Visa buying YellowPepper to capitalize on Latin American mobile commerce
Amid the global explosion of e-commerce and demand for digital money transfers, Visa is acquiring YellowPepper to help drive tokenization and real-time payments in Latin America.
Visa’s purchase of YellowPepper will help it accelerate its “network of networks” strategy by reducing the implementation cost and time-to-market for new payments solutions for issuers and processors in Latin America.
YellowPepper’s platform enables financial institutions to launch account-agnostic solutions that include tokenization, virtual cards and push payments. Demand for more secure mobile commerce solutions is being fueled by a strong growth in smartphone ownership in Latin America, as well as fears over shopping in-stores as COVID-19 is experiencing a spike in new cases across South America.
The acquisition of YellowPepper builds on a prior 2018 investment of $12.5 million by Visa in Yellow Pepper’s Series D round. The transaction is expected to close in the next several weeks. Financial details of the acquisition were not released.
“Over the last three years, we have partnered closely with YellowPepper to deliver innovative solutions to clients in the region,” said Ruben Salazar, head of innovation and products for Visa Latin America and the Caribbean in the release. “As these solutions scale to other markets, aligning more closely with YellowPepper and combining our businesses is a natural extension of our relationship. Together, we can offer a flexible and low-cost platform in order to connect to multiple networks for new flows throughout Latin America and beyond.”
In March, YellowPepper announced its first live project in Brazil with Banco Bradesco and Visa. The project is a Credential-on-File program that will allow Bradesco clients to make online payments through a virtual tokenized card, improving security while addressing the growing demand for e-commerce in Brazil. In the program, YellowPepper is implementing a Visa-powered virtual card in Bradesco mobile banking app to power e-commerce transactions. At the time of the Brazilian launch, YellowPepper was processing 565 million transactions annually.
In May, YellowPepper teamed with Peruvian banks BBVA, Interbank and ScotiaBank to launch a real-time payment platform that combined Visa Direct push payment capabilities with YellowPepper’s Alias Directory, customer identity profile and smart routing tools. This platform allows customers to use an email, phone number or other personal credential to exchange money at their bank using a payment option of their choice.
Prior to the acquisition by Visa, YellowPepper had raised over $51.5 million in funding in six rounds since 2010, according to Crunchbase, a website that tracks investments in private companies. One notable early investor in YellowPepper is International Finance Corporation, a Washington, D.C.-based private equity and venture capital firm that invests in early stage startups in developing countries. Its investments include Klar, the Mexico City-based challenger bank.
YellowPepper provides real time payments, push payments with Visa Direct and Mastercard Send, Ripple as well as ACH. It provides tokenization services using Visa’s Token Service and Mastercard’s Digital Enablement Service. YellowPepper also offers identity solutions that include an alias directory and a payments vault.
Based in Miami and founded in 2004, YellowPepper operates in nine Latin American and Caribbean countries, serving 50 clients and five million active users. The countries in which it currently operates include Brazil, Mexico, Colombia, Ecuador, Peru, Bolivia, Dominican Republic, Costa Rica and Trinidad & Tobago.
A key driver behind Visa’s interest in fueling the next generation of payments in the Latin American markets is the rapid growth of smartphone ownership by young consumers, ages 18-34 years old which has begun to approach U.S. ownership rates, according to a Pew Research Center Global Smartphone Ownership Study.