Latin America is a multifaceted region with different social, economic, and technological realities. Even when some countries resemble each other in the size of their economies, such as Mexico and Brazil, they can also differ in the adoption level of certain technologies, including payment technologies. Therefore, when it comes to the future of payments in Latin America, we must first carefully observe each country’s current state, knowing that the entire region offers great opportunities for merchants looking to expand their operations. Let's discuss payment trends in the region's four main economies – Brazil, Mexico, Argentina, and Colombia.
Before the pandemic, Brazil still had a large portion of the population unbanked, a situation that has changed considerably, as 82% of the population has a bank account, according to Brazilian Central Bank data from 2022. Much of this change is due to the expansion of digital banks like Nubank, which is now the second most valuable bank in the country, and digital wallets like PicPay. The increased bank access was fertile ground for the adoption of Pix, which, in a few years, has become one of the preferred payment methods for Brazilians, being a worldwide success story in instant payments.
Based on the current Brazilian scenario, the future of payments points to the progressive disappearance of cash and paper-dependent payment methods, such as Boleto. Concomitantly, the use of credit and debit cards continues to grow, along with Pix, which keeps gaining more market share and becoming a competitor to cards, especially with the new features that are expected to be launched this year – such as Pix Parcelado (instalments) and Pix Automático (recurring). In 2023 alone, 42 billion transactions were carried out, surpassing credit card (17.8 billion) and debit card (16.3 billion) transactions by more than seven times, according to data from the Central Bank of Brazil. Not to mention Drex, as the Digital Real is known, which is already in the testing phase and, once launched, is expected to be quickly adopted by a population already accustomed to digital payments.
On the other side of Latin America, in Mexico, the reality is different. Although it is a strong and relevant economy, the country still has a population with a high unbanked rate and a greater dependence on cash. However, this scenario is changing with the arrival of digital banks like Nubank. According to a Bank of America study based on Sensor Tower data, Mexico has approximately 19 million active neobank users, representing about 15% of the population. This level is similar to that recorded in Brazil in 2018. What is the result of this? With more digital banks and a push towards banking the population, greater adoption of digital payments is seen, mainly credit and debit cards and digital wallets. However, physical cash remains one of the main payment methods.
According to the ecommerce data library research by PCMI, the most used payment methods in Mexican ecommerce in 2023 were credit cards (38%), debit cards (25%), and cash-based payment methods (10%) – e.g., OXXO Pay, where the user prints a voucher and pays in physical stores. Digital wallets come next with 8%. The future of payments in Mexico shows growth in the methods that dominate today, with more opportunities for cards and digital wallets, which should increasingly replace cash-based methods. The Mexican instant payment method SPEI/CoDi is also expected to gain more traction, as it is not yet considered a primary payment method in the country's main ecommerce and marketplaces space. However, this can change as the population becomes more banked and used to fully digital payment processes.
Following the analysis of the main Latin American economies, we focus on Argentina, which, unlike Mexico, has less dependence on cash. According to PCMI data, in 2023, only 2% of ecommerce payments were based on cash methods such as cash vouchers. Ecommerce is dominated by credit cards (54%) and digital wallets (23%). As a trend, digital wallets are expected to continue to gain market share. However, the market concentration of digital wallets featured in Mercado Pago might decrease, as Argentina’s central bank has announced that any digital wallet can now accept credit card payments, something that was previously exclusive to Mercado Pago.
Finally, Colombia stands out for having a significant 32% rate of bank transfers in ecommerce, according to PCMI data from 2023. This is attributed predominantly to the success of the PSE payment method, which redirects the user to carry out the payment on the internet banking page. Nonetheless, cash vouchers account for 10%, but this should also change as the country is transforming following the growth of several digital banks, such as Nubank, and digital wallets like Nequi, Bancolombia a la Mano, and DaviPlata. According to the third edition of the Financial Inclusion Report (IIF) by Grupo Credicorp, 61% of people manage at least one digital wallet, accounting for a good part of Colombia's financial inclusion.
Historically a deficit in the region, banking the population has advanced significantly in Latin America. This progress has facilitated more digital shopping and payment processes, generating various opportunities for merchants. Understanding the local particularities is essential to make the most of these opportunities and achieve success in the region.
What will be the predominant payment method in Latin America, and what opportunities will arise for businesses? In summary, while emerging and diverse payment methods are gaining traction, there is no dominant regional payment method yet. Consumers prioritise convenience, speed, safety, and a seamless experience. Consequently, merchants must remain adaptable and capable of accepting both existing and new payment methods.
Ignacio José Morales is Head of Unlimit Mexico. He is responsible for the company's operation in the country, leading the commercial, technology, financial, and legal teams – and working on the expansion of the company’s financial services in the region. Previously, Ignacio held different positions in the financial sector in companies such as Citibanamex, Western Union, and Mastercard. Ignacio holds an MBA from IPADE, a degree in Business Administration from Universidad Iberoamericana, and he studied Bank Card Management at the University of Oklahoma and Strategy at MIT.
Founded in 2009, Unlimit is a global fintech company that offers a large portfolio of financial services, including payment processing, Banking-as-a-Service (BaaS), and an on-ramp fiat solution for crypto, DeFi, and GameFi.
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