The COVID-19 crisis has been unprecedented, destructive and a sobering reminder that life is unpredictable. It has also been a lesson in adaptation, resilience and character—can we reinvent ourselves and move forward instead of staying stagnant and dwelling on the pain?
Reinvention will be essential in 2021. Within payments, COVID-19 acted as a massive catalyst for digital payments financial inclusion, demonstrating once and for all that Latin Americans are willing to digitize when the conditions are right, forcing the industry to adapt to a new level of digital acceleration.
In this final article from AMI’s Payments Practice in 2020, let’s review some of the key lessons brought to us during the COVID-19 pandemic that will help us reinvent ourselves going forward.
#1 More than 80% of Latin Americans shopped online in 2020 
At the beginning of 2020, around just over 50% of Latin Americans had shopped online. But, as a report conducted by Mastercard and AMI reveals, COVID created the conditions in which e-commerce shopping was no longer a luxury but a necessity, and catapulted e-commerce penetration to over 80%.
In discussions with AMI, fintechs like Ualá and Movii related that gaining access to a prepaid/debit card was a top driver of new account openings throughout 2020 as people strived to get access to online shopping for the first time. And debit cards will remain the fastest growing payment method for e-commerce over the next three years (26% per year)  as newly banked consumers continue to shop online.
#2 Contactless is winning the battle at the POS
One of the most frequent questions I get asked is, ‘Which will it be, contactless or QR code?’ While I have always maintained that there is ample market in Latin America for both technologies, and each are better suited for certain use cases, during COVID-19, contactless payments gained significant ground.
The same Mastercard study referenced above found that across the region, 40% of debit card holders and 29% of credit card holders have a contactless debit card, and that 40% of these increased the contactless usage during COVID-19.
Total penetration of contactless is still low in most places—discussions with various acquirers reveal that contactless penetration ranges from <10% to >50% of card-present transactions depending on the market (Chile and Costa Rica have the highest penetration rate). These rates exceed that of QR code payments, which did not grow as quickly during the pandemic as contactless. COVID-19 has been a catalyst for people to try contactless technology for the first time and become accustomed to it. The question is no longer which technology will win out but which specific use cases is QR best suited.
#3 Social selling is the new frontier of electronic payments
online than ever before. Payment enablers who were able to quickly launch payment links—links that merchants can use to charge customers over social media, email, or messaging platforms without the need for their own website—have taken most advantage of this trend.
Pre COVID-19, cash was the predominant payment method for 7 out of 10 SMBs and only 20% of SMB sold online, according to a 2018 study by Visa and AMI.  Most SMBs resisted digitization to avoid taxes and fees, as well as due to lack of simple solutions. At the same time, SMBs are heavy users of WhatsApp, Facebook and Instagram to sell their products. In the post COVID-era, payment enablers providing the most seamless and secure tools to collect payment over social media will help capture the $1 TR+ spent at small merchants who normally only accept cash.
#4 Instant payments have arrived
P2P is no longer a question mark…it is now a verified proof of concept. The most successful case in the region is Yape in Peru, with five million users, equal to a full 50% of the country’s banked population. In addition, 500,000 merchants are accepting Yape payments via QR code. Yape is living proof for issuers across the region that banks can create a path to a neobanking value proposition beginning with P2P. This lesson is particularly valuable in small markets where fintechs have not yet made major inroads.
While still its earliest of days, Pix, Brazil’s instant payment system, launched on November 16th, is already proving to have massive uptake among consumers. As of November 25th, Brazilians had registered 88 million chaves (aliases – i.e. nicknames linked to bank accounts that can be used to make and receive instant payments), made 19 million transactions equal to USD 3 MM. To put this in perspective, in 2019, Brazilians made 10.8 BN debit card transactions,  equivalent to 21 million per week. So, within one week of launching Pix has already reached 91% of the number of debit card transactions.
Of course, total volume transacted over Pix during this same time period represents <1% of total debit volume; nevertheless, the massive adoption rate during Pix’s first weeks demonstrates Brazilians’ readiness to experiment with new mobile-based payment systems and sets the tone for a fantastically disruptive 2021.
#5 Open APIs and fintech-as-a-service is transforming how financial services are offered
Without a doubt, banks have become more digitized in 2020, and with increased need for branchless banking during the pandemic, banks and fintechs are needing to find faster and more efficient services to consumers. To do this, banks are embracing open APIs, which allow them to leverage non-banking platforms to facilitate account opening and provision of other services. A top example would be BBVA allowing Uber drivers to open BBVA bank account directly in the Uber app.
In our second annual study on Innovation in Latin America published in collaboration with Visa, we found that one of the greatest changes since 2018 results was the increase in the use of open APIs, especially among issuers. 
And with an increasing number of banks and fintechs offering fintech-as-a-service, enabling industry players to launch digital accounts and a prepaid card in a matter of weeks (compared to the 1+ years it takes to become a card network principal member or get BIN sponsorship and go through the necessary regulatory hurdles), access to banking is truly no longer a question of removing the barriers in most countries. The battle will now turn into one of retaining new customers through value-added services that solve actual problems and relevant loyalty programs.
2021 will be a year of continued uncertainty, economic recovery, and some stabilization in the payments industry. We will see where the chips will fall after the chaos of COVID and if the region’s new-found financial inclusion and digital acceleration will stick. AMI will be watching very closely to understand what new opportunities, industry niches and payment flows emerge out of these changes, and who is successfully reinventing themselves accordingly. Trends to watch for in 2021 include:
- The disappearance of the unbanked
- Displacement of cash via P2P and new liquidity opportunity for fintechs
- Acceleration of debit
- Emergence of tap to phone
- The effects of SME mass digitization.
For continued analysis of these trends, be sure to register for our 2021 Latin America Payments Megatrends webinar taking place on February 4th. Click here to register for free, and we’ll see you all in 2021!
Sources Mastercard and AMI, 2020. “Payments, commerce, and life post-COVID-19 quarantine.” Study commissioned by Mastercard.
 2019-2023 AMI E-commerce Datapack Forbes, 2019. “ 70% de las pymes usan efectivos en Latinoamérica. https://forbescentroamerica.com/2019/07/22/70-de-las-pymes-usan-efectivos-en-latinoamerica/ Based on a study by AMI and Visa  ABECS 2020. MEIOS ELECTRONICOS DE PAGAMENTO BALANÇO 2019.  AMI and Visa, 2020. Innovation Rising in Latin America.