Emerging markets-focused payments processor dLocal has today announced that it is appointing current Co-CEO Pedro Arnt as Chief Executive Officer, with Sebastián Kanovich, who has held the role of CEO since 2016, becoming a Board Member and Head of Commercial and M&A Committee.
Mark Ortiz, who has previously worked at GE Capital, also joins the company as CFO
CFO
, taking over from Diego Cabrera Canay, who announced his intention to move on from the company in November 2023.
The move comes as Uruguay-headquartered dLocal, which IPO’d on the Nasdaq in June 2021, looks to build its next stage of growth as a public company, particularly in light of the significant rise in opportunity that emerging markets are currently seeing in the payments space.
“The leadership that’s needed to go from zero to one is not the same as it is to go from one to 100 and from 100 to 1,000,” says Co-Founder and Chief Strategy Officer Sergio Fogel.
“Seba did an amazing job starting a company from virtually zero and making it into a public company, but the public company is a completely different beast and the type of challenges that you meet and the leadership style that is needed are completely different.”
In Arnt, the company is getting a leader well-versed in dLocal’s culture and operations, but who also has significant experience growing organizations in the space. He has served as dLocal’s Co-CEO since August 2023, having joined the company from Mercado Libre, where he held the position of CFO for 12 years.
“dLocal has been a phenomenal success story in very little time,” says CEO Pedro Arnt.
“It has a tremendous growth opportunity ahead of it, and that necessitates that we keep what needs to be kept and that we’re also bold enough to change what needs to be changed.”
Growing dLocal into a market leader
Under the leadership of Sebastián Kanovich, who took on the role of CEO not long after the company was founded by Fogel and board member Andrés Bzurovski, dLocal has grown from a small startup operating only in Brazil to arguably the biggest emerging markets payments processor globally in less than a decade. Today it operates in 42 geographies, with customers that include Facebook, Google
GOOG
, Spotify and Shein.
“When we first started the company, we dreamt that one day we would have Facebook as a customer: that was the impossible dream,” says Board Member and Head of Commercial and M&A Committee Sebastián Kanovich.
“Now we have not only Facebook, but pretty much everyone. I still remember the day we closed $100,000 a day. Today, we process close to $20bn a year.”
As part of this, Kanovich has also cultivated a strong company culture, despite a hybrid approach that sees its 1,000 employees work across 49 locations globally.
“Culture means who you are when no one is watching and when no one tells you what to do,” he explains, adding that the company has a “very clear culture” that is “not for everyone”.
“When you deal with someone with dLocal, you should expect someone who’s very hungry, who really wants to achieve stuff, but doesn’t think too highly of himself or herself. People understand that we win as a team, and that we are here to achieve something that is much bigger than any of us.”
As part of his stepping back as CEO, Kanovich will take the lead of the new Commercial and M&A Committee at dLocal, which will focus on business development, mergers and acquisitions.
“We expect that committee to lead the long-term growth of the company; we expect innovation to come from there,” explains Fogel. “It’s a super interesting combination.”
Pedro Arnt’s appointment as CEO
In taking over as CEO, Pedro Arnt is shouldering the expectations of a company looking to find a new scale of future growth.
“It’s not easy to find someone to take over for the thing you care so much about, but Pedro had all the unique qualities that we wanted,” explains Kanovich, pointing to Arnt’s experience as CFO of Mercado Libre.
“Pedro joined the startup and turned it into the best company in Latin America. I’m very impressed by how much dLocal has grown, but Pedro has seen that times 10.
“He comes from emerging markets so he understands the complexity of what we are building.”
For Arnt, meanwhile, dLocal provides the chance to repeat his success.
“I came here six months ago because I believed in the enormous business opportunity, and because I’ve learned from working in this industry over the past 30 years that what I enjoy the most is this phase of an organization,” he explains.
“Where it’s large enough that we have the resources and the potential to do amazing work for our merchants yet we’re not so large that there isn’t still a lot of innovation, company-building and design to be had.”
His role as Co-CEO has only “increased that thesis” for Arnt, who describes the opportunity for the company as “incredible”.
“The people we have here to accomplish that are the right people, and our merchants are incredibly in need of us to deliver more and more payment services. Growth in the digital space lives in the emerging world.”
The growing potential of emerging markets
Arnt sees dLocal as setting itself apart from other players through its combination of strong emerging market focus and level of customization and bespoke solutions.
“No one has the depth of markets and the depth within each market that dLocal has,” he says. “We’ve been doing it for longer than most across many, many markets.”
This is critical given the current trends within cross-border payments. Across the industry, emerging markets – in particular Latin America, Southeast Asia and Africa – are being seen as critical sources of future growth. Rapid development and market expansion are providing new opportunities for many different types of companies, and players that can effectively support their needs are already seeing outsized growth.
This is also reflected in the emergence of key players from such regions. My own company FXC Intelligence’s annual market map of the Top 100 Cross-Border Payment Companies has seen the share of players from emerging markets in Africa and Latin America grow from just 5% in 2019 to 11% in 2023.
“Emerging markets are more relevant than they’ve ever been,” says Kanovich. “Global companies understand that they’re going to need to grow in our space. American companies, European, Chinese, but also regional winners.”
For dLocal, this means strong and growing interest in markets where the company already has well-established infrastructure, but where others will face high barriers to entry.
“We deal with very different and very messy payments ecosystems across 40 markets,” says Arnt. “We’ve already laid all the foundations, all the connections with PSPs, with acquirers, with issuers.”
This has seen the company build from a time when interest by international merchants was considerably more muted.
“When we first launched, international was Europe, and if they were very aggressive they wanted Mexico, and the very, very aggressive ones wanted to go to Brazil,” explains Kanovich.
However, he adds that merchants have undergone something of an evolution, which is not only increasing demand, but also expectations. During the pandemic, many merchants explored the prospect of becoming their own payments companies, and while they ultimately moved away from this idea, the knowledge they gained from the process has seen their understanding and expectation of payments processors change considerably.
“They got smarter, more demanding and, most importantly, they understand the importance of performance.”
According to Fogel, this has resulted in increased expectations around areas such as KYC, country-specific licensing and security, which is raising the bar both in terms of delivery and costs.
“If someone were to start a company like dLocal today from scratch, it would be virtually impossible,” he adds. “They would need to take such a big jump in the processes and regulation.”
Finding the next stage of growth for dLocal
As dLocal looks for its next stages of growth, M&A is likely to play a key role, with Kanovich arguing that the company is “well positioned” to capture inevitable consolidation in the market. However, beyond this, Arnt says that critical focuses will include growing “a wider footprint” as well as “significantly more share of wallets, of existing merchants”.
“Part of our growth vector is simply growing within our existing client base,” he says. This includes focusing growth on emerging markets beyond Latin America.
“We need to scale 10X in Africa. We need to scale 100X in Southeast Asia. The Middle East, it’s growing very, very fast for us,” says Kanovich.
Another critical part of finding the next stages of growth is accessing a broader range of verticals, which will in turn unlock new avenues for dLocal. For Arnt, this includes onboarding merchants in digital business areas that are still developing.
“Whether it be in the AI field or in the software as a service field, we’ll want to access global consumers – so there’s a lot of new customers for us to acquire,” he says.
Regardless of vertical, providing cross-border solutions will be key, according to Fogel.
“What we are especially good at is moving funds across borders for very large companies,” he explains. “There are some use cases of international movements of funds that we’re not tackling yet, and we are getting into those.”
dLocal is already increasingly catering to players in the remittance space by providing the use of its real-time payments rails. This is a particularly promising area given that the global market sizing of the C2C cross-border payments space is set to grow by 80% between 2023 and 2030, according to my own company’s FXC Intelligence’s market sizing data.
“Remittances was a space that we historically haven’t focused on,” says Kanovich, adding that over the past year the company recognised that there is a “clear need” for its services in the space.
“We are in the position to be very competitive. We have the financial infrastructure to do so, the compliance infrastructure to do so. We’re competing with either very small companies, which are not always up to global standards, or local banks, which are a nightmare to deal with. So this is an opportunity that shouts to us.”
Beyond this, there is also the potential for the company to expand its product range.
“If you look at our product portfolio today, it’s still relatively focused. It’s primarily pay-ins/pay-outs and invoicing, and now the platform product,” says Arnt. “I think we’ll continue to innovate and launch more complementary products within the payments universe.”
Nevertheless, the core product offering is also set to provide compounding benefits as time progresses.
“Many of the results we’re going to be seeing next year and five years from now are the seeds we planted back in the day,” says Kanovich.
“There’s a lot of traction that is already built on the platform. So I’m very bullish and extremely optimistic about what comes next.”
Disclosure: dLocal is a client of Daniel Webber’s company FXC Intelligence.
