FinanceFeeds Podcast Ep.#11: Zotapay’s Alex Behar offers insight into alternative payments for FX/CFD brokers

The eleventh episode of the FinanceFeeds Podcast hosted by our Editor-in-Chief Nikolai Isayev is out. On the other side of the talk was Alex Behar, Chief Information Officer of Zotapay, the payments marketplace.

The productive talk saw them both embark on urgent topics for the FX and CFD brokerage industry as firms look to emerging markets without the hassle associated with those regions in regard to payments.

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As he put it, Zotapay is a payments marketplace that allows merchants, predominantly Western ones – from Europe and North America – to access alternative payment methods (APMs).

The need is there because, outside the OECD, credit card penetration is under 20%, with nearly 3 billion cards issued to nearly 1.5 billion unique individuals. We usually call the other 6 billion people “unbanked”, but Alex Behar begs to differ: “They just don’t use the same banking instruments that we do”.

Enter Zotapay, whose focus is on the non-credit card world – although they also offer credit card solutions, but they’re bread and butter is to provide connectivity to the other 6 billion people.

Alternative Payment Methods reach the other 6 billion world citizens

Alex Behar reminded Nikolai that the card industry itself has been plagued by security issues ever since it was born. “if you can take a photo of the CVC on a card, you can process that transaction”. And there are more reasons to avoid cards besides their security faults: cost is one of them.

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For example, at a seafood market in Indonesia. a POS terminal is likely to cost more than the seller’s fishing boat. “It’s a major investment just to participate in the card network itself. This is why alternative methods ended up sort of winning the popularity contest in the emerging markets.”

“Today, a fully functional Android phone is $25. It has NFC, it can scan and display QR codes, and the settlement is immediate for these APMs”, said Alex Behar in defense of alternative payment methods.

“It provides security like no other card ever could because both devices are connected to the internet. They’re able to conduct a transaction without any sensitive information. Inherently, the fraud rate or bad transaction rate of APMs is much lower. That’s why a lot of merchants and vendors would lean towards APMs once they understand the ecosystem and how reliable it is”, he continued.

And, as opposed to cards, APMs are bidirectional, which allows them to both acquire and send funds, which is an opportunity for brokers to build “amazing features”. The card ecosystem is also plagued with chargebacks, which risk is priced in among all clients. Such disputes come in factions of a percent for alternative payment methods because these are immediate.

Zotapay acts as the broker’s payments team + technologies in a box

Alex Behar saw the APMs trend accelerating over the pandemic with Emerging Markets reducing exposure to cash and only a few players like Zotapay offering APM solutions in those regions.

Zotapay is catering to all kinds of diverse clients: from local government agencies trying to reach their own citizens  to public FX and CFD houses with large reputations to defend.

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“Larger treasury desks and the wider brokerage industry are aware of the financial operation challenges of dealing with multiple vendors, currencies, settling from multiple destinations, assuming all the currency risk while funds are being repatriated”, he continued, pointing that as the reason why largest institutions have dozens of staff in their payments division and adding that Zotapay acts as a payments team along with all the associated technologies in a box.

“We operate multiple relationships per jurisdiction”, he said as he explained the hassle for brokers to address each market, starting from connecting to several payment services providers (PSPs), and the recurring outages or maintenance issues that make brokers miss conversions no matter their marketing budget.

“What we would do on behalf of our clients is effectively maintain all of these relationships around the world. Currently, as of a few weeks ago we are looking at 1200 payment methods all around the world in 60 markets” and this would translate to a familiar experience for the payment client. raised conversions. more trust, and branding opportunities for brokers.

Zotapay effectively flattens everything into a single API or one of their various plugins for the benefit of their clients. In this case, from the brokerage industry.

Zotapay’s flows are reliable even on 2G networks

The firm has doubled down on its mobile-first payment focus because, after conducting thousands of transactions per second, they realized the internet is not as reliable as in the developed world, with 5-6% of global internet being inaccessible at any given moment.

“We monitor the same mobile internet providers in the same city to check outages of PSPs to avoid lost conversions, so that all of our flows are reliable on 2G networks”, he said, adding that they support hundreds of legacy phones that are no longer supported by their maker in order to widen the addressable market.

As to the cost of acquisition for the online trading industry expanding into the emerging markets – including Africa, Southeast Asia, and LATAM – it is much lower than first thought because these brokerages marketing campaigns directed at Europeans are often broadcast all around the world. It inadvertently affects the cost of acquisition for a lot of companies.

If they’re brand is already strong in, for example, Europe, then the cost of acquisition in emerging markets is lower and the ability to address them is now technologically more feasible with solutions like Zotapay.

Zotapay uses stablecoins to compete against SWIFT and SEPA

Zotapay is not particularly focused on the digital asset space, although the firm is a user of the institutional side of crypto.

“We use stablecoins to compete against SWIFT and SEPA. For providers all around the world we are able to work directly with stablecoin issuers. Today, it is effectively cheaper to transact outside the SWIFT and SEPA networks”, he explained, adding that much has changed during the last crypto cycle with a lot of institutional groundwork and capital which allowed the ecosystem to challenge certain norms in settlements.

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“I think that part is here to stay and grow”, he continued as he sees increased openness from vendors and law enforcement successfully tracking down the “baddie”, which raises trust within the institutional world.

Transactions using ETH mainnet and BTC should be further down the road as these are still very expensive today. “Until we see a major L2 adoption or material change to gas fees on Ethereum it is unlikely that retail” will adopt them.

Alex Behar is an expert in cybersecurity

The interview also covered travel, food, and Alex Behar’s passion for fighting cybercrime and extremism. He is a visiting lecturer on Cyber Defense and Crisis Management at the University of National and World Economy, Department of “National and Regional Security”.

He said one of his biggest achievements is to teach and pass on the hard work in law enforcement, which is something that gained center stage with the Russian invasion of Ukraine as smaller democracies realize the existing talent pool for cybersecurity is not enough for the demand, which leaves them more vulnerable to threat actors.

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