Digitisation, consumer expectations, and main trends for Latin America in 2023 and beyond

As the digital economy and ecommerce space in Latin America is entering what seems to be its most promising era yet, what are the main drivers of change in the region?

Latin America was already moving toward a more digitised region, but the pandemic made it happen much faster than previously expected. Considering LATAM’s six main markets, internet access is at 77% – five years ago, it was 50%.

Besides, about a third of Latin Americans have access to financial services through a neobank or digital wallet, which allowed many more people to have a level of access to credit cards, loans, and bank accounts that wasn’t possible before. In 2017, 51% of the region’s population had a bank account, and now it’s over 80%.

This severely impacts ecommerce penetration and access to digital goods and services. Latin American consumers are very open to new shopping experiences, to digital banks, to services that make their lives easier, that accelerate things. So, it’s a consumer base that very easily got used to ecommerce, streaming, online gaming, instant payments – especially in the region’s two giants, Brazil and Mexico.

LATAM’s ecommerce and digital payments space surges ahead, and global merchants show renewed interest in the region. How can they adjust their strategy to benefit from these developments?

The region’s users seek competitive prices, product variety, and a good payment experience. Not only referring to checkout with efficient UX, but to payment options. This opens up space for models such as Open Banking and Embedded Finance to rise in LATAM, bringing variety to the payment segment and improving the relationship with consumers, so it’s worth keeping an eye on that. The possibility of businesses from other segments tapping into the financial market might facilitate operations, besides fomenting competition and giving even more options and agility for users.

It’s also worth noting that this is an excellent moment for foreign merchants in LATAM, as cross-border ecommerce has gotten back on track after the pandemic – and is now rising even faster than domestic sales. We expect cross-border to reach USD 95 billion by 2025 among the six main markets of Latin America, which represent 93% of all ecommerce volume.

Does the uptick in ecommerce consumption in LATAM vary across different sectors? Which ecommerce verticals are expected to flourish in the next couple of years and why?

Retail is the strongest ecommerce sector, but the pandemic led to a widening of the products and services Latin Americans routinely buy online. For example, education and health are now much stronger online than before 2020. Ecommerce as a whole should grow by 25% annually in the next three to five years before its speed starts to decrease; it would still keep rising, but not as quickly as during this giant boom.

Travel algo got back on track after severely declining in 2020, going from USD 35 billion in 2021 to USD 65 billion in 2023 – this, considering LATAM as a whole and more mature markets, such as Brazil and Mexico.

Looking through the lens of your vast experience in the region, what should merchants across these verticals prioritise in terms of future trends that are expected to impact LATAM’s online commerce and payments space in the next few years?

Instant payments are definitely the protagonists of LATAM’s payment landscape right now. This is a movement led by Pix – the fastest-rising method in Brazil representing 25% of the Brazilian volume in 2023 –, but the whole region is making this move in direction of more innovative payments, in different stages of the instant revolution.

Instant payments are very exciting both for companies and for consumers since they allow payments to be cleared immediately and are so easy and dynamic to use. Thus, they gain more and more space each day, especially as cash-based payments lose market share.

How can PagSeguro help merchants stay ahead of these trends and focus on exploring the vast potential of Latin America?

Having deep knowledge of how Latin America and each of its markets operate is fundamental to succeed there. Providing a localised experience in payments, checkout, and even customer support is fundamental. This considerably increases a merchant’s chance of successfully reaching the Latin American markets.

And it’s very challenging to go local in LATAM without a local partner, as opening a local entity is difficult and costly. Counting on a local payment partner – like us – enables payment collection and foreign settlement without hassle. We have been established for years in all main markets of Latin America, and foreign merchants can count on our expertise.

This editorial piece was first published in The Paypers' Cross-Border Payments and Ecommerce Report 2022–2023, which taps into the fast-growing cross-border market and provides a comprehensive overview of trends and developments that are pivotal in this space, being the ultimate source of information for ecommerce businesses interested in expanding globally.

About Caio Costa

Caio has 25 years of experience in sales, marketing, portfolio management, product development and project implementation in the digital financial/payment industry: digital wallets, ecommerce, acquirer, issuer, merchants, processors, and brand networks. During his career, he led business units, digital wallets, deals, global cross functional teams, and projects serving and partnering with local and global partners, merchants, issuers, gateways, global e-commerce platforms, acquirers, brand networks, processors across different segments in the region, being executive of key local and global companies such as American Express, Citibank, Dotz, MasterCard, PayPal, and Visa.

About PagSeguro

PagSeguro provides innovative payment solutions, automating payments, sales, and wire transfers to boost businesses anywhere, in a simple and secure way. Part of the UOL Group – the leader in Brazilian internet –, PagSeguro acts as an issuer, an acquirer, and a provider of digital accounts, besides offering complete solutions for online and in-person payments. The company also has the most complete payment methods coverage in Brazil and 16 other Latin American countries, besides Portugal, Spain, Turkey, Greece, and Romania, allowing merchants worldwide to process and collect more than 140 local payment methods and local currencies. It also provides instant single or mass cross-border payouts to Brazil.