Covid-19 has driven changes in payment preferences and consumer buying behavior, especially in Latin America. This vibrant and lively region experienced the highest levels of eCommerce growth compared to other global markets.
Although the pandemic quickly accelerated the adoption of digital payments in the region, with 13 million Visa cardholders in Latin America making their first online purchases over three months in 2020, the expansion is unlikely to stop there. Predictions show that the LatAm eCommerce market will grow at a CAGR of 31%, reaching $611 billion by 2024.
While the LatAm market has enjoyed growth and undergone significant digital development over the last few years, the region is still largely untapped. This substantial growth and innovation present a whole range of new opportunities for merchants. And for those looking to expand into Latin America, they will need to offer not just local but a variety of payment methods to plug into this market and attract new customers.
In this blog, we explore some of the Latin American countries that have adapted and transformed their approach to payments in the wake of the pandemic.
Brazil's Push for Financial Inclusion
Although Brazil's push for financial inclusion began long before the word "coronavirus" became a regular addition to our lives, the Federal Government of Brazil took steps to financially assist its citizens during the lockdown. This incentive saw the creation of twenty-five million new online bank accounts over a two-week period in April 2020. Although many underbanked citizens are reluctant to trust banking providers, more than 100 million Latin Americans have shifted their reliance on cash and are now using new or previously dormant bank accounts, and by 2025, digital payments will account for over 95 percent of the almost 147 million fintech users in the South American country.
PIX has fueled the acceptance of digital payments in Brazil
The increase in active bank accounts has enabled PIX, an instant payment method similar to a bank transfer, to become a key player in the Brazilian payments landscape. The instant payment system created by Brazil's Central Bank makes it possible to transfer money between people and companies in up to 10 seconds, 24 hours a day, seven days a week. With a 74% share of cash used in total payment in Brazil, PIX initially focused on peer-to-peer (P2P) transactions. After their initial success, they continued to work on building rapport and trust with consumers, which enabled them to introduce recurring bill payments and eCommerce purchases, boosting Brazil's already extraordinary growth in this sector. PIX now serves as a benchmark for other real-time payment alternatives to emerge, creating more opportunities for financial inclusion.
Financial inclusion will continue to boost economic growth
Due to the size of the underbanked population in the country, financial inclusion initiatives will have a powerful overall impact on the country's economic growth, with analysis showing that the Brazilian eCommerce market will grow by 22.2% in 2022. Being one of the most developed economies in Latin America, the potential impact of offering new financial services in Brazil is enormous.
The accessibility and affordability of financial products and services provided by FinTech's are essential for reaching previously underserved groups. Therefore, merchants looking to expand into Brazil should offer a variety of alternative payment methods that remove the need for consumers - underbanked or otherwise - to deal with traditional banks. Merchants will also need to process payments with a local acquirer to secure high authorization rates to fill the payment method gaps within Brazil's banking system.
The Phenomenal Growth in Argentinian eCommerce
Due to the uptake in online purchases in Latin America, the region earned the top spot in the global rankings for eCommerce growth, experiencing a 37% rise in eCommerce sales in 2021 compared to 2019.
However, the region's third-largest country, Argentina, demonstrated the most significant increase in eCommerce growth, growing by 124% in 2020, largely assisted by the eCommerce marketplace giant, Mercado Libre, which attained a net revenue of $1.5 billion USD in Argentina in 2021.
The internet has paved the way for Argentinian eCommerce
The country has over 32 million internet users (the third-highest percentage in LatAm), and around 90% have made an online purchase at least once. The significant smartphone penetration in the country has enabled social media to become an effective selling platform for merchants in the country. In 2020, mobile phone purchases generated $5 billion USD, with predictions suggesting this will reach $13 billion USD by 2024. The Argentine consumer has very active consumption behavior and is eager to turn to international retailers who can deliver on purchases when local retailers cannot. Credit and debit cards are the most common payment method in this country and will help to facilitate the eCommerce boom. However, this adoption isn't just limited to the largest cities in Argentina, as rural areas are being incentivized to shop online, with delivery services offering better convenience for consumers.
The convenience of online shopping has shaped the eCommerce landscape
Although many turned to the internet to navigate the national lockdowns and minimize their risk of contracting the virus, the convenience and overall satisfaction of online shopping has proved that it's here to stay, with consumers indicating they're unlikely to revert to their pre-pandemic shopping behaviors.
For merchants wanting to launch in this region, improving app development to capture the growing number of mCommerce customers is a great starting point. But pairing this development with responsive UX, competitive offerings that match the Argentinean buying behavior, and preferred local payment options is an excellent approach to capture consumers looking to explore international commerce options.
However, other demand-based trends, like Buy Now, Pay Later (BNPL), mWallets, and click-and-collect are beginning to play an essential role in eCommerce, so merchants must remain flexible and appropriately respond to these changes by diversifying their payment offerings to suit customer demands.
Learn more about the payments landscape in Argentina by checking out our Argentina Country Guide.
The Adoption of Cryptocurrency in Colombia
In 2020, Colombia reached the ninth spot in the Global Cryptocurrency Adoption Index, with around 6.1% of Colombians owning the digital currency. By the end of 2022, predictions show that 36% of Colombians will use cryptocurrency as a payment method, predominantly driven by younger generations.
Colombia’s pilot program is enabling the adoption of crypto
The Financial Superintendency of Colombia (SFC) has also partially fueled the growth of cryptocurrencies by introducing a pilot program, LaArenera. The payment facility connects banking services with crypto programs, enabling greater crypto adoption throughout the country. Regional crypto exchange, Buda, grew by 350% between 2019 and 2020, with its active users increasing by 125%. International exchanges have also observed growth within Colombia. For example, LocalBitcoins, a P2P trading platform, reported that Colombia accounted for 11.3% of its global transaction volumes, just behind Russia and Venezuela.
Colombian authorities have a friendly approach to Bitcoin
With 79% of locals preferring to use Bitcoin to preserve their cash, it's clear to see the recovering Colombian economy has developed a passion for Bitcoin. Although the Colombian authorities haven't yet provided a regulatory framework for the crypto ecosystem, they have a friendly approach to this technology, revealing the country’s appetite for innovation in blockchain-driven development. When people purchase cryptocurrency in Colombia, they use P2P platforms or head to a Bitcoin ATM. Bitcoin ATMs have helped, in part, Colombians facilitate the move away from cash to crypto and have become a popular payment method for freelancers. There are over 50 ATMs spread across the country, the highest concentration of Bitcoin ATMs in any Latin American nation.
Many retailers in Colombia already accept Bitcoin. Offering this payment service means they can also enjoy significantly less processing fees (ranging between 0-1%), enabling these businesses to keep more of their revenue. Colombians are open to new opportunities across the Fintech landscape, so offering cryptocurrency as a payment method allows merchants to capitalize on its growing popularity while catering to current demands. Colombia's friendly approach toward technological innovation will enable businesses to prepare for the subsequent developments in the world of digital currencies.
Navigating the evolving LatAm payments landscape in 2022
As the worst of the coronavirus outbreak is seemingly over, Latin America has proved that it's rebuilding its approach to payments. With huge progression around financial inclusion, widespread internet connectivity, and the increasing acceptance of online retail, many Latin American countries are creating new opportunities for a broad range of demographics ready to experience the world of eCommerce. A region that was once difficult for foreign businesses to enter due to the number of protective policies placed to support the local currencies, it's clear that Latin America is undergoing a significant transformation and has become an increasingly attractive prospect for eCommerce merchants and their partners. With the payments landscape constantly evolving in Latin America, staying ahead of the competition is vital to success. Merchants looking to expand into this market need to understand the whole eCommerce ecosystem, including the regulations, consumer behavior, and cultural preferences. And for businesses that can localize and work with partners who know the local market, the opportunities are truly immense. With the right payments partner that enables you to react quickly to customer demands, launch new products, and cut through the intricacies of different payment cultures, you can focus on growing your business. Yapstone's feature-rich solution lets you easily accept local debit and credit cards, prepaid cards, digital wallets, and cash payment methods like Boletos in Brazil and Rapi Pago in Argentina. We take care of the complexities, while our robust market solution intuitively amplifies your growth as you scale globally.
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