If you haven’t been paying attention, Latin America is making waves as one of the fastest growing retail e-commerce industries out there, and if you’re looking to find the best Latin America market payments provider, you really need to fully understand how this market operates.
Processing payments in LATAM is getting easier by the minute
The pandemic’s impact was felt throughout the whole industry, and while it mandated confinements, many retail companies had to reinvent themselves in order to survive.
This in turn led to the embrace of ecommerce which was seen as the region’s silver lining to the whole situation.
So, whether you plan to start your online business in LATAM, to find your choice of cross-border payouts, or just want some insights on LATAM markets, there are many things to consider and many opportunities to grab.
So, how can you tap into the ever-growing Latin American e-commerce market?
First and foremost, it takes a great deal of understanding the market and how merchants are looking to trade.
It is also important to understand how the market is shaping up to become. In fact, while bank account penetration is relatively low (estimates point to 200 million unbanked), smartphone penetration is on the up and up.
All of these factors in tandem with COVID-19 restrictions have had a positive impact in terms of online shopping.
As such, to succeed it is quintessential to find the best online payment methods and retention methods for Latin America.
Finding out how to get payments from Latin America, and what the best Latin America market payments provider is not an easy task
When looking at the Latin America payments landscape, it will become evident that almost every country is inclined to using its own methods and its own payment mix.
Moreover, each country will have different internet penetration, computer and mobile literacy rates.
Accordingly, let’s take a first look at some LATAM countries brimming with opportunity with a country-by-country ap.
Argentina
Argentina Market Overview
Argentina stands as the third largest country in Latin America with a population of roughly 45 million.
It is also one of the largest markets in terms of e-commerce with an estimated 18M e-shoppers.
With over 93% of internet users, internet penetration is incredibly high.
In what concerns Argentina’s Payment Mix, domestic credit cards stand at the top of the list, followed by international credit cards and cash payments. Bank transfer and debit cards are a residual part of the country’s payment mix.
Payment Methods in Argentina
It is estimated that only half of the Argentinian population has a bank account and in what concerns credit cards, only a quarter is using them.
This puts cash, debit cards and e-wallets on the frontline of the country’s payment options.
Some of the most common online payment options are RapiPago and Pagofacil.
And, while VISA and Mastercard dominate the credit card scene, the leading online payment solution is still MercadoPago.
Brazil
Brazil Market Overview
Brazil is the largest country in South America and with 211M people, the sixth largest in terms of population.
It features roughly around 40M e-shoppers, a number which is growing by the day.
Going forward, Brazil is widely considered for solidifying its position as one of the top 10 e-commerce markets in the world.
Payment Methods in Brazil
With 67% mobile e-commerce rates and significant internet penetration, Brazil is a synonym of opportunities.
However, there are still some challenges to overcome in terms of cross-border commerce, namely the inconsistencies in the country’s internet service.
Mobile is key in Brazil as smartphones proliferated even in the rural interior. In what concerns credit cards, the most commonly used ones are Elo and Hipercard.
Cash is incredibly common and debit cards are used a lot more than international cards.
Accordingly, to make it in Brazil, finding a payment partner with in-depth market knowledge and market targeted features is key.
Boleto Bancário is widely considered the leading payment system as it allows customers to pay via credit card, bank transfer, or via Boleto (which is a pre-paid voucher customers can convert their currency into).
Safety Pay is another popular method for payments in Brazil and many other LATAM countries such as Mexico.
Its popularity derives from its online cash system which allows for cardless bank transfers.
Chile
Chile Market Overview
Chile is an incredibly promising market. With a population shy of 20M, the country generates roughly 300M GDP. The country features the highest e-commerce transaction rate per capita in Latin America and incredibly internet penetration, meaning that Chileans are quite comfortable with the process of online shopping.
But, even with online shopping not being a foreign concept, an estimated 85% e-commerce purchases are still domestic, meaning there is still much room for international transaction development.
Payment Methods in Chile
With over 90% of the country’s adult population empowered by mobile phones and with a near 80% having a bank account, Chile looks promising indeed.
Local and debit cards are used with Magna and Red Compra being the most popular ones.
VISA and Mastercard are also widely used amongst Chileans. In terms of services like e-wallets, the local go-to one is ServiPag. Paypal is also quite big over there.
Lastly, voucher services have proliferated in Chile with MultiCaja and Sencillito being the two most common ones.
Colombia
Colombia Market Overview
Colombia’s e-commerce market is growing at a fast pace. Given its stable pollical environment, solid GDP and flourishing tech industry, it comes as no surprise that it has been steadily growing at around 20% a year.
What is unique about Colombia is how installments have proliferated in the e-commerce scene.
Payment Methods in Colombia
Colombians prefer to pay via digital wallet services like RappiPay but both debit and credit cards like Visa, Mastercard and/or Diners Club are commonly used too. Via Baloto, a popular voucher payment system, is a tendency there as it allows users to pay rapidly using cash for their online purchase.
Peru
Peru Market Overview
Peru has one of the largest unbanked populations in Latin America, meaning there is a lot of untapped potential.
Even with over 70% of internet penetration, roughly 80 to 90 % of e-commerce purchases are domestic.
Payment Methods in Peru
Given how the situation unfolds, there might be a lot of potential going forward. However, for the time being, cash is still king as cash on delivery still generates about a quarter of e-commerce sales.
Another viable solution found in Peru’s payment mix are invoice/coupon payment systems like Mobiamo and SafetyPay.
Mexico
Mexico Market Overview
Mexico is the second largest market in term of e-commerce in LATAM.
Smartphone penetration in the country is estimated to be over 75% and is rapidly expanding.
Payment Methods in Mexico
Mexico’s payment mix is diverse. With around 60% of the population unbanked, cash is still very much the single option for many.
However, credit cards are still widely used as are local debit cards and other popular cash payment services, namely OXXO. Other payment providing services which are popular in Mexico include ar Paypal, Masterpass and Mercado Pago.
Uruguay
Uruguay Market Overview
Uruguay is known as a boutique country (or rather país boutique) given its population of 3.5 million and great development metrics in terms of e-commerce when compared to the rest of Latin American countries.
In fact, Uruguay has probably the highest computer and mobile literacy rate in LATAM, as well as an incredible smartphone and internet penetration.
Payment Methods in Uruguay
The payment mix in Uruguay is straightforward.
Since roughly 90% of the country’s e-commerce purchases are domestic, cash still represents a large cut of the pie. RedPagos and Abitab lead the pack.
As for credit cards, VISA and Mastercard are evidently around, as are local Oca Card and Lider.
So, how can you find your LATAM payment provider and how can you go about simplifying your LATAM payments?
Capitalizing on Latin America’s incredibly fast-growing market is certainly possible if you take the necessary steps in crafting a strategy which addresses each country, you’re planning to operate in.
Since a substantial number of adults still don’t use any sort of formal financial services and established companies like Paypal, Square and Venmo are still finding trouble in operating in Latin America or integrating themselves with Latin American banking systems. Thus, it can be hard to find a single payment method that works in every country.
In fact, the lack of integration with banking systems and regulations are stifling payment startups’ solutions (as an example: your payment in LATAM with an US issued credit card can be accepted via Rappi Colombia but won’t be accepted via Rappi Chile).
However, the relentless demand for easy-to-use payments has been found to be growing at an exponential rate.
As a direct consequence, regional providers like Allpago or PayU Latam as well as many 'clones' have been consolidating their presence during the past few years.
What are some of the most popular payment provider solutions in Latin America?
There are a few payment startups which operate very closely to what Stripe, Paypal, Square and Venmo are doing.
As such, your choice of cross-border payouts might benefit from resorting to one of these:
- Stripe lookalikes are MercadoPago, QVO, Allpago Brazil, Ebanx, Kushki, Conekta and ePayco.
- Companies which drew inspiration from Square are PagSeguro, StoneCo, Clip and Zoop.
- As for companies similar to Venmo, there is Mach.
Neobank’s growing presence
Neobanks are sprouting and thriving. They’re worldwide, branchless and fully mobile. Neobanks’ popularity and increasing adoption rates, paired with their increased agility and customer friendly services have made them compete with your standard traditional banks.
It comes as no surprise that it is no different in Latin America. The most commonly used Neobanks are Albo (Mexico), Cuenca (Mexico) , Nubank (Brazil) and Uala (Argentina).
These Neobanks have the power to mold LATAM’s financial services paradigm in the future.
Crypto can take a leading roll going forward
As Latin American countries become increasingly connected to the Internet, crypto processing has become an everyday occurrence in LATAM so don’t rule out payouts in crypto just yet.
Numbers show that 1 in every 5 cryptocurrency users have used their crypto to make a purchase in LATAM which further attests to how big of an impact crypto has made in Latin America.
In fact, there are some crypto related companies out there trying to solve the LATAM conundrum. Examples of companies like this are CryptoMKT, CoinBR, Bitso, RegargaPay and Ripio.
CoinBR is popular in Brazil as is RecargaPay. As for Ripio, it found adoption in Argentina whereas Bitso is popularized in Mexico.
Many Latin American merchants have begun to accept crypto meaning that both global and local enablers are making a significant effort to make crypto-commerce a reality in the region.
However, despite crypto providing an elegant solution to uniformizing payments in LATAM, there are still many challenges that need to be faced. For example, in Chile banks once closed down the accounts of some crypto-exchanges without warning.
Accordingly, if any crypto project wishes to thrive, perhaps regulations should be put in place as a safeguard for crypto investors, online merchants willing to accept crypto and buyers.
What are the 2022 megatrends for Latin America?
America’s Market Intelligence has posted a brilliant video on the subject.
It comes as no surprise that Paypal sees Latin America as its fastest-growing region and has made partnerships as a means of keeping its expansion project there.
Similarly, Stripe vowed to expand in the region.
Latin America is still slight dependent on cash. How are regional payment providers fairing and how will credit card processing shape up the future?
Many people will try to depict LATAM as a place where 'clone' payment providers sprout, which is lagging behind and is still heavily dependent on cash payments.
That couldn’t be farther from the truth. It is a fact that there was a steep barrier of entry in Latin America in terms of payment providers and even in simple credit card processing solutions.
However, that gap is closing by the hour as the internet penetration rate rises, the unbanked rate diminishes and crypto adoption blooms.
Accordingly, Paypal, Stripe or Venom are bound to strengthen their presence in Latin America.
Credit card processing in Latin America will face competition
This year’s Bloomberg New Economy Gateway Latin America conference has shown us proof that LATAM and crypto are probably going to be indissociable in the future as central bank digital currency was a hot topic.
The fact is that if crypto can reach critical mass it could engulf the region and work as an inclusive solution which may just overcome several problems LATAM currently faces in terms of processing payments.
Wrapping up
When crafting a strategy for market penetration in Latin America you should take into consideration that different countries will have different learning curves, different internet penetration rates, different levels of trust in online stores, and so forth.
LATAM is certainly very diversified, but all countries seem to have at least a common trait: they work relentlessly to adopt new technologies and modernize themselves.
As such, take your time to explore different avenues, look for the service which better suits your needs.
And, remember to keep an open mind in what concerns Neobanks and crypto because when looking at Latin America, their adoption seems to be simply inevitable.
