The payments ecosystem in Latin America is undergoing significant changes that could set a new course for strategic aspects of the sector.
Contactless payments are gradually gaining ground and are estimated to represent over 35% by the end of 2023 in Latin America. Cash will share (and perhaps relinquish) the top spot as the preferred payment method, representing 36% of payments in the region. Methods like PIX are gaining greater prominence not only in Brazil but throughout Latin America, and access to digital accounts reaches or exceeds 90% in markets such as Argentina, Brazil, Chile, and Colombia.
Latin America has long been recognized as a region where the informal economy predominated, but in recent years, with digitalization advancing by leaps and bounds, the region has transformed into a thriving market with improved quality, diversified methods, and constant strengthening in industries such as e-learning, tourism, e-commerce, iGaming, among others.
Discover more about the trends that are revolutionizing the digital payments ecosystem in the Latin American landscape below.
You might also want to read: What is payment modernization?
Currently, Latin America offers a wide range of payment solutions, with cash accounting for 45%, credit cards for 50%, and 18% for transactions made through online payments. It is expected that in the second half of 2023, payment methods that provide immediacy and an efficient user experience, as well as the region’s financial ecosystem, will become more consolidated.
The payment trends with the highest growth are:
- Interoperability breaking barriers
Consumers in the region have started to demand bringing international commerce closer to Latin America through a seamless flow of money between different banks, wallets, and applications.
The main challenges regarding this involve offering complete coverage with preferred payment methods for each country in the region, aligned with integrating innovative, secure, and widely accessible solutions. Additionally, operating with an API that allows smooth transaction flows for recurring payments, supported by a reliable anti-fraud system, is crucial to ensure uninterrupted digital payments while maintaining a seamless payment experience, a feature incorporated into the offerings of companies like PayRetailers.
Interoperability is gaining prominence within the payment processing system, inviting competition based on user experience, customer service, and security. It allows digital payments to reach new heights, promoting open banking and embedded finance.
While this is still an ongoing process, payment providers like PayRetailers are constantly innovating to ensure their all-in-one solution remains aligned with the rapid growth of technology, catering to the financial needs that emerge in the Latin American market.
- Contactless
Did you know that credit cards were the first electronic payment method introduced? They arrived in Latin America in the 1970s and today they represent over 50% of transactions in e-commerce and 20% of physical payments.
That’s why payment gateways like PayRetailers are constantly working to integrate a wide range of card payments into all the countries where they operate, as a few years ago, access to cards was not widespread across the entire population. Nowadays, Latin America is undergoing a process of financial inclusion where carrying a card is becoming increasingly easier.
To enhance the payment experience, Visa and MasterCard implemented contactless technology in 2017. Currently, it exceeds 35% in Latin America as a whole and is used in over 50% of in-person transactions in countries like Colombia, Peru, and Chile. This technology represents an effort by the market to maintain competitiveness in this system, using a technology that reduces time and vulnerabilities. It is safe to say that contactless payments will continue to gain ground in the coming years.
- Instant Payments: PIX
PIX is considered the most transformative payment solution of the last decade when it comes to payments, being a reference in terms of financial inclusion, speed, and payment security. This has prompted other markets in Latin America to replicate an instant payment system in pursuit of security and efficient flow.
Among its most notable features, PIX offers immediacy through a disruptive and low-cost system, aligned with the goal of promoting financial inclusion.
Currently, PIX is used by 80% of Brazilians and 25% of businesses, reaching a transaction volume of $2.1 trillion in its first year, even surpassing the country’s GDP.
The demand for this method has skyrocketed due to consumer access facilitated by high digitization, as well as the way it helps define faster processes and reduce costs by streamlining and simplifying real-time payments. This increases the sales conversion rate and reduces cart abandonment, ensuring that customers do not leave the store’s website or app to complete their purchase. This has made it clear that there is interest from both consumers and merchants in an instant payment method with such characteristics, creating an opportunity for payment service providers (PSPs) to assist merchants in adopting new payment methods. PayRetailers offers PIX, contributing to the expansion of businesses in markets like Brazil, where it is highly demanded by consumers, instills confidence, and is applicable across any industry.
- Cashless
The digitalization experienced by payment systems, partly motivated by the COVID-19 pandemic, has resulted in over 50% of transactions in the region now being conducted through cards. There has been a significant growth in electronic payments and the adoption of cashless technologies. This can be attributed to various factors, such as the increased penetration of mobile phones and the expansion of electronic payment infrastructure.
The list of methods is led by credit and debit cards, such as Visa, Mastercard, and American Express, government initiatives like Pix, and digital wallets like MACH in Chile. These digital wallets store money on users’ mobile phones and enable payments in both physical and online stores.
This does not mean that cash will disappear, but it establishes the challenge of diversifying methods for each country. Companies like PayRetailers continue to work so that users can pay in the way they prefer and reach further through their range of methods, without neglecting the security of transactions.
Digital payments are ways to innovate and influence, connecting every line of business to emerging markets with great expansion opportunities, driving improvement in financial systems. By optimizing them, they provide significant advantages for the end consumer and increased profits for merchants.
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