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Value Chain Analysis of the Payment in Chile.

Commercial Relationships

The payment industry value chain in Chile is characterized by a complex web of commercial relationships between diverse participants, evolving from a historically concentrated market structure to a more competitive and open ecosystem, particularly following recent regulatory changes like the Fintech Law and modifications to interchange fees. These relationships define the flow of value, data, and funds across the different stages of a payment transaction.

At the Payment Initiation stage, the primary relationships are between consumers and merchants, and between merchants and entities providing payment acceptance methods. Consumers initiate payments through various channels provided by merchants, which can be physical POS terminals, e-commerce websites, or mobile applications. Merchants, in turn, have commercial agreements with acquirers and payment gateways to accept these payments. These agreements typically involve service level agreements (SLAs) regarding transaction speed, reliability, and security, as well as pricing structures. For instance, a merchant using Transbank's Webpay Plus enters into a contract that allows them to process card payments, adhering to Transbank's technical specifications and fee schedule. Similarly, merchants integrating with digital wallets like Mercado Pago or MACH establish relationships that enable them to offer these as payment options to their customers, often involving integration fees and transaction-based charges. Billers have relationships with payment platforms like Servipag or banks to offer bill payment services, with commercial terms defining transaction processing and settlement timelines.

In the Payment Authentication and Authorization step, crucial relationships exist between merchants/payment gateways and issuing banks/payment networks. When a payment is initiated, the merchant's system (often via a payment gateway or acquirer) sends authorization requests to the card networks (like Visa, Mastercard, or Redcompra) or directly to the issuing bank (for certain A2A schemes). The networks and issuing banks then communicate to verify the cardholder's identity (through methods like 3D Secure, PIN verification, or biometric authentication for digital wallets) and check for sufficient funds or credit. The commercial relationships here are largely governed by network rules and interbank agreements. Acquirers pay interchange fees to issuers for each transaction, a key revenue stream for card-issuing banks. These fees, along with scheme fees from networks, are components of the Merchant Discount Rate (MDR) charged to merchants by acquirers. Fraud prevention service providers also have commercial relationships with banks, acquirers, and gateways, offering services on a fee-per-transaction or subscription basis.

The Payment Processing stage involves the technical routing and formatting of transaction data. Payment gateways and processors have direct commercial relationships with acquirers, payment networks, and often with merchants. They provide the necessary infrastructure and software to transmit transaction information securely and efficiently. These relationships are typically based on processing fees per transaction, setup fees, and potentially volume-based discounts. For example, a payment gateway like Khipu connects merchants to various banks to facilitate direct bank transfers, operating based on agreements with both merchants and participating banks.,, Their service involves formatting the payment instruction data to be compatible with different bank systems. Payment networks themselves maintain relationships with participating financial institutions (banks, acquirers, issuers) to ensure seamless data flow and communication across the network.

Payment Clearing and Settlement is where the financial obligations are reconciled and funds are transferred. This step involves strong relationships between commercial banks, clearing houses (like ComBanc for large-value payments and potentially others for retail clearing), and the Central Bank of Chile (Banco Central de Chile).,, Banks are participants in clearing houses and the Central Bank's Real-Time Gross Settlement (RTGS) system (Sistema LBTR). Commercial relationships here are governed by participation agreements and the rules of the clearing and settlement systems. ComBanc, for example, processes netting instructions from participating banks and determines the net amounts owed or due by each bank., The final settlement of these net positions occurs through the transfer of funds between banks' accounts held at the Central Bank via the LBTR system.,, The Central Bank provides the LBTR service to banks, although it doesn't charge financial institutions for the core payment services, it does impose fines for overdrafts. ComBanc charges participating banks a combination of fixed annual fees and variable fees based on transaction volume for its clearing services., Dispute resolution involves relationships between issuing banks, acquiring banks, and payment networks, guided by network rules and regulatory requirements regarding chargebacks and refunds.

In the Payment Acceptance and Wallets segment, merchant acquirers (like Transbank, Getnet by Santander, EVO Payments in partnership with Bci) have direct commercial relationships with merchants, providing POS terminals, online payment solutions, and processing services.,, These relationships involve contracts for service provision, including the collection of the Merchant Discount Rate (MDR), which is the fee the merchant pays for accepting electronic payments. The MDR includes components like interchange fees, scheme fees, and the acquirer's margin. The unbundling of the acquiring market in Chile has led to increased competition, influencing the commercial terms offered to merchants. Digital wallet providers (such as Mercado Pago, MACH, Tenpo) have relationships with consumers (users of the wallet) and with merchants, enabling wallet payments. They also have relationships with banks or card networks to link cards and accounts to the wallet. Their business models involve transaction fees for merchants and potentially fees for P2P transfers or other value-added services. Providers of Alternative Payment Methods (APMs) like Servipag (for cash payments) or Wibond (for BNPL) have commercial agreements with merchants and potentially with networks of physical locations (for cash payments) or financial institutions (for BNPL funding).

Finally, the Payment Infrastructure and Networks layer involves relationships between network operators (Visa, Mastercard, Redcompra, ComBanc, Banco Central de Chile) and their member institutions (banks, acquirers, processors).,,, These relationships are governed by network rules, membership agreements, and fee structures for using the network infrastructure and services (e.g., authorization, clearing). Telecommunication providers have commercial relationships with all players requiring connectivity, providing network services on a contractual basis.

Products and Services Exchanged

Across the Chilean payment value chain, a diverse range of products and services are exchanged:

  • Payment Initiation:

    • From Consumers to Merchants/Billers: Payment instructions (intent to pay), payment credentials (card details, digital wallet information, bank account details), and consent for the transaction.
    • From Merchants/E-commerce Platforms to Payment Gateways/Acquirers: Transaction requests containing payment details, merchant information, and transaction value.
    • From Consumers to Payment Platforms (e.g., Servipag): Cash, checks, or other payment instruments for bill payment or online purchase settlement.

  • Payment Authentication and Authorization:

    • From Merchants/Gateways/Acquirers to Issuing Banks/Networks: Authorization requests, cardholder verification data (PIN, CVV, 3D Secure data), fraud assessment flags.
    • From Issuing Banks/Networks to Merchants/Gateways/Acquirers: Authorization responses (approved/declined), authentication results (successful/failed), fraud warnings.
    • From Fraud Prevention Providers to Various Players: Fraud scoring, transaction monitoring alerts, risk analysis reports, fraud prevention software/APIs.

  • Payment Processing:

    • From Gateways/Acquirers to Processors/Networks: Formatted transaction data for routing, switching services to direct transactions to the correct network or bank.
    • From Processors/Networks to Gateways/Acquirers/Issuers: Processed transaction data, routing information, network services (connectivity, data translation).

  • Payment Clearing and Settlement:

    • From Acquirers/Issuers to Clearing Houses/Networks: Batches of settled transactions, netting instructions, dispute notifications (chargebacks, refunds).
    • From Clearing Houses to Participating Banks: Net settlement obligations (amounts owed or due) based on aggregated transactions.
    • From Central Bank (LBTR) to Commercial Banks: Final settlement services for large-value payments and net balances from clearing houses.,
    • Between Issuing and Acquiring Banks (via Networks): Dispute resolution services, chargeback processing, fund adjustments.

  • Payment Acceptance and Wallets:

    • From Acquirers to Merchants: POS terminals (physical and virtual), e-commerce payment plugins/APIs, merchant accounts, settlement reports, customer support.,
    • From Payment Gateways to Merchants: Technical integration services, secure payment processing, access to multiple payment methods, reporting and analytics dashboards.,
    • From Digital Wallet Providers to Consumers: Mobile applications for payment storage and initiation, P2P transfer functionality, loyalty program integration, transaction history.
    • From Digital Wallet Providers to Merchants: Acceptance of wallet payments, integration tools, settlement of wallet funds.
    • From APM Providers to Merchants: Integration of alternative payment methods (cash payment instructions, BNPL options), processing of payments via these methods.

  • Payment Infrastructure and Networks:

    • From Card Networks to Members (Banks, Acquirers): Network access and rules, authorization and clearing infrastructure, branding, fraud monitoring services.
    • From Interbank Networks to Banks: Secure communication channels, funds transfer protocols.
    • From RTGS/ACH Operators (Central Bank, ComBanc) to Participating Banks: Systems and rules for high-value and batch clearing and settlement.,,,
    • From MNOs to all players: Mobile network connectivity for transaction data transmission and mobile payment services.

  • Regulation and Oversight:

    • From Regulatory Bodies (Central Bank, CMF) to all players: Licensing, regulations (e.g., Fintech Law, capital requirements, consumer protection rules, AML/CFT guidelines), supervision, enforcement actions, guidance on compliance.,,,
    • From Financial Institutions/Fintechs to Regulatory Bodies: Compliance reports, transaction data (for AML/CFT), applications for licenses and authorizations.,

Business Models

The commercial relationships in the Chilean payment industry are underpinned by various business models, largely driven by transaction volumes and the specific services provided at each stage.

  • Transaction-Based Models: This is the most prevalent model across the value chain.

    • Interchange Fees: Paid by the acquiring bank to the issuing bank for each card transaction. These are a significant revenue source for card issuers. The level of interchange fees has been subject to regulatory intervention in Chile, with caps implemented to reduce costs for merchants.,
    • Scheme Fees: Paid by both acquirers and issuers to the card networks (Visa, Mastercard, etc.) for using their brand and network infrastructure. These are typically a percentage of the transaction value and/or a fixed fee.
    • Merchant Discount Rate (MDR): The fee merchants pay to their acquirer for accepting card payments. The MDR is a bundled fee that includes the interchange fee, scheme fee, and the acquirer's margin. Acquirers profit from the difference between the MDR they charge merchants and the sum of interchange fees and scheme fees they pay. The unbundling of acquiring services and increased competition are putting downward pressure on the acquirer's margin component of the MDR.
    • Transaction Fees: Charged by payment gateways, processors, and alternative payment method providers (like Khipu, Servipag, digital wallets) per transaction., Khipu, for instance, charges a commission percentage plus VAT for instant bank transfers, with volume discounts available. Digital wallets may charge merchants a percentage of the transaction value.
    • Clearing and Settlement Fees: Clearing houses like ComBanc charge participating banks fees based on a combination of fixed and variable (volume-based) components for their netting services., While the Central Bank doesn't charge for basic LBTR services, it might levy fines.

  • Subscription or Fixed Fee Models: Some players charge recurring fees regardless of transaction volume.

    • Platform Fees: Payment gateways and technology providers may charge monthly or annual fees for access to their platform and services.
    • POS Terminal Fees: Acquirers or third-party providers may charge merchants a rental or service fee for providing and maintaining POS terminals.
    • Membership/Participation Fees: Banks pay fees to be members of payment networks, clearing houses, and the Central Bank's systems. ComBanc charges a fixed connection fee.

  • Value-Added Services Models: Players offer additional services beyond basic payment processing for extra revenue.

    • Fraud Prevention Services: Offered on a subscription basis or per-transaction fee.
    • Data Analytics and Reporting: Providing merchants with insights into their sales and customer behavior.
    • Loyalty Programs and Marketing Services: Integrated into payment acceptance solutions or digital wallets.
    • Financing Services: Some payment platforms or digital wallets may offer credit or BNPL options to consumers or merchants, generating revenue from interest or fees.

  • Interchange++ Model: Some acquirers and PSPs are moving towards more transparent pricing models, where interchange fees, scheme fees, and the acquirer's margin are billed separately., This model, while more complex, offers merchants greater clarity on the cost components of each transaction.

  • Cross-Border Acquiring Models: New models are emerging to facilitate cross-border e-commerce. These involve foreign merchants partnering with local Chilean acquirers or payment processors using local agents to connect to local payment systems, often aiming to bypass international card scheme fees and foreign exchange costs.,, Providers like PayRetailers have obtained authorization to operate under these models. Their business model involves processing international transactions locally, charging fees to the foreign merchant.

  • Open Finance driven models: The implementation of the Fintech Law and the Open Finance System (OFS) is expected to create new business models, particularly for Payment Initiation Service Providers (PISPs)., PISPs will be able to initiate payments directly from a user's bank account with their consent, potentially competing with traditional card-based and bank transfer methods., Their business models will likely involve fees charged to merchants or users for the payment initiation service.

Bottlenecks and Challenges

Despite significant advancements, the Chilean payment industry faces several bottlenecks and challenges:

  • Regulatory Implementation and Adaptation: The most significant ongoing challenge is the full implementation and adaptation to the new regulatory framework, particularly the Fintech Law and its associated regulations issued by the CMF and the Central Bank.,,,, While the law aims to foster competition and inclusion, the phased implementation and the large number of regulations being issued (estimated at 70 by the CMF) create uncertainty and require substantial effort from all players to ensure compliance within tight deadlines (e.g., fintechs needing to apply for registration and authorization by early 2025).,, Delays in the full operationalization of the Open Finance System (expected by mid-2027) could also slow down innovation driven by data sharing and PISPs.
  • Managing Increased Competition and Evolving Business Models: The unbundling of the acquiring market and the entry of new players (fintechs, international PSPs, non-bank acquirers like Kushki) have intensified competition. While beneficial for merchants in terms of potentially lower fees, it requires traditional players like Transbank to adapt their long-standing business models and fee structures.,, The shift towards more transparent or varied pricing models (like Interchange++) requires greater sophistication from both providers and merchants.
  • Interchange Fee Regulation Impact: The mandated reduction in interchange fees, effective from October 2024, significantly impacts the revenue streams of issuing banks., While intended to lower costs for merchants, this could potentially affect the incentives for banks to invest in card issuance and related services. The long-term effects of these caps on the overall card ecosystem remain to be seen.
  • Interoperability and Standardization: While progress has been made, ensuring seamless interoperability between different payment systems, networks, and newer solutions (like digital wallets and APMs) remains crucial. Lack of standardization in areas like QR code payments, despite discussions, can hinder widespread adoption. The Open Finance System aims to address some of these interoperability challenges through mandated APIs, but its full impact is yet to be realized.,
  • Fraud and Security Risks: As digital payments grow, so do the risks of fraud and cyberattacks. All players in the value chain need to continuously invest in robust security measures, fraud detection systems, and compliance with evolving data protection regulations., Balancing enhanced security requirements (like SCA) with user convenience is an ongoing challenge.
  • Financial Inclusion for Underserved Segments: While Chile has relatively high financial inclusion compared to other Latin American countries, gaps remain for individuals with lower education levels, those in rural areas, and those outside the formal labor force. While fintechs and digital wallets aim to address this, ensuring accessibility, digital literacy, and trust among these segments is a challenge. Cash remains relevant for a small but significant portion of the population and transactions.
  • Cross-Border Payment Complexity: While new cross-border acquiring models are being authorized, navigating the complexities of international transactions, including currency conversion fees, varying regulations, and higher transaction costs for merchants, remains a challenge, particularly for smaller businesses.,,
  • Operational Efficiency and Cost Management: For many players, particularly traditional institutions and smaller fintechs, maintaining operational efficiency and managing the costs associated with technology upgrades, regulatory compliance, and fraud prevention are constant pressures.

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