Latin America and the new opportunity for operators

Across Latin America, as in most of the rest of the world, we’ve seen the rise of e-commerce accelerated by the pandemic and subsequent lockdown measures. This has been accompanied by increasing use of alternative payment methods (APMs), such as eCash, digital wallets and bank transfers. In many ways a natural reaction to an exceptional set of circumstances, a critical consideration when assessing the Latin American opportunity is whether these changes in consumer habits will endure in the long-term. With a view to better understanding consumers’ payments habits, Paysafe conducted a survey of 3,000 consumers across Brazil, Chile and Peru in April 2022 and our survey paints a positive picture in this regard, with 74% of respondents saying that their payment habits have changed permanently since the start of the pandemic. With such momentum, it’s an exciting time for operators who might have been considering an expansion into the region. Access to the internet and e-commerce through mobile phones – smartphone adoption reached 72% in 2020 and is forecast to be nearer 81% in 2025 – and different ways to pay are driving greater choice for consumers. At the same time, operators can look to a region that might have seemed prohibitive in the past due to a lack of local knowledge and partnering opportunities, as well as payment hurdles. Latin American countries’ increased digitalisation (260.2 million digital shoppers in 2022), support of instant payments (such as Pix in Brazil), and a population keen to adopt alternative payment methods (APMs) (63% had used a digital or mobile wallet, eCash or crypto in the last month) has made this a market with huge potential. Although many differences – demographics, banking environments and regulations, payment preferences and so on – clearly exist from one Latin American country to another, there are some shared characteristics. For instance, there’s a general tendency towards an informal economy with a big unbanked population – 45% according to the World Bank – and a preference for cash over debit or credit cards. This is largely driven by the turbulent economic climate over the last decade, access to credit, an air of mistrust of the economic system and high fees and interest rates of debit and credit cards.

Switch it up

In this environment, alternative payment options such as eCash are particularly popular. Results show that 20% of respondents use eCash more frequently than they did a year ago and 15% in Latin America said they used eCash in the last month compared to 9% across Europe and North America. Alternative payments methods such as eCash, Pix and QR-code-based services have been increasingly popular over the last couple of years in Latin America. While convenience, simplicity and speed are good reasons for their uptake, it also highlights a real concern around security of financial information. In our survey, 45% of consumers said security is the most important factor when choosing how to pay for an online purchase. Further, 66% don’t feel comfortable entering financial details online and 78% are more comfortable using a payment method that doesn’t require them to share their details. Payments methods such as eCash give people access to e-commerce in a way that makes them feel secure, without having to enter their financial or personal details online. When you combine this with increasing smartphone adoption, eCash is likely to continue its growth as an everyday payment choice across the region. Crypto is another payment method which is starting to gain traction, with 8% using it more frequently compared to a year ago. When we look at the wider picture, this figure is almost identical to responses from the other regions surveyed, with 7% in Europe using crypto more than they did a year ago and 9% in North America. What once might have seemed an incredibly difficult and complex market to enter now presents a rich opportunity for operators outside of Latin America who might have been considering the region as part of their growth strategy. With a market so unique and diverse, there’s still little more valuable than local knowledge and presence so it’s still essential to team up with a well-established player ‘on the ground’ with the regulatory requirements in place to get instant access to local payment networks. But with a promising step change in local payment preferences and behaviours, it seems that the opportunity is shifting from industry buzzword to exciting reality. Gustavo Ruiz Moya is CEO of eCash, Latin America and global head of open banking at Paysafe. Formerly head of Latam for SafetyPay, he was the CEO of SafetyPay from 2013 before taking over his new role as part of the Paysafe Group, bringing his extensive experience in payments, banking and travel industries. Prior to SafetyPay, Ruiz Moya was VP and general manager for American Express, membership travel in Latam. He also successfully led American Express Bank in Mexico.