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Wego and Kushki: Payment Technologies that Transform Public Transport

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Stella Vargas
Líder de contenido @Kushki
octubre 19, 2020
Lectura de 2 minutos
Wego and Kushki: Payment Technologies that Transform Public Transport

Currently, public transport is a fragmented and neglected market niche in Peru, where carrier companies do not have the technological infrastructure to control their operations and efficiently manage money collection, according to Roberto Chávez, Wego's CEO. As a consequence, the money collected is stolen, time is wasted daily when counting cash and, due to the current situation, passengers and drivers are afraid of using physical money because it is a transmitter of the COVID-19 virus, in addition to the decrease in tickets sales.

Likewise, the Peruvian Ministry of Transport and Communications (MTC, in Spanish), decreased by 80% the frequency of public transport in Lima and Callao in March 2020; which has been gradually reactivated with the compulsory compliance of strict health protocols. Therefore, it is necessary, especially at these times, to maintain an adequate and efficient control of the revenues generated, and the use of contactless payment methods.

This is why Wego was created, an APP designed to pay public transport by using QR codes, supported by the Kushki payment suite, seeking to transform culturally and digitally public transport in the region, in order to generate a safe, efficient and high quality transport ecosystem.

Understanding the Problem

Wego founders are frequent users of public transport in Lima, Peru. They wanted an efficient, safe and high quality service. However, this was not a widespread service because many processes were still manual and technological tools were scarcely used by transport companies, whose current solutions are not comprehensive and do not integrate operations, money collection, and fleet administration.

For this, Wego founders, using their previous experience in digital transformation for solving problems at different industries, decided to create a solution to help transport companies to improve their processes, optimize their services, and allow their passengers to enjoy their daily trips comfortably.

Digital Transformation Is, and Must Be, Cross-Sectional

To make Digital Transformation possible in public transport, it is necessary to involve the whole ecosystem. For this, Wego decided to create a comprehensive solution that engages bus owners and transport companies, drivers, and passengers. Converting a highly operational and manual service into a much more efficient and more profitable business.

On the other hand, our Kushki payment platform allowed them to enable credit and debit card payments, for single and recurring payments, as well as cash payment, by using a technological tool that supports each one of these stakeholders. Thus, carrier entrepreneurs will have access to a web platform that helps them to monitor money collection for tickets sales, or the administration of their vehicle fleet. Bus driver are equipped with a collection and registration system for ticket selling, supported by hardware; and the passenger has an app that is continually updated, which can be used to pay tickets without having any contact, and soon, it will provide much more information. As a result, transport companies are efficient, profitable, safe and provide a better service.

But this does not stop there, payment digitization in public transport companies allowing for payments through QR or NFC technology in Peru brings along an immediate banking of its money collection process, which enables access to bank credits for renewing their fleet and stay active in the business at this difficult moment for the industry.

Now companies of this sector will be able to leverage the large amount of existing data, that, after being processed by Wego, might be used to make better decisions, optimize the operation of their vehicle fleet and manage their business from any smartphone or laptop and at any location, accompanying them in the constant daily trips that they must do for fulfilling their daily tasks, as Roberto Chávez states. Finally, all this generates an improvement in the quality of the public transport service, which becomes an incentive for citizens to use mass transport, and, in turn, generates a direct impact by decreasing the use of private vehicles and helping the environment.

Regional Expansion Plans

R. Chávez states that urban public transport systems in countries such as Mexico, Colombia, Chile, and Peru is similar, and because of the pandemic, contactless payments are experiencing an increase in their acceptance.

For this, Wego considers that expanding their solutions to a system of electronic payment collection and fleet administration for public transport is a viable plan in the next few years. However, at this moment their main objective is to position themselves in Peru, and then head for countries such as Mexico or Chile, where we will be ready to support them with our products in their expansion process.

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The fight against money laundering: This is the international story and the case of Colombia

Many of us have seen the series and movies that show the history of criminal groups and how these networks launder large sums of money. The truth is that these scripts are not completely removed from reality, and it is that when illegal activities are carried out, the immediate need to camouflage the origin of all those funds and to make them unnoticed by the auditors also emerges. Many of the cases are concentrated in the region: Latin America and the Caribbean are at the riskiest ends of the Anti-Money Laundering Index 2020, published by the Basel Institute for Governance, a study center located in Switzerland. The history, though, started much earlier and more to the north of the continent. In 1920, the term “money laundering” began to be used when American mafias created networks of laundries to hide the origin of illegal funds that came from criminal activities. For these groups, led by some of the most famous gangsters, such as Al Capone or Meyer Lanski, the reason was simple and without much science: Since most of the laundries payments were made with cash, it was the easiest way to camouflage money and not to be able to track all of its origins. The starting point What is the problem based on? All starts with the principle that, what is born unlawful or unlawfully acquired, may never be lawful. At the most, it could achieve a certain appearance of legality. The States of different countries prosecute money laundering based on that basic principle. In 1970, a normative effort against money laundering was inaugurated in the United States. It was the so-called Bank Secrecy Act. Until that moment, criminals had learned to easily tap confidentiality to hide all types of activities. The American Congress raised its voice, and the duty to know the customer was established, report transactions and monetary securities, to name a few, was enacted. All that, accompanied by sanctions if not fulfilled. A little later, in 1973, President Nixon created the mythical DEA (Drug Enforcement Administration), which is pictured in many big-screen productions. That same year, Time magazine published an article that pointed to Colombia as “the new drug hub”. Journalist Alberto Llera claimed that, from the coffee country, drugs were distributed to Jackson Heights in New York. Colombia and Money Laundering It turned out that Time magazine was not very wrong. In Colombia, drug trafficking was taking force in the 1980s and 1990s. One of the world's most famous drug trafficking kingpins was Pablo Escobar, the Medellin cartel's head. According to international figures and estimates, it is estimated that the Colombian came to be among the ten richest people in the world. In the Colombian criminal code, anyone who acquires, safeguards, invests, transports, transforms, stores, preserves, protects or manages assets that have a mediate or immediate origin in criminal activities, such as smuggling of migrants, drug trafficking or terrorist financing, Among many other crimes, might be subject to a sentence from ten to thirty years of imprisonment, and a fine from a thousand to fifty thousand enforceable minimum monthly legal salaries; that is, any person who is involved in the chain that is used to launder money, knowingly or not, can be affected. Therefore, every October 29, the National Day for the Prevention of Money Laundering and Terrorism Financing is celebrated in Colombia. The event is organized by the Bogotá Chamber of Commerce, the United Nations Office on Drugs and Crime, and Responsible and Safe Businesses (NRS in Spanish), as space to nationally promote anti-money laundering culture and education. At Kushki, we endorse the National Day for the Prevention of Money Laundering and Terrorism Financing. Latin America in the Crosshair In the year 2000, the Latin America Financial Action Task Force (Galifat in Spanish) is created to tackle money laundering, the financing of terrorism and the proliferation of weapons of mass destruction. The entity covers 17 countries in South America, Central America, North America and the Caribbean. In 2019, they released a Money Laundering Regional Threat Report. On it, seven current threats were identified: Illicit trafficking in narcotic drugs and psychotropic substances Illicit Cross-Border Transportation of Cash Tax Crimes (direct and indirect taxes) Participation in organized criminal groups Smuggling (including taxes and customs charges) Corruption and bribery Trafficking in Human Beings and Migrant Smuggling Also, the Anti-Money Laundering Index AML 2020, of the Basel Institute of Governance, evaluates the vulnerabilities of countries and their capabilities to react to these crimes. Scores are calculated based on data from large institutions, such as the Financial Action Task Force, Transparency International, the World Bank and the World Economic Forum. In the 2020 version of the report, Chile's score reached 3.82, being placed at 125 of 141 countries, being the best evaluated in Latin America and the Caribbean. Venezuela and Mexico were some of the worst rankings in the region, falling in the “high risk” section, with scores of 6.56 and 5.20 respectively. What do we do in Kushki to fight it? In the world, approximately two trillion dollars are laundered each year. That's why in Kushki, we are very aware of the threats that this activity entails for our region. We have a risk management system to prevent money laundering and terrorism financing. We ensure that we know our customers, and verify that they work transparently, in a way that can detect any type of behavior that is out of normal. If this malpractice was easy to attack only by controllers, it would already have been ended years ago. Unfortunately, it is not so, and the techniques are becoming sophisticated year after year, so it is necessary for each link in the chain to do its part.
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Magdalena Ovalle
Líder de Comunicaciones Internas @ Kushki
octubre 13, 2020

From 2006 until Today: The History and Development of Payment Gateways

The history and development of payment gateways Since the first payment gateway appeared 14 years ago, a lot has happened with these tools that are key to the world of electronic commerce and digital economy. Although the term was already used for the first time in the United States in 1996, when the young engineer Jeff Knowles founded Authorize.Net, the truth is that it was developed for processing only credit card payments, and remained that way for many years, even after the company was acquired by Go2Net Inc in 1999. With the pandemic and the boom of e-commerce, digital payment platforms and other fintech vertical platforms have become more significant, increasing dramatically the investment of companies in this sector and even their profitability. This is an industry that, just some years ago, had been advancing at a more paused pace, but today, it poses great challenges to countries, given the speed at which it is evolving. Who were the Pioneers? The first payment gateway (defined as the service that allows a merchant to accept all payment methods through internet, automate operations between customers and merchants and centralize information) was Adyen, created in The Netherlands. Founded in 2006 by a group of young entrepreneurs, including Pieter van der Does and Arnout Schuijff, its main objective was making the businesses grow in a country where, despite being economically developed, payment technologies were becoming increasingly obsolete. They decided to name the company Adyen because in a Suriname's creole language it means “to start again”, which made sense with the idea of building a modern infrastructure to connect first, The Netherlands, and then, the whole world. Today, it is the payment platform that giants such as Uber and Spotify use, and it has offices in 22 cities around the world. In 2019, they processed 240 trillion euros. The Local Reality In Latin America, the development of the payment gateways has advanced at a slower pace, but it is not less relevant. In a region where, according to Brookings Research Center data from Mexico, Colombia, and Peru, less than 40% of the people have formal bank accounts, the development of the fintech industry, and specifically, of digital payment gateways, has become more necessary than ever. In this context is where Kushki and many other companies and startups are created for payment processing, financing, financial infrastructure, personal financial management, insurtech and digital assets negotiations, among other activities. In 2018, according to a study by FinteChile in collaboration with EY, the Latin American fintech industry counted up to 55 investments for a total of US$500 million. With the pandemic, the investment increased dramatically: according to quantitative data by KoreFusion Consultancy, the fintech sector in Latin America reached historical investment values for US$8 billion, a payment category that accounts for a 50.5% of the total. Until 2018, only in Chile –one of the countries with the highest bancarization rates in Latin America– online banking users had doubled during a period of five years, reaching 9.3 million in 2017, according to the Association of Banks and Financial Institutions of Chile (ABIF, in Spanish). A 70.3% of the customers used banks websites and among them, 34.5% connected to banks from a mobile device. By mid 2017, Law 20.950 was promulgated in Chile, establishing the legal framework for payment gateways, among other provisions concerning payment cards. In Colombia, payment gateways appeared massively in 2011, after the creation of the Colombian Chamber of Electronic Commerce in 2008. Before that, the main operator was Pagosonline, which changed its name to PayU Latam. In June 2020, payment platforms operations increased by 64% compared to 2019, as a result of the pandemic. Some of the best known digital payment platforms in that country are PayU Latam, PlacetoPay and ePayco, among others. In this scenario, Kushki has been progressing together with state entities such as the Superintendence of Notaries and Registry (SNR, in Spanish) and the Single National Registry of Vehicles and Drivers (RUNT, in Spanish), digitally transforming analogous processes and making them more accessible for the general population. A study about e-commerce in Colombia's neighbor, Ecuador, conducted in 2017 by the Ecuadorian Chamber of Electronic Commerce, revealed that the most used method to pay in e-commerce transactions is credit cards (61%). Debit cards follow them by far, accounting for a 17%, and cash is the least used, accounting for only 8%. In Ecuador several platforms operate and, among them, the most important are Kushki, Paymentez and PlacetoPay. Mexico, Peru and the Way ahead A little behind, but advancing quickly, we find Peru. According to 2019 data by the Inter-American Development Bank (IDB), the country had 81 fintech enterprises, most of them payments and remittances (27.2%). The main sponsor is the Ministry of the Production (PRODUCE), with a non-refundable seed capital that, since 2016, has contributed $ 2.7 million Peruvian Soles. Although there are some popular payment gateways, cash transactions continue to be strong, with PagoEfectivo positioned as one of the most used. There is still a lot to do: According to some studies, four out of ten Peruvians mistrust online purchases and payments. Some of the best opportunities can be found in Mexico, one of the biggest countries in Latin America and the second most important economy of the region. There, cash is still the king. It is not a coincidence to see long lines of people in front of ATMs waiting to withdraw money at the beginning of each month. Although Mexico was one of the pioneers of the region after promulgating a Fintech Law, their bancarization level is the lowest in a group that includes developed countries such as Spain, and emerging economies such as Chile, Argentina and Peru. According to the National Banking and Values Commission, only 12% of the Mexicans owns a credit card. All the above, place this country as one of the greatest territories where digital payment platforms can earn more space. Kushki has recently opened a branch in this country some months ago, where also Conekta and Stripe have operations. In six years, the Latin American fintech ecosystem has grown exponentially: It went from being a financial market US$50 million worth to reach US$2.1 trillion, closing 139 venture rounds in 2019. In addition, Latin American countries are the fastest adopters of mobile internet, reaching a 66% of the population versus the global average of 53%. This is an industry that moves faster than regulations at each country; regulatory agencies will now have to catch up with the technological acceleration that has resulted from the worldwide pandemic.
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Magdalena Ovalle
Líder de Comunicaciones Internas @ Kushki
septiembre 29, 2020

Canary Deployments and how to sleep peacefully at night

Canary-type implementations Today, you will learn about a technique where code deployed to production will not be replaced instantly by the previous code, but within a time frame and under a controlled environment, so you can sleep peacefully at night. It is a widespread idea that the only way technology companies can deploy their code to production is at non-working hours and opening maintenance windows for their clients. This is an old practice adopted by big companies, and it works to some extent, but at what cost? At the cost of having a dedicated team for those deployments, extra hours, night schedules and a significant workload for employees and companies. In addition, when introducing new features to production, even after full tests have been performed (point-to-point testing and unit testing), there is always the risk of the human factor, because nobody is perfect and something can fail. For this reason, companies prefer to deploy code at non-working hours. To solve these overwhelming problems, that often deprive software developers from their precious sleep, canary deployments were invented. A canary deployment is a technique where code deployed to production is not replaced by the previous code instantly, but within a time frame and under a controlled environment; errors, statistics and other features are monitored to replace the complete code or to roll back to the previous one. This, my dear reader, is what I will tell you in this article. Flow chart of a canary deployment, before, during and after deployment. Canary deployments were developed precisely to satisfy the need and the obsession of software developers to achieve control over even the smallest detail of a deployment to production. Nobody likes inserting bugs in production, but they are something we all programmers have had to deal with, and we know that they will not disappear because they come from the imperfection of human nature. Nevertheless, we can reduce those bugs to the minimum and, if they occur, they can be limited to just some components and non-critical features of a product or a service. We can minimize them in both number and impact to the product. Canary deployments introduce a new version of a developed code and release it for a small part of the users, gradually increasing the number of users with access to it within a specific time frame. For example, you can launch a 10percentEveryMinute deployment, which means that at the first minute of deploying the code to production only 10% of the users will be using it, while the remaining 90% will continue accessing the old code. The usage percentage of the new code will be gradually increased until total deployment has been achieved. A gradual deployment may be accompanied by automated monitoring alarms that detect the error level of the code that is being tested, if it is higher than the threshold, an automatic rollback will be performed. A rollback is understood as aborting the new deployment to production, a functionality that is generally used when errors were found in the new code. Likewise, you can complement alarm monitoring by running functions before and after starting the deployment, in order to ensure that the code being tested does not cause any problems. The idea is running a test system using the old code we know is working in the first stage, and then repeat the test using the new code. This allows us to prevent a random deployment that unluckily has hidden any potential bugs during deployment due to simple statistics. In this way, canary deployments help us to: Perform deployments to production under a controlled environment. Roll back easily. Version code in production. Reduce bugs significantly. As we can see, canary deployments have a lot of advantages, well-received by developers when releasing code to production. However, I want to put in perspective that if statistics are poorly read, this might cause aborted deploys due to results full of false positives from errors that actually never occurred. During deployment, some problems caused by integrated suppliers or third parties may occur, and, when error measurement is performed automatically, deployment might be also canceled automatically, taking these third parties problems as if they were ours. This reinforces the need to establish more control mechanisms. Although they will make the process of release to production longer, they also will reduce the error rate, and we will avoid false positives. Below you will see a practical example of a canary deployment using Serverless Framework. You will find the framework reference here: https://www.serverless.com/ The canary plugin is here: https://github.com/davidgf/serverless-plugin-canary-deployments. You can configure a canary deployment in a very simple way by using the structure of a serverless project with the following lines of code: A canary deployment is configured in a very simple way by using the structure of a serverless project with the following lines of code: Step 1: Install the plugin version in the package.json file js "serverless-plugin-canary-deployments": "0.4.8" Step 2: Reference the plugin in the 'plugins' section of the serverless.yml file yaml plugins: - serverless-plugin-canary-deployments Step 3: Set up the options of the canary deployment you will use. In this example, we will specify two alarms, the environments where the canary deployment will be applied and the type of deployment. yaml deploymentSettings: stages: - ci - qa - stg - uat - primary type: 10percentEvery1Minute alias: Live alarms: - ErrorChargesGatewayAlarm - ErrorChargesCountAlarm Step 4: Reference the configuration of the canary deployment in the lambda function to be applied. yaml functions: record: handler: src/handler/RecordHandler.HANDLER${self:custom.deploymentSettings} And that's it! We have analyzed much of the pros and cons that we can find in a canary deployment, from the concept to a practical example of how to make it functional. Without a doubt, the use of this technique is becoming an increasing trend in the world of software development, as it minimizes errors in the critical components of a software system, allowing developers to sleep peacefully at night.
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Patricio Moreano
Tech Lead @ Kushki
septiembre 16, 2020

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