In Consumer and Retail, Payments

In May 2016 I had the opportunity to speak at M2Money & Payments LatAm 2016, which took place in Costa Rica.

My focus was on giving an overview of the opportunities and best practices. Here are some key takeways about opportunities that are useful to grasp the current state of the m-commerce landscape in Latin America.

1) M-Commerce in LatAm Is Smaller than Expected
The chart below shows e-commerce sales by device in Latin America for 2015. While most estimates claim that mobile represents about 20% of all e-commerce in Latin America, this is misleading.

That’s because tablets alone account for an estimated 15% of e-commerce in LatAm. But this does not necessarily mean the user is mobile. In Latin America, the tablet is often used as an alternative to a home computer. Ultimately, a true mobile user requires different features and products to engage in m-commerce.

When you remove tablets from the calculation, a less robust picture of mobile penetration of e-commerce in Latin America emerges:

That said, in 2016 it’s projected that Latin American mobile commerce sales will total $5 billion.

2) Services and Digital Goods Offer Prime Opportunities
In looking at Brazil, LatAm’s largest e-commerce market, mobile sales of digital goods and services reach 30% penetration of e-commerce sales, whereas retail and tourism are much lower since they are more expensive and require a greater time investment. But companies good see some interesting gains by focusing more on service and digital goods that represent convenience and the on-demand economy while also typing into the fundamental on-the-go consumption nature of m-commerce.

3) E-Commerce in LatAm Is Starting to Plateau While M-Commerce Is Growing Strongly 
A number of factors indicate that m-commerce will continue to expand in Latam:

  • Smartphone penetration in Latin America is growing at 12% annually
  • High cost of PCs vs. low cost of handsets
  • Sales via Whatsapp and social media
  • Growth of key verticals
  • Creative merchant solutions

Given these factors, here are some comparisons of e-commerce vs. mobile growth in a number of LatAm markets (from left to right, Brazil, Mexico, Colombia, Peru and Argentina)

4) Two Distinct Smartphone Consumer Groups Emerging
While nearly all banked Latin Americans use smartphones and are the typical target market for m-commerce, unbanked smartphone users are growing by 12% annually. This is a strong market to target because they’d like to access m-commerce but can’t because of a lack of payment methods. A number of verticals have strong potential appeal for these unbanked smartphone users, including mobile downloads, mobile top-ups, entertainment, bill pay and small business uses.

5) Optimizing Payments for LatAm M-Commerce
A number of companies recognize both the challenges and the potential of mobile commerce in the region, and are working towards resolving the hurdles:

  • Several providers allow for cash payments for e-commerce and m-commerce, such as SafetyPay, Pago Efectivo, Rapipago and Efecty
  • Payment Service Providers like PayPal and Mercado Pago have implemented digital wallets
  • PayZen in Brazil has payments through Whatsapp
  • Netshoes had an extremely successful collaboration with MUV Mobile in which it offered a free web access campaign that helped circumvent users’ hesitation to shop via mobile because of their prepaid data plans

Contact Americas Market Intelligence for further strategic insights into the m-commerce and payments market in Latin America that will drive your business decisions successfully in areas such as affluent business or consumer cards, mobile money, digital wallets, POS systems and more.

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