man in market

Ripe Opportunity: Embedded Finance in Agriculture

By Alfredo Dellepiane, Sr. Director and Regional Head Agro Industry Verticals, Visa Latin America and the Caribbean

Agriculture is the foundation upon which our global population grows and thrives. It’s also way behind other industries in the transition to embedded finance and digital payments.

The seasonal nature of agricultural production cycles poses a unique challenge, too. Small to medium-sized farms rely on the revenue from harvest to pay for seed, fertilizer, and equipment, which leads to a cash crunch in between cycles. This demand for financing and shortage of digital payment options creates a largely untapped market for banks and fintechs to implement tailored solutions that benefit all stakeholders.

One clear opportunity: online agribusiness marketplaces, built to make it easier for all parties to exchange goods. Imagine Facebook Marketplace, but for large orders of fertilizer or tractor equipment. While these digital platforms allow farmers and suppliers to arrange sales more efficiently, payment is often completed outside the platform – in cash or in check. The volume of transactions in the value chain magnifies the inefficiencies of cash and increases the considerable risk to farmers who rely on it. With the support of a partner, those marketplaces could offer payment and/or digital financing options directly in the platform, enabling a more efficient and secure payment process.

Latin America has gone from a region with nearly half its population unbanked, to a booming digital economy, projected to double by 2026.¹ That shift is reflected in the payment methods of surveyed Brazilian farmers: the majority now use a combination of digital platforms, instant messaging, and in-person interactions for agricultural purchases, though more than a third still use cash as a main form of payment.²

The development of digital marketplaces for agricultural purchases has been a welcome innovation for the industry, but most platforms lack integrated payment options. Buyers and sellers agree on a price and then complete the payment outside of the system, creating delays and requiring tedious, manual processes. Embedding payment processes within an already popular platform would differentiate the marketplace from its competitors, and offer a seamless, secure transfer of funds for all parties.

Agrotoken, a Brazilian fintech company that specializes in Real-World Asset (RWA) tokens of agricultural products, announced an agribusiness collaboration with Banco de Brasil, allowing farmers to purchase fertilizers and equipment directly on the bank’s digital platform with the tokenized form of their grain production.³ This innovation, built on blockchain technology, eliminates the hassle of cash or check payments for both producers and distributors.

The cash flow challenges faced by small to medium-sized farms present a significant opportunity for the integration of digital payments and embedded finance. Banks, fintechs, and other stakeholders are positioned to benefit from the development and implementation of these tailored solutions. Not only can they help smooth out expected cash flow gaps and improve access to credit, but they can also enhance efficiency and security in the value chain. As such, the transition to embedded finance presents a ripe opportunity for the agricultural sector.

 

Accelerating Digital Payments Latin America and Caribbean, IDB Lab and World Economic Forum, published 2022.  Payments Evolution Accelerates Digital Commerce in Latin America, Forbes, published 2024.

The Brazilian Farmer’s Mind, McKinsey, published in 2022.

³ Driving payments innovation for business in Latin America and the Caribbean, Visa.