In Payments

2021 was a historic year for technology adoption. The 100-plus leading Latin American companies interviewed in a recent Visa study in collaboration with Americas Market Intelligence (AMI) reported high levels of tech implementation. Security tools such as tokenization, biometric identification, and contactless technology showed the greatest increase compared to 2020.

“The adoption of state-of-the-art technology is what we have seen as the most definitive aspect when viewing a company as innovative,” says Lindsay Lehr, head of Payments Practice at AMI. In the Visa Innovation Study in collaboration with AMI, we interviewed over 100 leading businesses in the region to identify the fundamental principles behind innovative processes. The study’s conclusions are detailed in our article on key points for innovation in Latin America.

Below we look at six uses of technology that the AMI and Visa team view as elements of innovation that mark a difference among leading companies in Latin America. The study covered three types of companies or verticals:

  • Issuance. Issuers of credentials and digital accounts, including card-issuing financial institutions and financial technology companies (“fintechs”).
  • Commerce. Retail stores and online platforms that enable shopping and commerce; for example, brick-and-mortar stores, e-commerce stores, and cryptocurrency exchanges.
  • Acceptance. Companies that enable the acceptance of digital payment methods, including acquirers, payment aggregators, and facilitators.

1:1 Personalization via AI and ML

“As competition for consumer loyalty intensifies, the region’s most innovative businesses are implementing advanced personalization technologies, what we call 1:1 Personalization,” says Roberta Isfer, Sr. Director of Strategic Alliances and Innovation. At least two thirds of the companies surveyed in the Visa–AMI study use machine learning and artificial intelligence, with a focus on personalizing and improving the user experience.

Notable also is the use of these technologies primarily to detect fraud and improve cybersecurity.

Artificial intelligence sets companies apart in terms of their innovation. 66% of the leading companies interviewed used this technology in 2021. However, in the top innovators segment (top 30), 90% of companies used artificial intelligence in their processes. The study found that the top 30 are 36% more likely to use artificial intelligence than the other companies.

Moreover, to gain the loyalty of highly digital consumers, the region’s innovative leaders are doubling their efforts to develop a robust mobile experience, along with monitoring tools that will reduce purchase friction and create personalized experiences.

Low-contact, omni-everything consumption

“We are seeing some of the innovative leaders of the traditional market (brick-and-mortar stores) trying to find ways to connect with consumers at all times, wherever they may be, in what we call ‘Always Shopping,’” says Arthur Deakin, project manager at AMI, and one of the study’s consultants. To achieve this, the most innovative brands look to have an impact on all potential channels, from social media to the brick-and-mortar store itself. As an example, Arthur mentions the fascinating alliance between Magazine Luiza (Magalu) and music streaming platform Deezer, which allows consumers to listen to music through Deezer, and then buy the same musical instrument they are listening to, at Magalu.

This trend is not only happening among players considered as merchants or marketplaces.Innovative issuers and acquirers in the region are also promoting the creation of digital accounts, recognizing that the process of going to an actual bank branch may cause friction and frustration among their users. According to the Visa study, 81% of acquirers that serve card-present merchants allow virtual onboarding. Better yet, the top innovative acquirers in Latin America manage to get the onboarding of their services done online in under a day. Meanwhile, the leading innovative issuers are enabling bank accounts to be opened and credit cards to be issued online.

Faster payments

As fast payments become more accessible and customary—offered by both central banks and companies—consumers in Latin America are becoming less and less tolerant of delays, whether they are B2B, B2C, or P2P transactions. According to the Visa–AMI study, real-time payments are “highly attractive.”

It is worth mentioning that the possibility of offering instant payments depends on the country’s infrastructure—Brazil is currently the leader in instant payments, thanks to Pix. However, Lindsay Lehr, head of Payments Practice at AMI, says that “even if central banks aren’t offering interoperable rails in a given country, there are now technologies that facilitate immediate transactions. We have found that consumers regard companies prioritizing and following this real-time payments trend as the most innovative.”

Next-generation security tools

In a region with high levels of fraud, security tools have seen an upturn in popularity over the past year, particularly in three technologies:

  • Biometrics, including facial recognition, fingerprints, and voice
  • Tokenization
  • Artificial intelligence for financial fraud detection

For Arthur Deakin, “the speed of adoption of these technologies will allow a more secure consumer journey, but also a more direct, simple, and efficient payment process.” He also stresses the role of these systems in the face of an increase in digital identities—a global trend that could reach Latin America within the next two years. In fact, in addition to the use of technology by consumers, tools that guarantee the security of transactions against cases such as theft or hacking are needed, given all the personal information that may come to be stored on our devices. Security systems for digital identities will therefore continue to be developed so that the user can be fully confident about using unique self-recognition.

Dematerialization of money

“Because of consumer demand and the pressure of competition, we are seeing the leading companies in Latin America take a growing interest in API integration with crypto products,” says Visa’s Roberta Isfer. According to an April 2022 AMI survey of smartphone users, 36% of mobile users in Latin America have already purchased cryptoassets, and another 36% are interested in doing so.

Nevertheless, the lack of development in regulatory frameworks for digital assets, coupled with a gap in knowledge about crypto technology has made companies in the region maintain a reserved stance. Just 8% of the leading companies surveyed in the Visa Innovation Study have developed a blockchain product in recent years.

For Roberta, the low rate of adoption also tells another story: “There is ample market opportunity and potential for companies to achieve strategic alliances.” In fact, 22% of the companies surveyed plan to implement crypto technology in the near future. Payment acceptance companies are the most interested.

To illustrate the diverse range of crypto products, involving different levels of risk, we can mention the following:

Decentralization of everything

Decentralization refers to the creation and dissemination of open platforms that not only allow the use of certain services of a company, but also incorporate the services and products of the competition. This is achieved through API infrastructures developed by autonomous teams seeking to improve the user experience and provide solutions. In fact, the Visa–AMI study found that 94% of innovative companies in the region use other organizations’ APIs. “However, we are not only talking about open ecosystems,” says Arthur Deakin, “but also ‘microservices’: APIs that work independently, so that if one API crashes, it does not crash the whole system.”

The traits that an ideal API infrastructure would have are:

  • It would have a decentralized, microservice-based architecture that allows for easy connection with collaboration between internal teams
  • There would be a group of developers focused only on the API
  • The APIs would be open to allow direct, easy integration with third-party solutions
  • The APIs would be published on development hubs, so that external partners could quickly scale and improve the code

This trend is also related to the advance of open banking in the region, a priority strategy for 80% of the innovative companies surveyed.

In terms of technology, what makes a company innovative?

The Visa and Americas Market Intelligence team concludes that there are at least two states of innovation in terms of the use of technology in the region, which go hand in hand with the companies’ mentality.

The companies that are the least innovative in the use of technology usually have a reactionary response to the competition’s technology upgrades. For them, technology is not part of their core strategy.

  • Their technology upgrades are a response to the pressure to be competitive
  • They are reluctant to implement digital solutions, even if consumers are demanding them

On the other hand, the companies that are the most innovative in the use of technology are constantly looking to adopt technologies that will satisfy consumer needs:

  • They are technology leaders in their industry. For this, they adopt tools that are in demand, such as artificial intelligence, machine learning, biometrics, and cryptocurrencies
  • New technologies are not the goal; the goal is to improve the customer journey

Moving Beyond the data

We invite you to download the 2022 Innovation Study by Visa in collaboration with Americas Market Intelligence. As the leading market intelligence company in Latin America, AMI offers detailed research on payment topics in the region, helping companies minimize risk and expand their opportunities for success. Our market intelligence team can help you with research on key topics, including cryptocurrencies, buy-now-pay-later, e-commerce, payment methods between consumers and SMBs, mobile wallets, ACH, open banking, and much more.

Contact us to let us know what your needs are, and to explore the possibilities of conducting a study

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