Which Fintech Trends are Shaping the Future of Payments in Latin America?
Despite numerous economic challenges across most of Latin America, where many countries are considered to be ‘third-world’, eCommerce and the world of Fintech are expanding rapidly. In some LATAM countries with emerging markets, these are the fastest growing sectors in a region slated to balloon in the near future.
As things stand today, it’s a remarkable statistic for many to fathom but roughly 70-75% of the citizens of Latin America either don’t hold bank accounts or are severely underbanked. That’s the main reason why fintech is flourishing, while new and exciting technologies are providing new ways for the best part of 600 million people to shop and purchase goods. With the trend towards fintech and online shopping, many companies are eyeing South America for its future potential.
The following fintech trends are clearly shaping the future of payments in Latin America:
1. Digital Wallets
Digital wallets, not to be confused with eWallets or Prepaid wallets, saves consumers’ personal payment information which they can use when they purchase items online. Digital wallets are convenient as users only need to validate their details once. Such third-party alternative payment options are being used by people in Latin America, favoring them over traditional banking options.
2. Local Payments
Local Payment methods are becoming more popular generally in Latin America, while every country has its own local methods of choice. For example, in Brazil, Boleto, which works using a voucher system, consumers simply print their payment voucher and can be used to pay bills and for groceries and other items. PIX is another real-time payment method in Brazil that has grown to prominence more recently, another much-loved service by locals.
3. Less Cash
In this day and age, much of the world is moving in the direction of digital payments as cash and cheques become less popular for a variety of reasons. While cash has been king for many years across most of Latin America, that trend is changing and it’s changing fast. This fact is, in turn, transforming the way people shop and that means that online stores need to be more open and far more flexible when it comes to accepting cards, digital wallets, and other similar services. In this day and age, much of the world is moving in the direction of digital payments as cash and cheques become less popular for a variety of reasons. While cash has been king for many years across most of Latin America, that trend is changing and it’s changing fast. This fact is, in turn, transforming the way people shop and that means that online stores need to be more open and far more flexible when it comes to accepting cards, digital wallets, and other similar services.
4. New Neobanks
Neobanks are included under the umbrella of fintech sector services and they’re increasing in popularity in many countries in LATAM. Essentially, Neobanks are online banks that address various issues faced by people wanting to enjoy ease of access and speedy financial services. Larger, traditional banks are losing popularity as consumers need their transactions to be handled fast.
5. Paying in Installments
The concept of purchasing goods and services by paying in installments is common in LATAM, and especially in Brazil. It’s a fact that in Brazil, up to 50% of all online purchases are carried out using an installment schedule, sometimes referred to as ‘Quotas’ or ‘Months without Interest’. Many South American countries pay in installments for larger, more costly items, including international vacations and cars.
6. Evolving Preferences
In conclusion, there’s no question that consumer behavior in Latin America is evolving rapidly and that paves the way for some amazing opportunities when it comes to entering the massive LATAM market. Understanding and facilitating consumer preferences is vital and presents endless opportunities for those with the right infrastructure, network and, most importantly, understanding and local market know-how. As for the trends in Latin America, companies planning to enter the market need to be flexible, savvy and be prepared and ready to furnish consumers with local payment services. Nothing is more important than studying and understanding which solutions are the best match for which countries.
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