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How merchants can cater to Latin American consumers with alternative payment methods
In Latin America, alternative payment methods are consistently gaining popularity. Why is this the case, and how can merchants cater to millions of Latin American consumers?
In this article, we explore how consumers in Latin America have embraced alternative payment methods (APMs), from real-time bank transfers to eCash, and how merchants can benefit from offering a broad payment ecosystem, including digital wallets such as Paysafe’s Skrill.
Read more to find out how merchants are meeting the needs of Latin American consumers.
An evolving payment landscape
As the payment landscape in Latin America keeps evolving, let’s look at the boom that took place over the last ten years. With the record growth of eCommerce across the region, along with the adoption of digital payments, Latin America is now seeing a surge in APMs.
A few factors contributed to this landscape: a push from the fintech sector, local regulatory developments and innovations, and accelerated digitalization during the pandemic. With that, businesses have quickly adopted new tools and digital alternatives.
The future of alternative payments in Latin America also lies in adding digital wallets, such as Skrill, to a broad suite of payment choices and therefore catering to a wider audience.
Latin America’s payment industry goes digital
It is evident that the payment landscape in Latin America is experiencing a shift in consumer behavior and the growing adoption of several payment methods. This change can be attributed to various factors.
Internet and smartphone adoption has grown steadily over the last ten years. Digitalization and smartphone adoption led to the acceleration of eCommerce. As reported in Paysafe’s Lost in Transaction: Consumer Payment Trends 2023, the popularity of digital and APMs has grown in several countries in the region.
Besides the consumer movements, regulators have also contributed. The two big regional digital payment frameworks, CoDi in Mexico and Pix in Brazil, have incentivized faster, simpler, and secure digital payments.
Instant payments were already present in Mexico, but CoDi significantly simplified and improved this process, providing both merchants and consumers with accessible and instant payment options. In Brazil, Pix has strongly encouraged consumers to go digital and challenged traditional payment methods. Digital wallets have benefited from this, creating opportunities for different customer experiences.
While the region still has room to grow when it comes to financial inclusion, both of these frameworks, along with Transferencias 3.0 in Argentina and others, have revolutionized accessibility to digital payments, benefiting considerable parts of the region’s population. This boom has prompted the creation of many solutions such as payment gateways and various interbank initiatives.
Younger consumers driving adoption of APMs
More than half (58%) of the population in Latin America consists of young adults (18-29 years old) and middle youth (30-44 years old). Overall, compared to Europe, North America, and Asia Pacific, this is a younger population, which is typically tech savvy and more open to adopting new habits.
Another point to note is that, while Brazil and Mexico have started their journey to digitalization, other countries in the region, such as Peru and Colombia, still have only 57% and 60% of the population banked. This means that, while smartphone adoption is high, and digital payments are possible, cash remains the main payment method in Latin America, with more than seven out of ten transactions being conducted with cash. This creates an opportunity for eCash, a digital cash solution that enables consumers to buy online and pay in cash at local retailers, stores and agents.
Alternative payments methods gaining popularity
When looking at digital transactions, such as peer-to-peer payments, real-time bank transfers have the highest value of all payment methods in Latin America. In terms of volume, cards (debit and credit) are the most popular non-cash method in the region.
For bank customers, digital wallet use has been growing annually and currently is cited as one of the preferred payment methods by 41% of respondents, according to our Lost in Transaction study. Real-time bank transfers are cited by 40% of those surveyed.
How digital wallets add value
As the payment landscape in the region matures, and digital payments become a preferred transaction method, merchants need a reliable payments partner in Latin America. Through our solutions like Skrill, Paysafe is uniquely positioned to serve eCommerce merchants in the region due to our support for a large variety of existing alternative payment methods in Latin America.
By offering a multitude of payment methods, merchants can deliver benefits to their customers and improve financial inclusion by enabling them to pay in their preferred way. Not only that, but merchants can expand operations and offer their services and products to a broader range of customers.
If you are looking for the right payments partner in Latin America to support your eCommerce payments, learn more about our digital wallets today. If you are a business looking to accept the Skrill digital wallet, please get in touch.