This is about dLocal, a company that helps global firms like Uber and Google accept payments in emerging markets (Brazil, India, etc.). Founder Kanovich says the problem isn't tech but broken local infrastructure: each country has unique payment methods (e.g., Pix in Brazil, UPI in India) and regulations. dLocal's fix: build local pipes in each country, then offer one API so merchants integrate once. He insists every transaction must be profitable, no loss-leading. Key mentions: Uber (early client, paid drivers manually in Argentina), Google (uses local payments in Brazil), Shein (killing it in emerging markets).
At a Glance This episode of Founder’s Field Guide features a conversation with dLocal CEO Sebastian Kanovich, exploring the construction of payment infrastructure in emerging markets. The core thesis: dLocal bridges the payment gap between developed and emerging markets via an API, enabling global m
Sebastian Kanovich, 31, CEO of dLocal, self-funded the founding of this emerging-market payment infrastructure company in 2016. After its IPO in 2021, the company reached a market capitalization of $10 billion. The main thread of this issue: how dLocal bridges the payment gap between developed and emerging markets through a single API, and the CEO's reflections on the API product, regulatory relationships, and personal growth. Kanovich's core judgment is that the payment problem in emerging markets is not a technical challenge, but an infrastructure issue that "breaks at the edges"—each country has unique payment habits, regulatory frameworks, and currency controls. The solution is not to invent new technology, but to lay down localized pipelines one by one, and then abstract away all complexity through a standardized API.
Kanovich argues that the "user pays → merchant receives" flow, which users in developed markets (US, Europe, China) take for granted, is completely broken in emerging markets (Nigeria, India, Brazil). The issue is not the technology itself, but the fact that infrastructure pipelines are not connected. At the same time, payment behavior is highly localized — users in South Africa, Mexico, and India have entirely different payment methods. This is good for users (more choices) but a nightmare for global merchants: they need to accept hundreds of different payment methods.
dLocal's solution: Build localized pipelines in each emerging market, then provide a unified access point to global merchants (Uber, Spotify, Google, etc.) through a single API. Merchants need only one API integration to cover all emerging markets — change the configuration parameter from BR (Brazil) to MX (Mexico), and the entire logic switches automatically.
> "Payments is not rocket science by no means, but it works, but it's sometimes broken on the edges."
1. Identify Local Payment Methods: India has UPI (government-backed payment method), Brazil has Pix (central bank-sponsored), Boleto (cash payment), installment payments, etc.
2. Fill Infrastructure Gaps: Many payment methods do not support recurring billing, which kills merchants' subscription business models; tax reporting is extremely complex, requiring integration with tax authorities for automated tax filing; fund repatriation is subject to capital controls.
3. Establish a Local Entity: The first hire is a local country manager who understands the regulatory framework and payment methods.
4. Standardize Back to Product: Do not localize the product team — dLocal adheres to the "one API" principle, ensuring the product experience in India, South Africa, and Mexico is consistent.
Kanovich identifies two key differences:
> "This is a nightmare. Let's go fix it. That process might take three months or might take three years... we know that we are going to see the payoff, hopefully, in five years to come."
dLocal has repeatedly been asked to enter Germany or the UK — technically easy, with a well-established regulatory framework — but Kanovich refused: "We would rather spend three years in Bangladesh, because that’s where we can differentiate." The power of an API lies in standardization, and standardization means saying "no" to many things.
Early on, some merchants asked dLocal to send promotional emails to their user databases for their products — Kanovich refused, because once you start, you slide into the territory of "which ride-hailing company to recommend." Infrastructure companies should "sit in the middle" and not pick winners.
If you only understand technology without grasping regulation and reality, you end up with "good technology that no one uses"; if you only understand regulation without technology, you become "a bank." A successful payment company must understand both worlds simultaneously.
dLocal holds an exceptionally clear stance on each transaction: every transaction must contribute profit. Kanovich reviews the previous day's transaction volume report each morning — he is pleased when clients perform well, but more importantly, regardless of geography, payment method, or product, every transaction must contribute gross profit.
1. Processing Fee: A percentage or fixed amount charged to merchants per transaction (similar to credit card transaction fees)
2. Foreign Exchange Spread (Cross-border transactions only): A spread charged on each foreign exchange transaction
Processing Cost: Fees paid to payment method providers (bank transfers to banks, credit cards to acquirers, issuers, and card networks)
Kanovich opposes the traditional banking mindset of using payments as a "loss leader" to attract business and then profit from other services. dLocal does not subsidize early-stage expansion — "We don't want to wake up one morning and think: Oh, our merchants are doing so well, and we feel terrible about it."
Being too shy early on. Should have invested more boldly in 2016–2017. dLocal once wanted to "become a Silicon Valley company" — that was a mistake. The company should embrace its origins and differentiation. Another lesson: Dare to dream big — what he saw in Israel and Silicon Valley was "bold thinking," and it took dLocal several years to learn that.
| Position | Guest's Stance | Key Data |
|---|---|---|
| Uber | Early key client (paying drivers) | Manually paid 700 Argentine drivers in the first week |
| Core client (advertising, cloud, YouTube, Play) | Accepts local credit cards, installments, Pix, and Boleto in Brazil | |
| Spotify | Client | No specific data provided |
| Netflix | Client | No specific data provided |
| Didi | Client (growth from Latin America) | "Crazy" when entering Latin America 4 years ago; now prominent |
| Shein / Shopee | Observation (strong performance in emerging markets) | "Killing it all across emerging markets" |
| Kamba (Australian company) | Unexpected success story (India market) | No specific data provided |
| Adyen / Stripe | Competitors (developed markets) | Not entering emerging markets or currently entering |
| Wix / Shopify | Partners (market platforms) | No specific data provided |
1. "Payments is not rocket science, but it breaks at the edges" (Kanovich) — The payment problem in emerging markets is not a technical challenge but a matter of unconnected infrastructure pipelines; the solution lies in localized deployment plus standardized API abstraction.
2. "This is a nightmare, let's go fix it" (Kanovich) — dLocal chose Bangladesh over Germany because complexity equals differentiation opportunity; the payback period may be five years, but this is a DNA-level commitment.
3. First principle of API products: standardization means saying 'no' to many things (Kanovich) — If an API needs to integrate five different places for different use cases, it's "dead" no matter how strong the value proposition; dLocal refuses to enter Germany/UK because excellent APIs already exist there.
4. Infrastructure companies should never compete with their customers (Kanovich) — dLocal refuses to promote merchant products to its user database, because once it starts, it will slide into "picking winners"; infrastructure should "sit in the middle and not pick winners."
5. Every transaction must be profitable (Kanovich) — dLocal opposes using payments as a loss leader for customer acquisition; every morning, it reviews transaction volume reports — when clients do well, he is happy, but every transaction contributes gross margin.
6. "I am not the CEO of dLocal; I am Sebastian, who happens to be CEO at this point in time" (Kanovich) — A low-ego environment: the technical team is handed over to those more capable; if someone better suited to be CEO emerges tomorrow, that should be encouraged.
7. The biggest early mistake: being too shy to dream big (Kanovich) — dLocal should have invested more boldly in 2016–2017; the company once wanted to "become a Silicon Valley company," but it should embrace its own origins and differentiation.
8. The formula for a successful payments company: the intersection of technology × finance (Kanovich) — Knowing only technology without regulation equals "good tech no one uses"; knowing only regulation without technology equals "a bank"; mastering both creates "magic."