The Latin America effect: Payments trends and a continent of opportunity
Burgeoning eCommerce is making Latin America an attractive market for merchants. And the appetite for alternative payment methods keeps on growing. Paysafe’s latest Lost in Transaction survey highlights some key trends in people’s payments habits in the region.
With a view to better understanding consumers’ payments habits, Paysafe conducted a survey of 3,000 consumers across Brazil, Chile, and Peru in April 2022. While we’ll look at the specific trends and opportunities in each of these three countries in more detail later, here are some of our findings for the region as a whole.
eCommerce and APMs shift up a gear
Across Latin America, as in most of the rest of the world, we’ve seen the rise of eCommerce accelerated by the pandemic and subsequent lockdown measures. This has been accompanied by increasing use of alternative payment methods (APMs), such as eCash, digital wallets, and bank transfers.
In many ways a natural reaction to an exceptional set of circumstances, a critical question is whether these changes in consumer habits will endure in the long-term. Our survey paints a positive picture in this regard, with 74% of respondents in the Lost in Transaction survey reckoning that their payment habits have changed permanently since the start of the pandemic.
With such momentum in the region, it’s an exciting time for consumers and merchants. Access to the internet and eCommerce through mobile phones – smartphone adoption reached 72% in 2020 and is forecast to be nearer 81% in 2025 – and different ways to pay are driving greater choice and inclusivity for consumers. At the same time, merchants can look to a region that might have seemed prohibitive in the past due to a lack of local knowledge and partnering opportunities, as well as payment hurdles and difficulties of cross-border transactions.
Latin American countries’ increased digitalization (260.2 million digital shoppers in 2022), support of instant payments (such as Pix in Brazil), and population keen to adopt APMs (63% had used a digital or mobile wallet, eCash, or crypto in the last month) has made this a market with huge potential.
eCash equals inclusion
Although many differences – demographics, banking environments and regulations, payment preferences, and so on – clearly exist from one Latin American country to another, there are some common characteristics.
There’s a general tendency towards an informal economy with a big unbanked population – 45% according to the World Bank – and a preference for cash over debit or credit cards. This is largely driven by the turbulent economic climate over the last decade, access to credit, an air of mistrust of the economic system, and high fees and interest rates of debit and credit cards.
In this environment, alternative payment options such as eCash are drivers of financial inclusion. There are numerous benefits to the consumer: they avoid high fees, they conveniently pay in their neighbourhood merchants, no need to go through complex application processes, there are no credit checks, and they don’t have to share a load of sensitive information online (more on this later). From pretty much every angle, it’s just a better overall experience for the cash-preferred customers.
So there’s no surprise that the use of eCash in Latin America is on the rise. Results show that 20% of respondents use eCash more frequently than they did a year ago, with 17% saying they use it about the same amount compared to a year ago. Our survey – which also gathered responses from 8,000 consumers across the UK, US, Canada, Germany, Austria, Bulgaria, and Italy – highlighted more use of eCash in Latin America: 15% said they used eCash in the last month compared to 9% across Europe and North America.
Security tops consumers’ list of concerns
Alternative payments methods such as eCash, Pix, and QR-code-based services have been increasingly popular over the last couple of years in Latin America. While convenience, simplicity, and speed are good reasons for their uptake, it also highlights a real concern around security of financial information.
In our survey, 45% of consumers said security is the most important factor when choosing how to pay for an online purchase. Further, 66% don’t feel comfortable entering financial details online and 78% are more comfortable using a payment method that doesn’t require them to share their details with merchants.
Payments methods such as eCash give people access to eCommerce in a way that makes them feel secure, without having to enter their financial or personal details online. Of the Latin American consumers in our survey, 38% said they don’t know enough about eCash, while 21% said they’d use it in the next 2 years if it becomes more widely available. So the key to wider acceptance and uptake is at least in part about understanding alternative payment options as well as how they work. With greater awareness, combined with increasing smartphone adoption (81% by 2025, as mentioned above), eCash is likely to become a more everyday payment choice across the region.
Cost of living, credit, and crypto: other trends across Latin America
The cost of living has had a significant impact on Latin American consumers’ choice of payment method for online purchases, with 63% saying they’ve changed the way they use certain payment methods, compared to 36% in Europe and 39% in North America.
This seems to show a willingness to adapt payment habits to circumstances. Whether that’s trying to avoid high fees or interest rates – of those who have said they’ve changed their habits, 63% are avoiding using pay-by-instalment plans. Or opting for a method that doesn’t involve credit – 58% are using their debit cards more often, while 45% are using direct bank transfers more regularly. The digital wallet has also seen fast adoption: 35% of consumers say they use them more often as a result of the rising cost of living. And 27% are using eCash more often for the same reason.
Crypto is starting to gain traction as a payment method, with 8% using it more frequently compared to a year ago. When we look at the wider picture, this figure is almost identical to responses from the other regions surveyed, with 7% in Europe using crypto more than they did a year ago, and 9% in North America.
Millions of potential customers with one connection
What once might have seemed a difficult and complex market to enter now presents a rich opportunity for businesses outside Latin America, especially online merchants with virtual deliverables. And it really can be as simple as choosing the right provider with a well-established presence ‘on the ground’ and the regulatory requirements in place to get instant access to local payment networks.
If you’re a merchant, for instance, partnering with Paysafe means you don’t have to establish a legal business entity in each country you want to sell into: our solution integrates currencies and payments in one place. We also provide expert local knowledge and partnerships, an extensive banking network and collection points, a range of payment channels, and real-time capabilities.
One connection is all it takes to open up access to multiple payments methods across multiple markets and reach millions of potential customers in Latin America. Find out more here.