New payment types unlocking the potential of Latin America

In a region where about half the population still doesn’t have a bank account, new payment types are unlocking the potential of the Latin American market for online merchants as the Open Banking movement matures there.

According to a new Beyond Borders data analysis released by EBANX, methods such as Pix instant payments and digital wallets have paved the way to a major shift to digital commerce for Latin Americans with an increase of close to 50% more e-commerce users last year compared to pre-pandemic years (68% at the end of  2021 vs. 45% prior to the pandemic).

This means that more than 150 million people bought online for the first time during the last two years.

“Instant payments and digital wallets are the fastest-growing means of creating broader financial inclusion and access to more goods and services purchased online in Latin America, which is one of the world’s fastest-growing e-commerce markets,” said Paula Bellizia, president of Global Payments at EBANX.

“They’re connecting more businesses with consumers, many of whom are first-time digital shoppers who desire more variety and instant gratification.

And the rise of this new ‘instant economy’ is a vital way for merchants to unlock the huge potential of the LatAm market and grow their slice of an increasingly lucrative pie.”

Latin America’s digital commerce market is projected to grow 31% per year until 2025, an acceleration comparable to only that of Asian markets.

Open Banking drives new online shopping experience 

In addition to instant payments, regulators across Latin America and the world are promoting initiatives to support the development of Open Banking to encourage further innovation, competition, and efficiency in the financial sector – a movement that is increasing the accessibility of financial services to more significant swaths of the population.

In Latin America, Brazil is once again leading the charge in Open Banking regulation, while countries such Mexico and Colombia are preparing its implementation for late 2022.

“Companies will have to invest even more in customer experience and satisfaction, which is exactly what the regulators want. If you want to keep your customers, you’ll need to provide a good service,” said Wagner Ruiz, Chief Risk Officer and co-founder at EBANX.

Alternative payments increase access

As Latin America’s e-commerce ecosystem matures, new types of instant payments such as Pix are ushering in a new era of closer relationships with end consumers, who expect a friendlier shopping experience, greater payment flexibility, and faster confirmation and delivery.

“Pix democratizes access to e-commerce and brings more people to the table. People who didn’t have a credit card, for example, or small entrepreneurs who had no way to accept them, can now receive payments quickly via Pix,” said Erika Daguani, VP of Product at EBANX.

The improvement in online shopping experience with digital wallets is also indisputable.

It is another of the most quickly adopted payment methods in LatAm today, after growing to 11.5% of the region’s total digital market in 2021.

“Digital wallets are easy to use, mobile-friendly, don’t require the shopper to have a bank account, and let them make immediate purchases with instant notification with just a touch of a button,” Daguani added.

A new era of instant payments

At EBANX, Pix has been growing at about 40% per month during the last year, helping to increase its customers’ user base and gaining consumer preference in nearly half of their online purchases.

According to the latest Beyond Borders data analysis, a majority of Brazilian consumers using Pix are first-time digital shoppers.

The study found that 62% of EBANX’s customers who paid with Pix had not made any other online purchases on that website or app over the last year.

Their purchases represented 40% of all Pix volume for merchants using EBANX, and a 20% increase in sales overall.

Today, 98% of Pix transactions are carried out by mobile phones, which represents around 70% of the volume of the new payment method, according to data from the Central Bank of Brazil.

The share of mobile phones grows every quarter, demonstrating the ease of use and adoption of the new mobile payment.

“It’s fascinating to see how consumers massively migrated to Pix in less than a year. This shows a high level of trust in a new, digital payment method. For Latin America, this is transformative,” said Daguani.

The cross-border opportunity in Latin America

In this rapidly changing market, there is one niche with an even more intense acceleration:  cross-border e-commerce.

International online purchases in Latin America will move around $45 billion in 2022, according to data from Beyond Borders.

That annual growth rate is expected to reach 35% by 2025, which is four percentage points above the 31% growth forecast for the overall e-commerce market in the region.

The presence of international players in Latin America, paired with the recovery and resumption of the tourism sector, is expected to boost cross-border business.

In some Latin American countries, such as Colombia, Chile, and Mexico, international online sales are growing well above domestic e-commerce revenues, uplifting the market as a whole.

In Mexico, the second largest economy in Latin America and the number one trading partner with the US in the world, the jump in cross-border commerce was 59% in 2021 compared to a 28% increase for local e-commerce sales.

“It is undoubtedly a great opportunity for global companies who want to expand into Latin America,” said Bellizia.

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