Online sales in Mexico are still on a sharp uptick. AMI’s most recent research shows that electronic commerce reached a volume of 48.6 billion dollars in 2021. More interesting still is the impact that Mexican electronic commerce has on daily living, particularly the dynamics in the choice of payment methods. Data from surveys by companies like PayPal and AMVO show a prevalence of debit in daily and weekly online purchases. However, internal transactional data from Americas Market Intelligence (AMI) show the credit card will continue to be the payment method with the biggest market share in Mexico in 2022.
“Mexican consumers clearly choose their online payment method according to the purchase amount,” explains Andreas Farge, AMI senior analyst, on looking at the dichotomy of the data. “The average online purchase with a credit card is 48 dollars, while sales with debit cards barely amount to 20 dollars on average, according to 2021 Banxico data.” This might explain the credit card’s leadership in volume of sales, while the debit card leads in terms of the number of transactions.
Dynamics of Online E-Commerce Payments in Mexico in the Near Future
According to Farge, the payment ecosystem could change in coming years. Cryptocurrencies or models such as Buy Now Pay Later are increasing their penetration both in Mexico and Latin America, although their share of the current market is still low.
Rise of the Buy Now Pay Later model in Mexico
“In Mexico there has been a burst of fintechs offering the Buy-Now-Pay-Later (BNPL) model. It refers to payment by installments or interest-free monthly amounts unconnected to credit cards,” says Farge. “In this model, direct communication exists between the BNPL payment method and the trader or business; whereas with credit cards the communication is directly with the bank.” He clarifies, however, that “we are seeing the development of another type of BNPL solution, for example, issuers that allow payment in installments for transactions made using debit cards, in which case the provider does not need to establish direct integration with the trader.”
Farge notes examples of the BNPL model in Mexico, such as Kueski Pay and Nelo, whose growth has shot up in recent months. According to LabsNews, in September 2021 Kueski Pay grew 70-fold in gross volume of goods compared to 2020, while Kueski Cash, a personal loan product, grew by 320%.
The BNPL model has an incredible disruptive potential in Mexico, and its share as an electronic-commerce payment method is expected to increase significantly from its current 2%. AMI analyses show that, in terms of total payment volume, BNPL in Mexico could hit a 4% share in 2025. Now, the potential audience for BNPL will be Mexican debit card holders who do not have credit cards, although the true success of this model will depend, among other things, on providers that are capable of accessing open-banking solutions.
CoDi Is Growing in Terms of Payment Amounts, But Not Users
CoDi is a financial solution launched by Bank of Mexico to allow Mexicans to make electronic payments directly from their cell phone. Although it is mostly used for digital payments at brick-and-mortar establishments, CoDi has a remote payment option for businesses or individuals. This function can generate a “CoDi” and send it to the cell phone of the buyer, who has to pay the amount through their financial institution’s application.
Unfortunately, neither in remote payments — with potential for electronic commerce — nor as a digital payment method at brick-and-mortar stores has CoDi achieved the anticipated success in Mexico that its counterpart Pix in Brazil has had. According to data compiled by El CEO, electronic transfers made using CoDi at the close of August 2021 barely accounted for 10% of the target that Bank of Mexico had set for 2020,
Farge also points to the increase in the amount of CoDi transactions in recent months. According to the AMI analyst, in January 2022, transactions through CoDi were 36% higher compared to the previous year. Farge forecasts that the amount of transactions with CoDi will continue to increase by between 15% and 30% in 2022. However, it is possible the CoDi market share will remain low. The many reasons for this include Mexicans’ continuing preference for the use of payment methods with good user experiences, such as e-wallets, which in 2021 accounted for 9% of the total sales volume of physical products; as well as cash-based payment methods, such as payment vouchers (for example, Oxxo and PayNet), and gift cards or single-use prepayment cards, which accounted for 7% and 3% of the volume of physical products in 2021, respectively, according to transactional data exclusive to AMI as of March 2022.
In Mexico, Cryptocurrencies Are Not a Solid Payment Method Yet
According to AMI data as of September 2021, 21% of Mexican online consumers are interested in blockchain-based payment methods, and 6% are already using cryptocurrencies. Despite this, Mexican traders are a long way from accepting this kind of transaction, and they maintain a conservative stance. In December 2021, Grupo Elektra became the first online store to accept bitcoin in Mexico, although this integration was imposed by its founder, Ricardo Salinas Pliego, a faithful defender of cryptocurrencies. Other businesses are unlikely to follow Elektra’s example in the near term.
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Payment methods with the biggest impact for online purchases in Mexico
With respect to consumer payment culture, new payment solutions in Mexico are constantly molding the country’s ecosystem of payment methods. It is no longer a question of the payment method most used by Mexicans, but the circumstances that affect their choice, including the purchase amount or the product type. Companies have to take into account these circumstances for development of their sales strategies and decision-making. Americas Market Intelligence (AMI) has expertise in payments practices, including electronic commerce, neobanks and digital wallets, financial, point-of-sale (POS) and acceptance technologies, financial inclusion, cross-border payments, B2B payments, open banking, and faster payments. Our customized research study reports offer data-based clarity and granular strategic management based on expert sources.
Contact us to explore how we could put together a customized study to help with your strategy in the Mexican market.