Review of functions and basic nature of popular payment method in Colombia PSE

Colombia has become one of main target markets for many industries, and over the past few years, online transaction volume in the country has grown significantly. At the same time, businessmen have faced the challenges of local market, as international payment methods are not so relevant for local users. Accepting Visa and Mastercard is always useful, but is it equally indispensable worldwide? Obviously, the role of card acquiring cannot be considered leading equally in all countries, and the volume of payments varies.

This is precisely why you need to conduct payment analytics, which Monoup can do for you. Data from the analytics will help accurately determine which payment methods are required in your target countries and how to obtain them most effectively, considering the starting point and industry of your business.

Today, we will examine in detail Colombian bank transfer PSE and its position in payment structure.

How Colombian PSE Works

PSE (Pago Seguro Electronico) is a bank transfer supported by almost all banks in the country. Payment method allows for direct payment from user's bank account without involving a credit or debit card. This makes payment process seamless for the payer and fast for the merchant, with funds being credited instantly.

 The functionality is very simple: when selecting this payment method at the merchant's checkout and entering payment amount, payment request is automatically generated. The client only needs to log in to their online banking, check the payment details, and, ensuring everything is correct, authorize the payment using available 2FA method. This flow is very familiar and is actively used in other payment methods worldwide, showing some of the best approval ratio results. By minimizing necessary actions for a successful payment, it has a higher chance of successful completion and fewer potential errors in the process.

PSE operates through ACH interbank network (similar to one in the US), to which all banks in the country are connected. To ensure the success of a payment through the network, it is important to confirm the availability of sufficient balance in the account and no limits from the bank. For security reasons, online payments are sometimes limited by monthly or daily figures; to remove these limits, client need to call the bank or use functionality of the online application. Security in this payment method is ensured by several factors:

• By the client's bank, as logging into online banking using a login and password is required to make a payment every time. This helps confirm that payment is made by an actual account holder. If biometric data is used for login, the likelihood of account theft is even lower.
• By two-factor verification for approving the payment itself. After logging into online banking, the client will also need to confirm payment by receiving an SMS or using a token, or biometric data. The confirmation method varies from bank to bank, and each can choose different one. The main factor here is that 2FA is mandatory, which is another way to ensure the legitimacy of payment.

In the case of bank cards, theft, unfortunately, is very common. Plastic cards are constantly compromised by fraudsters who do not miss the opportunity to exploit the system's weaknesses for their own benefit. At the same time, the risk is lower with online banking payments, as many institutions can now detect devices and react to unusual activity, even if the password and login were entered correctly. Thus, a set of different anti-fraud settings helps make this payment method extremely secure for online payments, and although nothing can exclude fraud by 100%, its chances here are set to minimum.

This is precisely the feature that developers of PSE focused on, and users appreciated the quality of such service. Another important factor in the implementation of PSE is instant processing of payments, which is critical for many businesses. For example, in gaming industry, a deposit must be made immediately without a long wait; otherwise, players may lose initial interest in the website, and efforts to retain them will not secure expected result. Therefore, instant payments are simple, convenient, and very effective. They allow savings on processing and make it easier to retain the audience. 

The pricing policy for merchants is usually quite acceptable, which also allows PSE to win against expensive card processing. PSE payment method does not require significant infrastructure investments, so its maintenance is budget-friendly.

Other popular payment methods in Colombia

 In addition to PSE, when launching a new gaming product in Colombia, consider other popular payment methods in the country. The top payment methods in Colombia include Efecty vouchers along with Visa and Mastercard cards.

Efecty focuses on the segment of audience that is not yet fully familiar with digital products and does not use banking services. The voucher offers possibility of cash payment at offline points of sale with subsequent crediting to the online balance. To make a payment, clients need to create a payment request and pay for it on-site, like a bill. Although there are additional steps here, some users still prefer to use this functionality and cover online payments with cash funds.

The reason for popularity of vouchers often lies in transitional period of the economy when not everyone has yet integrated with the new approach to money movement. Many still prefer cash that can be touched by hands and do not trust banks. Under different circumstances, this segment of the population could be considered lost for most businesses. So, to prevent this, voucher serves as "transitional" payment method that support citizens not covered by the digital financial system. 

Visa and Mastercard, in turn, have also established a good trust among the population that uses bank accounts. Cards under the brands of these international payment systems guarantee their widespread acceptance in most cases. Despite the security risks discussed earlier in this article, about 30% of all payments in Colombia are made with cards, indicating the critical need to integrate this payment method into any online product. There is no full analog to credit cards yet, but both Visa and Mastercard invest significant amounts annually to improve their security systems and explore new anti-fraud possibilities.

Along with them, banks and payment systems also constantly update their systems, minimizing the influence of fraudsters on transaction flows. The number of fraud attempts has not decreased. On the contrary, the more volume digital business gains, the more fraudsters are interested. But this is the main challenge for anti-fraud systems. We have previously touched on this topic in earlier articles, which you can read for a complete picture. Any payment method, regardless of its functionality, can become a tool in the hands of fraudsters, so each financial institution devotes a lot of time to develop protection measures.

In conclusion, we note that Colombia has recently joined the international online business and has shown a good result in this short time. Of course, we can’t compare it to the real giants of Latin America, such as Brazil and Mexico, but the country has undeniable potential. Payment method reviews from Monoup are designed to help you learn more about payment infrastructure of different countries and draw attention to new markets that you may not have explored yet. More reviews of payment methods in this and other regions you can find here at MonoTalks, and we also publish daily short news in our Telegram channel.