Introduction to the Importance of Digitalization for Small Businesses
In Mexico, there are 1.2 million retail establishments, with 700,000 being small “tienditas.” By accepting digital payments, these businesses can boost sales, manage their operations and inventory more efficiently, and reduce the risks associated with handling cash. However, various barriers still need to be addressed.
Irina Valassi’s Role and Perspective
Irina Valassi, Vice President of Consumer and Digital Channels in North Latin America at Mastercard, emphasizes the significance of driving digitalization for small businesses and providing them with essential tools to overcome the challenging phase.
Digitalizing processes and accepting digital payments provides a competitive advantage, as it leverages consumer behavior data and enhances efficiency in accounts receivable processes.
Valassi explains that requesting products through marketplaces or WhatsApp with suppliers benefits these small businesses, as “products and services arrive at the store easily,” allowing for better control and projections based on digitalized information.
Benefits of Eliminating Cash
When small retailers accept digital transactions, they experience increased security since they no longer handle cash in their businesses and can conduct secure transactions with suppliers.
“Handling cash within stores is risky; there’s no security, and you’re exposing yourself to robberies. Transporting cash also incurs inherent costs; it’s not the same to pay the store’s utility bills digitally as it is to carry cash there,” she points out.
Digital payments also increase sales, as people carry less cash and opt to pay with cards, allowing for higher average purchase amounts.
Irina Valassi stresses that Mexicans love supporting local commerce, but the lack of digital payment acceptance often prevents it. When people can conveniently pay with cards, they’re more likely to shop at nearby stores they know well,” she explains.
How to Promote Digital Adoption Among Small Retailers
Mastercard’s study, “Transforming Traditional Retail in the CPG Industry,” highlights that 42% of packaged goods (CPG) companies sell through traditional channels like small grocery stores in Latin America. These businesses are crucial allies for digitalizing small enterprises.
The study indicates that in Latin America, there are 12 million traditional businesses, with 1.2 million in Mexico generating $362 billion in consumer sales, and 43% of transactions are conducted in cash—representing a $155 billion digitalization opportunity.
“An even greater opportunity lies in transactions between small businesses and suppliers. The report estimates that 90% of payments—equivalent to $293.4 billion—are still made in cash, checks, or bank transfers,” it notes.
Four Trends Accelerating Digital Payments and Value Transfer
- E-commerce: Platforms enabling small businesses to make online orders with their distributors, improving efficiency and inventory control.
- Conversational Commerce: Although many businesses already use WhatsApp for online orders, there’s a significant opportunity to leverage technology for customer loyalty.
- Credit for Small Retailers: Large brands extending credit to small stores through partnerships with fintechs.
- Integrating Digital and Contactless Payments: Through aggregator point-of-sale terminals, CoDi, or bank transfers.
Key Questions and Answers
- Q: Why are digital payments important for small retailers? A: Digital payments help small businesses increase sales, manage operations and inventory more efficiently, and reduce risks associated with handling cash.
- Q: Who is Irina Valassi, and why is her perspective relevant? A: Irina Valassi is the Vice President of Consumer and Digital Channels in North Latin America at Mastercard. Her insights are crucial as she emphasizes the importance of digitalization for small businesses.
- Q: What are the benefits of eliminating cash in small retailers? A: Eliminating cash increases security, reduces risks of robberies and cash transportation costs, and enables higher average purchase amounts through card payments.
- Q: How can digital adoption be promoted among small retailers? A: Partnering with CPG companies, leveraging e-commerce platforms, conversational commerce, extending credit through fintech collaborations, and integrating digital and contactless payment methods can drive adoption.
