. There are also legal and regulatory hurdles that each wallet operator will need to overcome to operate across borders, which is part of early and ongoing discussions.
The real challenge is to ensure a seamless user experience for consumers, both when they travel abroad and when they send money between wallets across borders, he said. That will require more due diligence around clearing, settlement and the overall operating model for the council.
Furthermore, Genovez predicted the emergence of “smart wallets” within the next couple of years. These wallets will incorporate artificial intelligence to provide personalized financial advice.
“They will be able to tell you in this merchant, you should use this credential, or you should use this payment method because you’re getting the best out of these financial transactions,” he said.
According to Genovez, the council’s work is expected to impact the competitive landscape of digital finance. Enabling domestic wallets to operate across borders could challenge existing Big Tech wallets that dominate cross-border transactions.
Genovez said he sees this as part of a broader trend.
“The expansion of network optionality is growing exponentially during the next five to 10 years,” he said. “And we want to be there from the wallet’s point of view and facilitate this type of connectivity for the wallet containers that are out there.”
The initiative could also accelerate financial inclusion. Genovez estimated that of the 2.1 billion to 2.5 billion wallets TerraPay serves, roughly 600 million to 700 million individuals lack any connectivity to the financial world or the digital world outside of their digital wallets.
“We will see more and more wallets coming directly to SMBs, and it will empower them to participate in the digital economy,” he said. “It is fragmented, and it is the early days, but in the same way that there is a significant number of consumers that are not connected to a payment ecosystem, there is an area of big development and big thinking almost everywhere about how you are going to bring more merchants into digital commerce.”
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