The Complete Guide to Accepting Payments in Latin America

The internet penetration rate and the number of mobile users in Latin America (LATAM) have been growing consistently throughout the past years. What’s more, the share of the unbanked population in the region is steadily decreasing, so if your online business still hasn’t entered this market, it might be the perfect time to do it.

Read on to find out what the Latin American eCommerce industry is like and how you can pick the best payment processor to help you handle transactions in this region.

SWOT Analysis of the Latin American eCommerce Industry

The World Bank states that approximately 55% of Latin American adults have an account at a financial institution, and their share is increasing rapidly. It is also a fast-growing eCommerce market. In fact, this region demonstrated the highest retail eCommerce sales growth in 2020, with a 36.7% increase compared to a worldwide result of 27.6%.

Hence, LATAM offers plenty of opportunities for conducting online business, making it an attractive market for global companies. However, before making a decision to bring your operations to this region, it’s crucial that you know the key details about its eCommerce landscape.

Below is a SWOT analysis of the Latin American eCommerce industry that offers you an overview of the pros and cons of running an online business in this region:

1. Strengths

The strong sides of the LATAM eCommerce industry are as follows:

• Presence of a first-mover advantage. The consumers in LATAM are very welcoming to new product launches in their domestic markets.
• High consumer loyalty. Market insights demonstrate that customers in Latin America tend to be extremely loyal to quality products.
• Demand for a diverse product portfolio. Businesses should target various segments when entering the Latin American eCommerce market.

2. Weaknesses

The main weakness of Latin America’s eCommerce industry is related to the nuances in domestic markets. While they can be beneficial in some business aspects, they can also become obstacles to achieving sustained growth.

This applies to the need for country-specific insights, adjustments to local payment methods, and sometimes even custom product lines.

3. Opportunities

The LATAM online sales industry is brimming with business opportunities, such as:

• Growth in market size. The rapidly developing market in LATAM, paired with the evolution of consumer preference, are ensuring the region’s eCommerce landscape for long-term growth.
• Evolving technological landscape. The emergence of neobanks and other FinTech solutions enables businesses across Latin America to scale more efficiently.
• Low market entry costs. It is fairly inexpensive to enter the Latin American eCommerce market for both national and international businesses.

4. Threats

The threats to the Latin American e-commerce landscape are mainly connected to the regulatory sphere. eCommerce businesses entering this market must be prepared for possible political instability and flexible enough to handle policy changes even at short notice.

Most Common Payment Methods in LATAM

The most popular payment methods across the LATAM region include:

• Cash - It’s the preferred payment method across Latin American countries, with 85% of transactions being cash-based. In some countries of the region, citizens don’t have easy access to credit cards enabled to make online purchases. What’s more, many consumers avoid digital forms of payment due to high fraud risks.
• Vouchers - With the help of vouchers, people can use cash to conduct online purchases. After a consumer selects a voucher during checkout, they receive an invoice with a barcode, which they can take to a physical store or pay for it through an online banking app. It is a popular payment method in Latin America. For instance, in Mexico, vouchers represent 16% of the total eCommerce volume, followed by Brazil, where the share of such payments equals 13%.
• Bank cards - Each country across Latin America has its own local set of cards. Hence, eCommerce companies that want to harness the full potential of LATAM must offer a variety of credit and debit card options. For instance, apart from Visa and Mastercard, you would also need to offer Elo and Hipercard in Brazil, Cabal and Naranja in Argentina, and Magna and CMR in Chile.
• Alternative payment methods - Bank transfers and instant payments are gradually increasing in popularity in LATAM. Many younger Latin Americans tend to use their mobile phones to purchase products online, making digital wallets a fast-growing payment method in the region.

Whether you are planning to conduct online sales across the whole LATAM region or are planning to enter a local market, it’s critical that you do thorough research and pick an excellent payment processor.

How to Make the Most Out of an eCommerce Business in LATAM?

It’s clear to see that businesses that can achieve greater flexibility in processing payments will have an advantage in the LATAM region.

Offering top-quality products and a variety of payment options is sure to prime your eCommerce business for success. But how do you ensure that you can cater to as many consumers in the region as possible?

Payneteasy simplifies market entry by removing the barriers for businesses with or without local offices in Latin America. With Payneteasy, you can forget the hassle of payment integration – we will handle these tasks for you.

Our FinTech solutions are here to help you offer a diverse set of payment methods, boost your conversion rates, reduce transaction costs, and generate informative financial reports. Reach out to us now and receive a custom solution to help your business thrive in Latin America and beyond.