Latest Insights into Latin America’s eCommerce & Payments

Latin America is a promising market that is undergoing major shifts. Currently, its evolution is driven by digitization, rising internet penetration, increasing consumer purchasing power, robust government support, and intensifying interest in online shopping. In turn, all these factors combined together create a fertile ground for innovative solutions to emerge and thrive.

While it is evident that the local payment and eCommerce landscape is changing for the better, you may be wondering: “Which specific verticals will it follow on its growth journey?” Find the answers to this and other burning questions in this detailed overview!

The Root Causes of Shifts in LATAM’s Commerce & Payments

Before we delve into the new payment and commerce-related verticals in LATAM’s growth trajectory, it is essential to review the events that preceded their emergence. Similar to many regions across the globe, the pandemic redirected the local market’s focus and accelerated its digitalization. Yet, even prior to the virus outbreak, Latin America was already heading toward a digital revolution.

With that said, the unique challenges presented by the pandemic accelerated this transformation far beyond initial expectations. Online shopping became the norm in no time, and millions of individuals opened their first digital bank accounts. As a result, access to financial accounts surged from 51% in 2017 to an impressive 84% in 2023.

What’s more, when Brazil’s Central Bank introduced Pix, an instant payment platform, in November 2020, it played a vital role in reshaping the country into a globally recognized financial innovation hub. However, not only does this system constitutes 29% of the eCommerce volume in Brazil, but also is responsible for 17% of the online sales volume in Latin America.

As you can see, the Latin American region has experienced several major changes over the past few years. But which results have they currently led to?

Local eCommerce Overview: Current State & Future Predictions

It is worth noting that while local eCommerce experienced a substantial 27% growth between 2021 and 2022, its pace slowed down in the subsequent years as shopping habits stabilized post-pandemic. However, the online sales volume in the top six LATAM markets is still anticipated to witness a 22% annual increase by 2026, reaching approximately $870 billion.

This growth is partly due to the fact that the previously lagging markets like Peru and Mexico are now catching up with countries that experienced rapid growth during the COVID-19 outbreak. In fact, experts predict that these two nations alone are set to grow by 35% and 33% over the next three years, respectively.

At the same time, the annual growth rate of cross-border eCommerce in LATAM stands at 30%, surpassing that of the overall online sales volume. Currently estimated at $52.5 billion, the total cross-border volume in the region is projected to reach $114.6 billion already by 2026.

Key Verticals Shaping Latin America’s eCommerce

Now that you are aware of the key nuances related to the development of the eCommerce and payments sector in LATAM, let’s explore some of the main directions you need to follow, namely:

This sector encompasses such activities as:

• Online casinos
• Sports betting
• Lotteries
• Online gambling

It is currently the fastest-growing sector in the LATAM eCommerce market, which is expected to keep experiencing a compound annual growth rate (CAGR) of 38% until 2026.

The three major markets driving this exceptional growth are:

• Brazil (with a CAGR of 49%)
• Mexico (CAGR of 40%)
• Chile (CAGR of 40%)

The surge reflected in these figures is mainly due to the destigmatization of this vertical into a widely accepted and increasingly popular form of entertainment. Consequently, regulatory frameworks are also forced to evolve to keep pace with the rapid expansion of betting activities, with Colombia and Peru leading as the most mature markets.

It is also crucial to note that the cross-border volume of the overall betting market currently equals 11% or $2.3 billion and is projected to rise up to $6 billion by 2026.

Digital Currencies

You may probably recall how, in the 2010s, digital currencies primarily attracted only very curious and adventurous investors. However, they are now gaining acceptance from traditional institutions and financial entities.

Latin America is home to five of the top six markets ranking among the world’s top 35 crypto hubs:

• Brazil in 7th place
• Argentina in 13th place
• Colombia in 15th place
• Mexico in 28th place
• Peru in 35th place

The distinctive trait of this segment is its fluctuations in response to bullish and bear market trends, which make it challenging to predict its steady rise. Yet, experts still anticipate a 22% growth in digital currency market share in 2024.

Retail

Many agree that Latin America’s primary market is likely to remain in retail, encompassing both online and brick-and-mortar sales. In fact, the local retail sphere experiences faster growth compared to other regions, boasting a CAGR of 21%.

While this trend positions retail to maintain its status as LATAM’s leading contributor to online sales volume, it also highlights the need for innovation in this sector for the sake of accommodating increasing demand. Therefore, it is advisable to invest in omnichannel retail solutions, data-based tools, and advanced cybersecurity.

Final Thoughts: What Can We Expect from LATAM in the Upcoming Years?

Overall, the rapid transformations in Latin America’s eCommerce and payments sectors are extremely positive for the region’s economic development. However, it also comes with adaptability struggles for industry players.

Fortunately, those who have a clear understanding of the factors that are driving these shifts, as well as their potential consequences, will manage to stay ahead of the game. Besides, it is crucial to remember to pay extra attention to the key sectors highlighted in the section above. After all, these spheres are sure to be experiencing the most fast-paced changes.