Latin America (LATAM) internet penetration rate and mobile users have consistently shown staggering growth throughout past years and with the unbanked getting smaller by the minute, it might be time to consider finding the best payment processor for your online business.
To do so it is quintessential to get to know how the e-commerce landscape is molding in Latin America, namely its strengths, its weaknesses, its opportunities and the threats surrounding it.
Latin America’s E-commerce Market and Payment Processors: A SWOT Analysis
A quick glance at Latin America’s individual e-commerce market drivers and a SWOT analysis will surely help you exactly pin down your payment processor needs.
Latin America is brimming with opportunities, but the e-commerce landscape differs from Brazil to Mexico, from Argentina to Uruguay, and so forth.
However, by drawing from this LATAM SWOT analysis you will be able to quickly understand what is going on in the e-commerce scene and quickly pivot to a better solution if necessary.
Strengths in Latin American E-commerce
Strengths can leverage your position to gain an advantage by building a sustainable competitive advantage. Major drivers usually include each country’s human, physical, and financial resources, their processes, and even past experiences and success stories.
Customers in Latin America shop for quality products and are said to be extremely loyal.
Moreover, there is demand a diverse product portfolio, meaning that various segments are primed to be targeted as companies seek to tap into Latin America’s potential.
In addition, first mover advantage is crucial in several segments, especially when targeting the uncatered markets.
What Do Latin American Consumers Look For?
The insights here are simple. Latin America consumers are highly open to the launch of new products in their domestic markets, but depending on your offer, you will need to be keen on taking insights from the local consumer base.
As such, if you are crafting a mass market strategy, you will need a solution with a broad reach for each country individually and a proven track record.
Best Latin American Mass Market Payment Processor
If you are looking for a mass market option, you can always go with a major global player like Paypal, Venmo, or Revolut (which is coming soon to LATAM).
However, your coverage may vary. Another interesting take on the mass market option are cryptocurrency payment processors because of how they allow for borderless, decentralized, and transparent payments with no fuss.
In fact, given crypto’s universal nature, businesses seem to be gravitating towards two major payment processors in Latin America: Coinspaid and Coinbase Commerce.
A detailed analysis can be found here.
Weaknesses in Latin American E-commerce
As it turns out, Latin America’s strength can sometimes be its weakness.
Their domestic markets can provide you with ample opportunities but can also be a roadblock to achieving sustained growth given their specific and very intricate nuances.
What ends up happening inside Latin America is that e-commerce manages will often be tempted to focus on their respective domestic markets.
If you are planning to focus on specific segments you might be on the look for a solution with a go to market mentality which can offer you personalization and perhaps even insights.
You can find an individual guide for each country here.
Best Latin American Segmented Payment Processor
If market targeted features are key to your strategy, you will want to find one of the previously mentioned names like for instance Boleto Bancário in Brazil, Safety Pay in Mexico, RapiPago and Pagofacil in Argentina, and so forth.
Each of these will most likely cater best to their own national audiences as they are massively popular in each of their respective countries.
Opportunities in Latin American E-commerce
Opportunities tend to derive from macro environment factors like policy changes, technological advances, economic growth, increase in disposable income and, more importantly to this matter the changes in consumer habits and preferences.
In fact, the growth in market size in LATAM, in tandem with the evolution of consumer preference, primed Latin America for massive growth.
The technological landscape is changing rapidly, and many companies are already making moves to capitalize on the consumer behavioral shift, namely via Neobanks.
This in turns leads to lower costs in terms of market entry for both national and international participants but also to consumers.
So, if you’re looking at new opportunities for your business to capitalize this paradigm shift the question you should be asking is:
What Neobank Should I Choose in Latin America?
Neobanks are popping up just about everywhere in LATAM and compete with traditional banks by having enhanced agility as well as many other customer friendly features.
Given that they are available worldwide, fully mobile, and don’t require physical branches, one can easily understand how fast they’re spreading.
The most popular Neobanks differ from country to another, however, Nubank in Brazil, Uala in Argentina, and Albo and Cuenca in Mexico have shown great promise.
The fact of the matter is that Neobanks can and most likely will mold Latin America’s way of looking at financial services and their capabilities.
Threats to Latin American E-commerce
The threats to Latin American e-commerce landscape are mainly regulatory.
There are political developments and abrupt policy changes which you should be prepared for.
In fact, when it comes to Latin America’s government regulations you should expect a fast-paced environment in tandem with growing pressure from many NGO’s and other protest groups, namely in what concerns the environment and labor safety.
As such, if you are worried about the ongoing political developments namely in the realm of crypto, you might want to consider partnering up with a safe payment processor which has a solid foundation, an ear to the ground, and can quickly pivot if necessary.
Safest Latin American Payment Processor
Addressing these threats can be done best with either a local option like the ones highlighted above, any instant payment solution like PIX, Pagbank, Yape, or Transferencias 3.
In fact, many would argue they when dealing with Latin America it’s best to go local or go home. America’s Market Intelligence has great insights on LATAM’s e-commerce landscape, namely local trends which can help you better understand how to position yourself:
In broad strokes, it seems that instant payments are on the rise with an expected 40% YoY growth rate, and local credit cards represent about 30% of the region’s e-commerce payments.
And with many of these instant payment processors being backed by their country’s respective governments and banks, safety is guaranteed.
What Payment Processor Should One Choose in Latin America Then?
There is no single best solution when dealing with LATAM’s ecommerce as a whole and as the region is leading in ecommerce sales time is of the essence.
Capitalizing on Latin America’s everchanging e-commerce landscape is possible through several different ways, depending on how you want to craft your strategy.
The massive crypto adoption rates in Latin America push some towards processing payments with cryptocurrency, while others understand that Neobanks are paving the way for the unbanked to finally access the global economy and opt for those. Lastly, there are businesses that just tend to gravitate towards more traditional means and recognize instant payments as the cornerstone of LATAM’s e-commerce.
Regardless, it seems like businesses that can achieve greater flexibility in terms of processing payments have the pole position as they can simply opt to go with the most popular method within each country.
By doing so, they are primed to succeed as they can effortlessly connect with their customers regardless of which Latin America country they reside in and regardless of which payment method they prefer.
