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Lost in Transaction Chile: Consumer payments trends 2022

A leader in Latin America when it comes to financial inclusion, the big banked population of Chile use their debit cards more than ever. But as eCommerce continues to increase, alternative payments methods (APMs) are gaining traction.

Growth, inclusion and new ways to pay

Sporting a buoyant economy, Chile is proving to be a growing market on many fronts. It experienced a gross domestic product (GDP) rise of 11.7% in 2021 and saw a significant boost in eCommerce, with first quarter 2021 online sales increasing by 196%. Smartphone adoption was 70% in 2020 and is forecast to be 81% in 2025, figures very close to those for Latin America as a whole.

The country has the highest banked population in Latin American – 74% of the population of 19.4 million people have a bank account, in comparison to a Latin American average of 49%. This is due in large part to the Chilean government’s financial inclusion initiatives and banks working hard to make financial services easier for people to access. For example, BancoEstado offers basic savings accounts and debit cards for individuals who don’t qualify for traditional current accounts. It’s also thanks to the lower cost of bank accounts compared to other countries in Latin America. But while the number of banked citizens is high, cash remains important. And, as we’ll see, digital wallet uptake is rising, and consumers have also significantly increased their use of bank transfers.

Contactless payments hit record use and debit card popularity is stronger than ever

With widespread banking access, debit cards have historically been a favourite. This is a trend highlighted in our April 2022 survey of 1,000 Chilean consumers, which also covered Brazil, Peru and respondents across North America and Europe, the Middle East and Africa (EMEA). Of the individuals surveyed in Chile, a massive 82% said they’ve used a debit card in the past month when paying for online purchases. This is compared to 69% for Latin America as a whole, 54% for EMEA, and 60% for North America. The only other country with such high debit card use is the UK, at 82% also.

Given initiatives to encourage financial inclusion and adoption of traditional banking services with access to debit cards, it’s not surprising that debit card use has risen. Of respondents, 65% say that they use debit cards more frequently than they did a year ago. This number is also significantly higher than the Latin America average of 51%. Further, 22% of Chileans say they use debit cards about the same amount as they did a year ago.

The responses around contactless payments tells a similar story: 91% have used contactless payments in store via a debit card or credit card in the last month. This is 10% higher than the figure for Latin America, as well as being much higher than North America, where the corresponding number is 67%.

The APMs that are gaining ground

Of the alternative payments options available, digital wallets and bank transfers are being used more often now compared to a year ago. Among respondents, 24% say they’ve used a digital wallet in the past month when paying for online purchases. And 20% use the payment method more frequently – with a further 17% saying they use it about the same as they did a year ago.

For bank transfers, 41% of survey respondents said they used this payment method in the past month – making it the most popular APM and the third-most popular payment method only after debit cards and credit cards. Furthermore, 61% said they use bank transfers either more frequently or about the same amount compared to a year ago.

Chileans are still very considerate of cash, however, with 63% agreeing that cash is the most reliable form of payment, and 71% saying they’d be worried if they could no longer access cash. Chileans are also exploring eCash, with 14% having used it in the past month for online purchases, and 34% having either used it more or about the same amount compared to a year ago.

Online banking, security and trust

Responses to questions about online and neobanks versus traditional banks show a significant appetite for digital banking, but with some reservations. For example, 61% of Chileans say they’d use an online bank but worry about how to deposit cash into it. This compared to 54% for Latin America as a whole, 44% for the North America, and 43% for EMEA.

There are further differences around trust: 56% say they’d use an online or neobank, but don’t fully trust them with their personal data. In North America, 43% of respondents say the same, and in EMEA just 38%.

The stance on security of online payments is largely in line with Latin America responses on the whole – 64% don’t feel comfortable entering financial data online, and 75% are more worried about online payment fraud today compared to 12 months ago.

Looking beyond the debit card

Chile traditionally has a large banked population and the enduring popularity of debit cards, which has only increased over the pandemic, as our Lost in Transaction survey results show.

Consumers’ uptake of digital wallets and the significant increase in the use of bank transfers indicate a willingness among the population to explore new ways to pay. This, coupled with the growth of eCommerce as well as the growing economy, make Chile an interesting market for merchants.