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Writer's pictureJaime González Gasque

Where are digital payments going in Latin America in 2021?


2020 demonstrated that the business ecosystem was ready to meet explosive demand. Cash continues to gain in the region, but changes in habits, both in businesses and consumers, show an irreversible trend towards digitization.


The digital payments industry is experiencing an unprecedented acceleration in Latin America. When we started to create the company several years ago, not only was cash the main means of payment in the region, but physical checks represented almost 18% of total transactions. From that time to the present, the ecosystem developed the technology capable of digitizing many of these transactions, and the emergence of new players and new business models drove a paradigm shift in the sector. Both in Mexico and in Chile, Brazil and other countries in the region, the opening of the acquisition market strengthened these movements and introduced new options for businesses and users, raising the bar for the rest of the players. Fortunately, the work of all these years lived up to the needs that the pandemic brought with it.


Digital payment and e-commerce solutions were vital so that in such difficult times businesses could continue to sell and so that consumers could continue to buy, in a safe, simple environment and without physical contact. In terms of numbers, Mexico is among the most reluctant countries to substitute the use of cash during the new scenario, lagging slightly behind the general trend in Latin America: even in the context of the pandemic, 45% of transactions in Mexico is made in cash, followed closely by Peru (44%), while on the other hand are Argentina (37%), Brazil (35%), Colombia (34%) and Chile (31%). In the case of Argentina, during the last four years, the number of banknote transactions when paying in-person stores fell from 44% to 37%, at the same time that transactions with electronic wallets grew from 4% to 11% of the total. This suggests that the expansion of accessible e-wallet services may play a key role in the digitization of payments in other similar markets in the region. The main challenge for the industry remains to build the right channels and sufficient capillarity at all links in the chain to transform cash into digital money. Additionally, to ensure that those who were digitized "by force" remain digital. What we do know is that both digital wallets and debit cards are the two eCommerce payment methods for which the highest growth is forecast between now and 2024. Both grew by 43.5%, from 13.8% in 2019 to 19.8% in 2020. The strong growth of digital wallets is expected to continue in Latin America and that they will overtake credit cards to become the leading e-commerce payment method at the regional level by 2024.


In this digitization process, the “irons” continue to be fundamental: both the updating of the card pool, which mostly already have NFC technology (the famous “chip”), as well as in the points of sale and other aspects of the technological environment. With this in mind, at GeoPagos we have strived to be the technology partner that offers the greatest variety of disruptive solutions and last year we were pioneers in the region with the launch of Tap To Phone in association with VISA. This technology that turns an Android cell phone into a payment terminal and marks another milestone in the unstoppable process of digitization. According to a VISA study, contactless cards tripled last year in the region and in 17 markets the penetration of contactless face-to-face transactions exceeded double digits in March. Additionally, 17% of surveyed consumers used contactless payments for their last purchase, preferring this technology when it was available. Developing solutions like these requires the joint work of many players. It is not by chance that the word "coopetition" is in fashion. This can be seen more clearly in interoperability, a system of rules of the game that requires complex technological integrations, coordination and trust between all actors. As the flow of information between wallets, aggregators, virtual accounts, bank accounts, processors and others grows, the offer grows, the system is strengthened, costs fall and it is possible to incorporate new and better financial services: it is the era of Open Banking. This opening of digital routes causes the cash out to fall naturally, as shown by all international experience. Argentina, Mexico, and Brazil are making great strides in this regard, with the implementation of their Transferencia 3.0, CODI, and PIX programs.


The payments industry is increasingly relevant in the economy. For its real impact on the simplification of processes and financial inclusion but also for the continuous improvement of technological standards and added value. Advances of which, thinking about the future, we still do not have a true dimension. In the mid-90s, a Japanese company created QR codes to speed up the classification of parts in the automotive production chain. Ten years later, this technological solution led to a true digital revolution in the payments industry, especially in China, where it is estimated that today 85% of people use digital media as their first payment option. Latin America cannot be left behind in this process, and from our trenches we will continue to provide solutions to contribute to the digital transformation of transactions in the region.


About the author: Julián Lisenberg is CRO of GeoPagos.


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