dLocal co-founder takes hands-on role to tap cross-border opportunity

As quickly as cross-border payments are digitizing, most of the market is still being left on the table, and this untapped opportunity has become a target for dLocal's leadership team. 

This month, co-founder Sergio Fogel was named co-president and chief strategy officer of dLocal, taking a more direct role in addition to his work on the company's board. Fogel will work with CEO Sebastian Kanovich and Jacabo Singer, who is dLocal's co-president and chief operating officer.  "It's a heavy load to operate in different countries and meet with regulators and investors who want to meet with senior executives," said Fogel.

The company named Fogel to his new role as dLocal expands and faces competition from other firms chasing share in cross-border payments including Tipalti, Ripple, Block and PayPal. As use cases such as international e-commerce and gig worker disbursements take off, these firms will be challenged to provide scale and technology that can connect people in different countries using different currencies.  

"We have a lot of room to grow in the segments that we are servicing right now," Fogel said. "We're really just scratching the surface."

Fogel has worked in financial technology for more than 30 years and has co-founded fintechs such as ElAgora.com, a B2B marketplace; Uniotel, a VoIP provider; and Astropay, a payment processor. Fogel also worked as a research fellow in IBM's Haifa Research Lab and as an account manager for Oracle in Latin America.

dLocal processes payments for 40 million consumers and has processed transactions for about 3.5 million freelancers. "But when you think about our markets having a population of more than 4 billion and a web-connected population of 2 billion, there's a lot of potential users," Fogel said of the 40 countries dLocal serves in the Asia-Pacific, the Middle East, Africa and Latin America. 

Alternative payroll options are emerging as a major opportunity, Fogel said. The gig or mobile app economy will generate more than $204 billion in 2023 and is on pace to pass $500 billion by 2027, according to Gitnux, a firm that tracks technology data.

The size of the contractor market becomes considerably larger when the definition is broadened to include general freelance work. That global volume is about $3.5 trillion, and is on pace to approach $7.8 trillion by 2030, according to Research Reports World. Twenty-four percent of gig workers in the world are in India, according to human resources platform Neuroworx, which projects the trend toward remote work will diversify geographic sourcing for freelance work. 

"There are skilled workers like graphic designers all over the world, and in many cases they earn a decent salary. But they have a hard time accessing the financial system," Fogel said. In particular, some firms face regulatory challenges when disbursing payroll across borders, Fogel said. 

dLocal has made several moves over the past several years to extend its reach among merchants and corporate users and to speed processing. In April, it introduced an e-commerce payment product for emerging markets that combines verification and payouts for sellers and contractors. The product enables marketplace sellers to onboard merchants via an API and accept payments in their local currency. 

The company has also added installment payments for merchants and launched dLocal Go, a suite of tools that enables small businesses to offer payments and other services in other countries without requiring a local presence. dLocal accepts more than 700 payment methods. 

dLocal is additionally working on real-time processing in markets such as Brazil, which offers the Pix real-time network, and India, which supports the United Payments Interface real-time rail. "Many of these markets are ahead of the U.S. in real-time payments," Fogel said, adding that dLocal is also monitoring central bank digital currency tests in Brazil and other markets. 

Digital transformation has opened new opportunities for cross-border knowledge work at scale, according to Nilesh Vaidya, executive vice president and global industry head of banking at Capgemini. 

"An explosion in entrepreneurial ideas is driving growth in education, legal, accounting and many other verticals," Vaidya said, adding that manual work, which has yet to be digitized, is another candidate for automated payroll. "The development of digital platforms also enables services in multiple countries in transportation, logistics and design services. Hence the scale of cross-border activities will grow significantly."

While the freelancing market grows and becomes more international, advancements in financial technology will open for payment providers, according to Vaidya. 

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"Both banks and fintechs have brought many business innovations to reduce costs and expedite them," Vaidya said, noting that Swift's upgrades designed for faster payment processing are also driving down the costs of cross-border payments, lowering the barrier to entry.

The advancement of real-time settlement systems such as the RTP rail and the pending FedNow system in the U.S., along with schemes in other countries, also creates an opportunity for payment companies to expand their cross-border operations. But there is still work to do to ensure the different real-time settlement networks can co-exist. 

"Much of the work around real-time payments has been in setting up domestic networks for clearing and settlement. The next frontier is cross-border," said Craig Ramsey, head of real-time and account-to-account payments at ACI Worldwide.

Paying an international network or team of contractors or freelancers will be one of the use cases that drives efforts to connect real-time payment systems, according to Ramsey. 

"Whether the international workforce is traditional or subcontractors, or even Uber drivers … the ability to move money to them needs to be quickly, particularly where workers may have less liquidity," Ramsey said.