In recent years, Latin America has seen a remarkable surge in digital payment adoption, transforming the way local businesses and consumers interact with money. From the rise of fintech startups to the emergence of CBDCs, the region is experiencing a wave of innovation, which is paving the way for enhanced eCommerce, greater financial inclusion, and economic growth.
As LATAM is striving to be more digitalized and interconnected, it is becoming increasingly important to understand the local payment scene in 2023 and moving onward. This article delves into the latest trends shaping the region’s eCommerce and payment ecosystem, providing invaluable insights for individuals and businesses seeking to navigate this dynamic landscape effectively.
Latin America’s journey toward digitization has seen growth at an unprecedented speed over the past years, further fueled by the pandemic’s impact. Given the fact that internet access soared to 77% across the region’s six major markets compared to 50% five years ago, the transformation is evident.
Additionally, the advent of neobanks and digital wallets has provided financial access to approximately one-third of Latin Americans, enabling them to obtain credit cards, loans, and bank accounts that were previously inaccessible. As a result, the region has witnessed remarkable change, with bank account ownership skyrocketing from 51% in 2017 to over 80% today.
Consequently, embracing eCommerce, streaming platforms, online gaming, and instant payment systems has become second nature, particularly in countries like Brazil and Mexico. As a result, it comes as no surprise that many industry experts agree that the LATAM region has entered its most digitalized and forward-looking era yet, which is promising to be truly game-changing.
With the revolutionary changes in LATAM’s payment sector gaining more and more traction, it is crucial for businesses to keep up with the current industry trends. Here are the top three actions merchants can undertake to ensure they stay ahead of the curve in the rapidly evolving Latin American payment landscape:
1. Implement Open Banking & Embedded Finance
In Latin America, consumers are driven by competitive pricing, product diversity, and a seamless payment experience that goes beyond user-friendly checkouts. This creates a fertile ground for the emergence of open banking and embedded finance models in LATAM, offering a wide array of payment options and enhancing consumer-business relationships.
This trend is worth closely monitoring as it brings innovation and convenience by eliminating the need for customers to navigate multiple platforms or undergo cumbersome payment processes.
2. Develop Cross-Sector Payment Solutions
Traditionally, businesses in such sectors as retail, telecommunications, technology, and transportation have focused on their core offerings. However, with the advent of innovative financial technologies and regulatory changes, these industries are now able to expand their reach and tap into the financial realm.
For example, retail companies can offer in-house financing options or digital wallets to streamline the payment process for their clients. Telecommunication providers can venture into mobile banking services, allowing users to access banking features directly from their mobile devices.
The convergence of various industries with the financial market in LATAM presents exciting prospects. This not only expands choices and agility for users but also improves overall customer experiences.
3. Tap into International eCommerce
LATAM’s geographic location offers significant cross-border trade opportunities. As eCommerce platforms and logistics networks improve, businesses in the region can tap into global markets and expand their customer base.
Thus, now is an opportune moment for foreign merchants eyeing LATAM to get into action, as cross-border eCommerce has regained momentum post-pandemic. In fact, cross-border sales are now surging at an even faster pace than domestic transactions.
Projections indicate that international online sales are set to reach a staggering $95 billion by 2025 among the region’s six major markets, which collectively account for 93% of the total eCommerce volume. This presents a lucrative avenue for international businesses looking to capitalize on Latin America’s vibrant market.
LATAM’s payment sector is forecast to continue its major transformation as consumer preferences and market dynamics continue to evolve. Aside from major tendencies like the expanding variety of digital payment methods and the shift to open banking, there are other key trends that are expected to influence the future of payments in the region moving forward, namely:
These trends indicate a shift toward digital, convenient, transparent, and secure transactions in LATAM, making the future of payments in this region look bright.
In the payments sphere, the increasing mobile wallet adoption, open banking advancements, efficient cross-border transactions, and secure authentication and operational practices are promising to create favorable conditions for local and international businesses to prosper. These developments are also aimed at making digital payments more accessible to all.
As for eCommerce in Latin America, it is projected to grow at an annual rate of 25% over the next three to five years. While the speed of growth may eventually stabilize, online commerce will continue to expand, albeit at a slower pace than during the recent boom. Thus, businesses should seize the current momentum and prepare for sustained growth in the digital commerce space.
Overall, the long-term trajectories of eCommerce and the payment sector in LATAM are projected to be positive. As these sectors continue to evolve, they are expected to contribute significantly to the region’s economic growth and offer vast opportunities for businesses and consumers alike.
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