where digital growth meets alternative payment methods

With the hypergrowth of e-commerce and record smartphone adoption, Latin America is the next step for merchants who successfully cater to customer payment preferences. Paysafe’s latest Lost in Transaction survey offers insight into how Latin Americans pay.

Gustavo Ruiz MoyaCEO of eCash for Latin America and Global Head of Open Banking, Paysafe

In April 2022, Paysafe took a deep dive into Latin America to better understand consumer payment habits through a survey that garnered responses from 3,000 people in Brazil, Chile and Peru. Here are the highlights of payments in the region.

E-commerce: hypergrowth

Latin America has seen the rise of e-commerce accelerated by the pandemic and subsequent containment measures. This has been accompanied by the increasing use of alternative payment methods (APM), such as eCash, digital wallets and bank transfers. In 2022, it was reported that E-commerce in the region is in hypergrowth mode.

With such momentum in the region, it’s an exciting time for consumers and traders alike. Internet and e-commerce access via mobile phones – smartphone adoption reached 72% in 2020 and is expected to approach 81% in 2025 – and different ways to pay offer greater choice and inclusion for consumers.

Increased digitization of Latin American countries (260.2 million digital buyers in 2022), support for instant payments (like Pix in Brazil), and the population eager to adopt APMs (63% had used a digital or mobile wallet, eCash or crypto in the past month) made it a high-potential market.

Large unbanked population, preference for cash and need for financial inclusion

In Latin America, there is a general trend towards an informal economy with a large unbanked population – 45% according to the World Bank – and a preference for cash over debit or credit cards. This is largely due to the turbulent economic climate of the past decade, lack of access to credit, an air of mistrust in the economic system, and high fees and interest rates for debit and credit cards.

In this environment, alternative payment options such as eCash are drivers of financial inclusion. There are many advantages for the consumer: they avoid high fees, they easily pay at merchants in their neighborhood, they do not need to go through complex application processes, there is no verification of credit and they don’t have to share a load of sensitive information online. . From almost any angle, it’s just a hotbed for cash-preferred customers.

The use of eCash in Latin America is on the rise. The results show that 20% of respondents use eCash more frequently than a year ago, with 17% saying they use it about as much as a year ago. The Paysafe study – which also gathered responses from 8,000 consumers in the UK, US, Canada, Germany, Austria, Bulgaria and Italy – found increased use of the eCash in Latin America: 15% said they had used eCash in the past month, compared to 9% across Europe and North America.

Online data sharing is a concern

Paysafe data shows that 45% of consumers said security is the most important factor when choosing how to pay for an online purchase. Additionally, 66% don’t feel comfortable entering financial information online and 78% would rather use a payment method that doesn’t require them to share their information with merchants.

Payment methods such as eCash allow users to access e-commerce in a way that gives them a sense of security, without having to enter their financial or personal information online. With greater awareness, combined with growing smartphone adoption (81% by 2025, as mentioned above), eCash is likely to become a more everyday payment choice in the region.

Rising costs drive payment behavior

The cost of living has had a significant impact on Latin American consumers’ choice of payment method for online purchases, with 63% saying they have changed the way they use certain payment methods, compared to 36% in Europe and 39% in North America. .

This seems to show a willingness to adapt payment habits to avoid high fees or interest rates: 63% avoid using installment payment plans and 58% use their debit card more often, while 45% use direct bank transfers more regularly. . The digital wallet has also seen rapid adoption, with 35% of consumers saying they are using them more often due to the rising cost of living. And 27% use eCash more often for the same reason.

Crypto adoption is starting to gain traction, with 8% using it more frequently than a year ago. When we look at the bigger picture, this figure is nearly identical to responses from other surveyed regions, with 7% in Europe using crypto more than a year ago, and 9% in North America.

Based on consumer feedback, APM adoption is on the rise, more so in Latin America than in other markets. This trend is expected to continue to grow, especially among consumers who prefer to pay with eCash as they become more aware of the solutions and how to use them.

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Elaine R. Knight