Digital payments in Latin America have been well-received in recent years, particularly because of the pandemic, when methods like contactless payment reached the region. All of this was part of a megatrend that AMI’s market intelligence team referred to at the time as the “Cash Displacement,” which unlocked the door to open banking and innovation in credit, and marked a new era of financial inclusion in Latin America led by the digital wallets and neobanks.
AMI analysts believe the continued growth in digital payments in 2022–2023 stems from the development of e-commerce and an indisputable trend toward omnichanneling, prompting large Latin American retailers to develop their own financial solutions. “OXXO, for example, has launched its own payment method, the digital wallet Spin, which has captivated millions of users and works alongside OXXO Premia, its rewards and loyalty program for shopping at brick-and-mortar stores,” says Andreas Farge, a senior analyst at AMI.
Another example of omnichanneling as a strategy for the development of payment solutions is 7Pay, developed by 7-Eleven (a convenience store chain). With 7pay, people can pay for their digital purchases in cash at the nearest 7-Eleven store.
Another prominent case has been Walmart, through its digital wallet Cashi:
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“Tap to phone”: innovation in digital payments
With the success of digital payments and e-wallets, and the need to keep improving their omnichanneling strategy, alternative payment method providers have continued developing new technologies. One of the most recent ones is tap to phone, or tap on phone, a contactless phone mechanism for accepting or receiving payments, similar to how this would be done with a card and a point of sale terminal.
Tap to phone has had a positive reception thanks to the high adoption of contactless payment in the region. “In Central America alone, 7 out of 10 in-person transactions with a card are contactless,” says Farge. “Contactless payments by phone have now become incredibly popular, and bring benefits to both the merchant and the acquirer. They save time, they save costs, and they improve accessibility,” he says.
Javier Chacón, founder and CEO in Costa Rica of Symbiotic, a pioneer and leader in contactless mobile payments, told AMI that “Anyone with a cell phone can accept payments with cards—that is the potential of this technology [tap to phone] in the future.” Symbiotic is, in fact, the technology provider behind NuTap, Nubank’s service for turning the phone into a payment terminal.
The tap to phone payment system works with cell phones that support NFC technology; however, Chacón explains, the tendering processes and certifications necessary to provide this service force them to work with specific Google-supported Android versions, as opposed to open-source versions. The aim of all this is to protect card data and provide security to the user. “Even if the Android system were supported by Google, but Google has stopped providing security updates to that version, we would no longer be able to offer the service. […] What is needed is an Android cell phone with an NFC antenna and version 9 or higher,” says Chacón.
As for Apple devices and iOS versions, the service is not yet available in Latin America. “Apple already has this technology and is using it primarily in the United States. They have a couple of allies there, but they are not in Latin America yet,” says Chacón.
For Lindsay Lehr, Head of Payments Practice at AMI, tap to phone’s potential is fairly significant considering the penetration of payment acceptance in Latin American businesses, especially small businesses. “Just 30% of small businesses accept cards, and this is not even including the large informal segment in Latin America,” she explains.
Chacón believes that, given the widespread adoption of Android in the region, nearly 60% of devices in Latin America would be compatible with tap-to-phone. “In Brazil, for example, at least 85% of cell phones are Android. The same is true in most countries. It may be higher [the percentage] in Costa Rica, and in Dominican Republic. Nearly all the new cell phone versions on the market have an NFC antenna.”
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