In Payments

Much like the rest of the world, Latin America is still struggling to recover from the pandemic. Inflation reached 38% in Argentina in 2021 and is projected to go even higher in 2022 to 45%, and Brazil, Peru, and Colombia have all experienced currency devaluations. While GDP projections for 2022 aren’t bad for Colombia (4.2%), Argentina (3%), Chile (also 3%), and Peru (2.3%), they are low for Mexico (1.9%), and poor for Brazil (0.3%) [1].

That said, there are also some positive indicators and trends that suggest that cash’s iron grip on spending in Latin America is slowlybeing broken as Latin Americans take greater advantage of digital options, especially with banking and greater adoption of e-commerce. Below we look at what 2022 will bring via our lens of good, bad and ugly.

The Good

Despite the modest GDP growth or contraction that are forecasted for 2022, AMI analysis indicates that consumer expenditure will achieve 103% of what it was in 2019, as COVID-19 restrictions have eased, and consumers embrace e-commerce. And as consumers resume their spending, new payment technologies are enabling them to have new and better payment and commerce experiences. Three specific options are starting to make serious inroads into cash’s dominance of LatAm payments:

  • Real-time, mobile-based ACH
  • Cryptocurrencies
  • E-commerce growing at 30%

In Brazil, person-to-business payments via Pix, Brazilian Central Bank’s real-time ACH payment platform, are growly rapidly. While card spend in Brazil is generally at pre-pandemic levels, Pix P2B purchases exceed $80 billion in 2021, which suggests that Pix is cannibalizing cash, boleto bancário and other bank transfers. That debit card volumes have returned to 2019 levels suggests that Pix has not cannibalized card volume yet, although its persistent growth month over months indicates that it may begin to do so.

A similar phenomenon is taking place in Costa Rica, with the Central Bank’s SINPE Móvil. This real-time ACH mobile payment platform grew by 25% per quarter in 2021 and overall tripled in volume compared to 2020. AMI analysis estimates that SINPE Móvil will have a total volume of US$6.3 billion in 2021 [2], quadruple the volume of 2020, and not far from the volume of debit cards (US$7.5 billion) and credit cards (US$9.5 billion). This shows that Latin Americans have an appetite for instant, easy mobile-based payments, and are willing to substitute these for cash. Similar platforms are in emerging stages in Argentina, Colombia, Mexico and elsewhere.

In addition, AMI data from Q3 2021 indicates that 8% of Latin Americans have already purchased cryptocurrencies. Both banked and unbanked consumers show interest in crypto, and their main reasons for adoption include investment, savings protection, and the fact that crypto is not controlled by the government. Facebook’s Novi and Moneygram are among the global leaders integrating crypto and blockchain into remittances without consumers even knowing about it.

E-commerce is helping drive the digitization of payments of Latin America, and AMI analysis indicates that e-commerce volume in the region will expand by 31% between 2020 and 2024 to reach more than US$611 billion. Growth rates for specific countries break down as follows [3]:

  • Brazil: 30% growth in its e-commerce market by 2024
  • Mexico: 27% growth in its e-commerce market by 2024
  • Colombia: 21% growth in its e-commerce market by 2024
  • Argentina: 32% growth in its e-commerce market by 2024
  • Chile: 28% growth in its e-commerce market by 2024
  • Peru: 42% growth in its e-commerce market by 2024

Credit and debit cards are still dominant payment methods in e-commerce, but Pix and other bank transfers are quickly gaining share. Mobile devices are rapidly overtaking desktops as the primary devices used for e-commerce in Latin America and we forecast that by 2024, 75% of e-commerce transactions in Latin America will be done with a mobile device. Moreover, e-commerce is steadily encroaching on face-to-face retail: AMI’s team predicts that by 2024, retail e-commerce in Latin America will make up 14% of overall retail, versus 10% in 2021. Marketplaces will capture 48% of e-commerce retail sales, while burgeoning social commerce will drive 25% of retail e-commerce sales.

This growth indicates that Latin Americans will look to adopt digital payments in ever-greater numbers as they shift their shopping to online. It also indicates that the future of payments in Latin America is multi-rail, incorporating cards, bank transfers and alternatives such as cryptocurrencies. With more options for payments available, prices being driven downward and the UX improving, consumers and merchants will adopt digital payments even more in 2022.

The Bad

Despite the benefits of digital payments growth, fraud is still rampant: it’s been estimated that as many as 20% of digital accounts created in Latin America were fake [4]. Pix has fallen victim to fraudsters, provoking the Central Bank to place restrictions on its real-time functionality during night hours, to increase security. The LatAm payments ecosystem is still not ramped up at a high enough level to combat the fraud, which could significantly impact the uptake of digital by consumers.

To combat this challenge, digital security companies are facing a great opportunity. Digital identity, utilizing biometrics and other advanced analytics to validate users’ identities and authorize transactions, is making a debut in the region and probably has a decade-long runway of growth opportunity. The next wave of industry development in the region will be focused on securing the massive growth in digital payments the region experienced in the past two years.

The Ugly

Regulation is always “ugly” in the region, and this is even more so today, as regulators face COVID-19 relate staffing shortages and unbelievable uncertainty and lack of knowhow. Mexico and Brazil are still trying to push through landmark fintech and open banking regulations, delayed by the pandemic, as well as navigate the immense uncertainty that comes with implementing novel real-time payment infrastructure.

The biggest black box is around cryptocurrency regulation, in which countries are still in early stages. There is tremendous uncertainty around the legality of crypto, how it is treated from a tax standpoint, the rules for banks and other incumbents to deal with crypto, and how central banks will respond, possibly with their own digital currencies. With these huge projects on their plate, regulatory progress in many markets is stagnated, creating uncertainty for market players and investors and delaying progress.

Beyond regulation, the downside of digitization is that lots of companies are now jockeying for position in LatAm’s ecosystem, as fintechs compete with legacy players and platforms like Pix command strong shares of consumer spend. It will become much harder to stand out from the competitors and offer the combination of value, depth of services and convenience that consumers are expecting, while also dealing with security concerns and ever-lower costs that cut into profits.

Insights into Latin America's Cryptocurrency Market

Insights into Latin America's Cryptocurrency Market

An in-depth look at consumer preferences and behavior

Next Steps

Contact us to find out more about how our LatAm payments market intelligence can help you navigate the good, bad and ugly in this sector while growing your business during this year and beyond.


[1] The Economist Intelligence Unit. Note: These projections represent per annum or yearly growth, real GDP growth, as opposed to nominal GDP growth.

[2] Banco Central de Costa Rica, March 2022

[3] Americas Market Intelligence análisis, developed for the Latin America 2020-2024 E-Commerce Datapack

[4] HID Global, Wladimir Álvarez, How LatAm Banks Can Face Down Fraud Amid Booming Digital Business, 10/12/21

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