In 2020, Latin America saw significant changes in payment channels amid the pandemic. The comparatively lower e-commerce penetration rates, coupled with a point-of-sale market dominated by physical money, have generated dramatic change across Latin America. The Covid-19 exposed the drawbacks of paper money and forced millions of businesses and consumers to turn to the payment alternatives available so far.
E-commerce transaction volumes have skyrocketed in the region over the past year, despite the recessionary climate that has shrunk the overall size of the economy. Many Latin Americans first researched e-commerce during the pandemic. To give you an idea, more than ten million consumers in this region have made their first digital purchase due to the need imposed by the health crisis. And cash at points of sale fell 34.7% due to Covid; until 2019, money was the basis of Latin American commerce, capturing most of the point-of-sale spending.
E-commerce transactions in Latin America are expected to exceed $ 160 billion by 2024, with continued double-digit growth rates in the region’s largest economies: Brazil (11.9%), Mexico (15.8 %) and Argentina (22.3%). The low e-commerce penetration in the region further suggests that Latin America will offer high growth potential in the current decade.
The advantage of installment payments, which is widely used in this region, keeps credit cards still very popular – they are still at the forefront of electronic payment methods in the six Latin American countries listed, for example, in the study The Global Payments Report 2021, with the lowest percentage in the region, 29.1% in Mexico, and the highest, 43.2%, in Brazil.
Debt has grown 37% in the past year, from 11.9% (2019) to 16.3%. The increase in this payment method is attributed to the greater number of low-value purchases, as daily point-of-sale spending is now done online. In addition, governments and banks have also promoted its use as an alternative to physical currency.
With a series of transformations taking place in different segments, the pandemic has also accelerated the growth of digital wallets in three years, exceeding the projection for 2023, ahead of Covid-19. This means that the use of technological resources, such as software offered to the public in the form of applications, such as smartphones, computers and other digital means, to make payments and transfers, has become more common these days. .
The analysis by The Global Payments Report highlights that digital wallets are expected to continue their solid growth, overtaking credit cards and becoming the main means of payment in e-commerce in the region until 2024, when they are expected to capture. 31.2% of transactions.
Still from the point of view of the study, digital wallets and debit are the only means of payment in e-commerce with a growth projected until 2024. As for the credit card, acquisition cards, transfers banking, cash on delivery and postpaid services will see gradual declines. in the share of e-commerce payments.
While, on the one hand, there has been a growth in alternative payment methods resulting from the pandemic, such as digital wallets and bank transfers, the use of cash has shown a decline in trade across the region. Latin American: 31.3% in Argentina, 24.9% in Brazil and 36.8% in Mexico. The drop in point-of-sale liquidity was absorbed by cards, POS financing and especially digital wallets. All forms of card payment have seen an increase in participation in POS payments in the region: credit cards are up 17% from 2019, reaching 26.1% of spending in 2020, while debit cards gained 37.3% compared to 2019, reaching 23.2%.
Acquisition cards and prepaid cards have gained a greater presence in the region. Point-of-sale financing options have peaked among Latin American consumers on installment plans, including Marketplace solutions, “buy now, pay later” services, and merchant financing offers. New category analyzed this year, POS funding captured 3.7% of the region’s POS spending in 2020.
Given the period from last year to 2024, the currency’s decline will continue without significant setbacks, regardless of the trajectory of the pandemic. We know that once the consumer has a positive and secure experience, they don’t go back to the methods and channels of the past. And so, they show us projections, which indicate that physical money will drop another 36.1% from 2020 levels, leaving the top position in POS payment methods by 2024.
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