Andre Boesing, VP International Business Development at emerchantpay
The impact of the digital shift
Payments in Latin America have rapidly evolved, spurred on by internet penetration in the region. In the decade between 2012 to 2022, the number of people in Latin America with internet access grew from 43% to 78%, surpassing that of China. By the end of this year, 401.83 million people in the area will be mobile internet users.
With more of the region online, eCommerce sales have skyrocketed. In fact, Latin America is now one of the fastest growing eCommerce markets worldwide, making it a prosperous landscape for merchants to enter and expand their online payments.
Merchants targeting the Latin America sought-after eCommerce market must understand that a one size payments solution will not fit the whole region.
Instead, providing tailored payments strategies will be key to ensuring the continued progression of Latin American payments. These strategies should offer a range of payment methods that align with local shoppers’ preferences as well as bide by country-specific infrastructure and compliance requirements.
The road to effective cross-border payments
The payments landscape in Latin America is fragmented as each country has its own unique preferred payment methods.
Consumers in Latin America have demonstrated a keen openness to adopt new solutions over the past few years. Adoption largely differs among Latin American countries. For example, Mastercard research shows that Chile is the country with the highest penetration of debit cards, both in-store and online. Brazil is the country where mobile devices are mostly used for payments (86%), which also boasts the largest consumer market in Latin America Integrating a wide variety of payment methods can be a time-consuming, costly challenge for merchants. In addition to this, the hidden costs of cross-border transactions and lack of transparency can impact profitability. Moreover, disparities in digital infrastructure across Latin American countries present even further roadblocks.
To combat these issues, merchants should look to utilise a Payment Service Provider (PSP) equipped with on the ground payment specialists with expertise and knowledge of the local payment landscape, infrastructure and legal requirements. The right PSP will help merchants decide the payment strategy and right payment mix, ensuring the customer base in the target market can be catered to.
Real-time payments
Another notable development in the Latin American payments landscape is real-time payments. Historically, banking infrastructure in the region posed challenges with fund transfers and payments. However, real-time payment methods such as Pix in Brazil allow transactions to be processed immediately. emerchantpay’s Global Payment Outlook report shows that 36 billion transactions were processed by Pix in Brazil in 2023.
In fact, the volume of real-time payments in the region is predicted to nearly quadruple by 2027 from 2022 levels. This suggests that, as payments in Latin America continue to evolve, more customers are going to expect rapid, seamless transactions from merchants.
Because of this demand, it’s important that merchants aiming for a successful entry in Brazil ensure they are offering this payment method. Partnering with a PSP that offers a range of local preferred payment methods can help merchants optimise the checkout experience, tailored to the market they’re targeting.
Enhancing risk management capabilities
As eCommerce in the region grows at an impressive rate, Latin America has witnessed a consequential surge in fraud. So much so, it is now the region with the second highest eCommerce fraud rate globally, with 20% of all revenue lost to fraud.
As such it’s crucial for merchants looking to enter Latin America to ensure their risk management strategy helps them safeguard their revenue. Working with payment providers that offer robust fraud prevention can ensure safeguarding of revenue.
PSP’s can also offer the expertise needed to handle the intricate international and local payment regulations and compliance standards in Latin America. This can help mitigate legal risks and ensure seamless operations across borders.
Payments have rapidly evolved in Latin America, however there will always be differences across countries that create challenges – something merchants operating in the region must bear in mind. As we look to the future, I expect to see even more of Latin America embrace cross-border eCommerce and digital payment methods. Navigating this rapidly changing landscape can pose a challenge, yet the companies that partner with the right PSPs to align with the region’s demands will reap significant rewards.
