While much of the ecommerce and banking world's attention has been on the rise of cross-border and mobile payment in Asia and faster payments in Europe, a new picture is coming into focus in Latin America.
New players are emerging with technologies to address the needs of consumers and businesses alike, including digital challenger banks, payments processing firms, mobile payment apps and point-of-sale technologies that will accelerate commerce where millions of people cross borders every day to find work, take vacations, shop and travel for business.
"A big thing about Latin America is the potential for growth," Henrik Nilsmo, chief commercial officer at Ebanx told Mobile Payments Today via email. "While both Latin America and the U.S. have similar numbers of online shoppers, in Latin America they correspond to a smaller percentage of the total population."
He cited data showing that among the region’s 650 million people, about 155 million were expected to buy online in 2019. He said online sales are growing about 19% in the region, expected to reach $118 billion by 2021.
The Latin American digital payments market poses some unique challenges when compared with Asia and much of Europe, according to experts familiar with the region.
Katherine McClure, partner development manager at PPRO Group, says that Latin America is still heavily reliant on cash, compared with other regional markets,with 21% of ecommerce transactions paid with cash, compared with only 10% in Asia and 7% in Western Europe.
"While it seems strange to Americans to go through a checkout process online then pay via a voucher with cash at a bank branch or convenience store, it fits those consumers, their lifestyles and their payment preferences," McClure said via email. "It's a unique way to think of omnichannel or clicks-to-bricks experience."
PPRO just announced a week ago the acquisition of allpago, one of the leading payments providers in Latin America.
Banking access
One of the factors involved in these regional discrepancies is the large percentage of unbanked or underbanked consumers in the region. Argentina for example, has a banked percentage of only 49%, compared with a global average of 68%, McClure said. Other countries in the region have similar levels of banking penetration, for example Columbia is only 46% banked and Ecuador is 51% banked.
Earlier this month, Boston-based Airfox launched BanQi, a digital challenger bank in Brazil that aims to address the disparity regarding access to banking services. Airfox, which launched a digital wallet in the country in 2018, developed the challenger bank in partnership with local retailer Via Varejio, which operates a retail chain called Casas Bahia, which have stores located in 400 cities across the country, and have access to neighborhoods that in some cases lack a major banking presence.
"The unbanked often lack physical access to critical financial institutions - and with no credit history, don't meet the requirements to open accounts and or access loans," Katie Sedat, vice president of marketing at Airfox, said via email. "Digital banking and microlending platforms provide a strategy to finally democratize financial services for an enormous population - and open new opportunities for the underserved, who do not have access to reliable, egalitarian, non-exploitative financial options."
Flow of funds
Money transfer is a large and still growing business in Latin America, particularly transfers into the region from the U.S. In 2018, money transfers grew by 10% into Latin America, spurred on by a strong U.S. economy, according to World Bank data.
Mexico was the largest recipient of remittances, with $36 billion, an increase of 11% from the prior year. Remittances increased by 16% into Columbia compared with the year before, while Guatemala saw a 13% increase and the Dominican Republic and Honduras each saw 10% from the prior year.
Officials at Western Union Business Solutions say their transaction volume into Latin America and foreign exchange grew by double digits. Traditional methods for bill payment has been to go into a local shop or bank, they said.
"As Western Union business solutions expands, we have been able to offer more convenient ways across the region by providing financial institutions with the ability to offer their clients 24/7 access to online payments," Al Carpetto, regional head of the U.S., Latin America and the Caribbean at Western Union.
POS
Evo Payments Mexico earlier this week entered an agreement with TouchBistro to provide an iPad-based point-of-sale tool to help automate payments at restaurants in that country. Evo Payments is a unit of Atlanta-based Evo Payments Inc., and the exclusive payment provider to Citibanamex.
"Integrated payments is in its early stages in Mexico, and the new solution from EVO and TouchBistro will be a great asset for restaurant merchants looking to incorporate payments into their business management tools," Brendan Tansill, EVO president, the Americas, said via email.
