Cross-border payments in emerging markets are currently a hot topic, with companies seeing the potential to expand customer bases and unlock growth in regions like Latin America, West Africa, and Southeast Asia. This excitement has attracted the attention of investors, leading to increased interest in companies like dLocal, Payoneer, and CAB Payments, as well as private players like EBANX and Nium. Companies founded in Latin America and Africa have seen significant growth in the industry, highlighting the importance of building a strong presence in these emerging markets.
Emerging markets present both challenges and opportunities, with unique payment methods and a continued reliance on cash in many regions. Companies like Payoneer have built infrastructure tailored to the specific needs of these markets, leading to record growth. Additionally, the demand for exotic currency pairs in emerging markets is creating opportunities for companies with the right connections and systems in place to support these pairs. Companies like Corpay’s Corporate Payments division are expanding their offerings to cater to these markets.
However, companies focused on emerging markets may face challenges when it comes to explaining their businesses to investors due to the volatility and uncertainty of these markets. Quarterly reporting can be chaotic, with unexpected drops in certain markets affecting overall projections. For example, dLocal experienced significant revenue decline in Nigeria and Argentina due to currency devaluation, leading to a negative reaction from investors. Similarly, CAB Payments faced challenges with reduced revenue projections but has since seen its share price climb significantly, highlighting the importance of taking a long-term view in emerging markets.
Investors in companies operating in emerging markets need to accept greater volatility than in traditional markets and understand that fluctuations are part of the territory. Effective communication of these differences is crucial for companies in the cross-border payments space, as market reactions may not always reflect the long-term potential of the business. With so much growth still ahead in emerging markets, more volatility and market reaction can be expected in the future, highlighting the importance of understanding the unique challenges and opportunities presented by these regions.
