Guide to LATAM payment preferences

overview

Latin America (LATAM) offers significant growth opportunities for many businesses looking to expand overseas. Between 2020 and 2021, the region’s e-commerce market grew by an estimated 37 percent – and by 2025, it’s predicted that 361 million consumers will be actively shopping online here.¹

As always, commercial success depends on a number of factors – not least the ability for your online store to offer a diverse mix of localised payment options. In this guide, we’ll explore how the pandemic has impacted consumer payment preferences, which key trends you should be aware of, and which payment options you should offer at checkout. We’ll also look at some of the major payment providers, and help you decide which ones could be right for you.²

Towards a cashless society?

Consumer payment preferences vary a great deal across LATAM, but one thing is clear: since the pandemic started, cash payments have seen the largest overall decrease across most countries. That said, cash is still used to pay for 20 percent of purchases in Mexico – and that rises to 25 percent in Peru. Across the region though, just 14 percent of e-commerce purchases are settled using cash.

Credit cards gain popularity

In Brazil and Chile especially, local credit cards are the payment method of choice for e-commerce purchases – accounting for 36 percent and 40 percent of transactions respectively. In Mexico, Colombia and Peru, it’s international credit cards that dominate. Regardless, what’s clear is that credit cards (both local and international) are now the preferred payment method in the region, used in 39 percent of all e-commerce purchases. In Brazil, that figure rises to 88 percent when funding digital subscriptions.

Debit sees a surge

Debit payments have also become more popular, with significant rises in both Mexico (24 percent payment share) and Chile (28 percent). Indeed, across the entire region, debit is now used for 18 percent of all e-commerce transactions, and 25 percent for digital subscriptions in Colombia.

e-wallets on the rise

Across LATAM, it’s e-wallet payments that have seen the biggest jump – surging in Brazil, Chile, Colombia and Peru. In fact, this method is now used in almost one in five transactions across the region.

Don’t forget bank transfers

It’s easy to overlook bank transfers. After all, they account for just 3 percent of online transactions in Brazil, 4 percent in Peru, and as little as 2 percent in Mexico. Yet in Colombia, 24 percent of payments are made this way – and one in ten payments across the region as a whole.

What does this mean for your checkout experience?

While consumer preferences have seen a major shift towards contactless in recent years, the payments ecosystem still remains diverse and highly localised. In fact, some online stores in the region now offer more than 15 different payment options – simply because shoppers are more inclined to purchase if their preferred choice is available. An interesting case in point is Colombia , where 68 percent of customers are more likely to purchase when the ‘Via Baloto’ logo is visible on the website, as it allows them to make online payments using cash.³

Next, let’s explore some up-and-coming payment trends across the LATAM region, plus recommended checkout options for your business.

Mexico

• Cards are used by more than 75 percent of consumers here, and are now the dominant payment method.
• Debit makes up almost a quarter (24 percent) of all e-commerce transactions, so consider teaming-up with a payment service provider (PSP) or regional partner to ensure you’re able to meet this need.
• Instalments (Meses sin interés) via credit card are very common in Mexico, but a local partner is still required to support these transactions.
• Thinking about offering e-wallet payments? The leading brands in Mexico are PayPal and Mercado Pago.
• The cash payment market leader is OXXO convenience stores.
• Keep an eye on CoDi: a new wire transfer brand that’s gaining popularity.
• Must-have payment methods are Cards (both international and local schemes such as Carnet, Banamex, and BBVA cards), bank transfer, and e-wallet.

Brazil

• While cards are the preferred method for online payments here, just 20 percent of consumers actually own cards suitable for cross-border transactions.
• Local card schemes such as Elo and Hipercard are popular in Brazil, so consider adding (and promoting) them on your site.
• PIX is Brazil’s latest local faster bank payments method. It’s grown exponentially since launching in November 2020, and this is expected to continue.
• Boleto is an increasingly popular ‘post-pay’ solution, where users download vouchers and pay offline or via online banking.
• Must-have payment methods are bank transfer and e-wallet. We also recommend supporting Elo and Hipercard cards – plus PIX for long-term growth. Accepting Boleto payments will help you attract consumers who don’t have bank accounts, while dLocal can help with processing payments.

Argentina

• Debit and credit cards are the most popular form of payments for online transactions here.
• More than one in three e-commerce transactions (37 percent) are paid with local credit and debit cards. Nearly all the country’s debit cards are unsuitable for making cross-border purchases.
• e-wallets remain extremely popular in Argentina. Leading players include Mercado Pago and PayPal.
• Cúpon de Pago is a popular cash payment method that allows consumers to pay by cash in 12,000 affiliated stores or agents, including RapiPago and PagoFacil.
• Must-have payment methods are credit and debit cards and e-wallet.

Colombia

• At 42 percent of the mix, international credit cards are the most popular form of e-commerce payment.
• The next most popular type is bank transfer (24 percent share). In particular, Pagos Seguros En Linea (PSE) is a form of online debit that lets consumers pay for things online via bank transfer.
• 15 percent of e-commerce payments are made using cash on delivery.
• Via Baloto is the trusted voucher for cash payments, used by 85 percent of the population.
• With over 8,800 locations, Efecty is another popular cash payment option.
• Must-have payment methods are cards, bank transfers, and cash on delivery.

Peru

• International credit cards are the most popular form of e-commerce payment here, making up 43 percent of the mix.
• Cash on delivery accounts for one in four e-commerce payments, making it the second most popular method.
• It may be worth adding PagoEfectivo to your list of payment options. When consumers select this method, the merchant’s site generates the billing details as a print-optimised document, which consumers can use to pay via online banking, or using cash at an approved agent.
• SafetyPay is a voucher and ePayment method that allows consumers to generate a transaction number, then pay offline by cash or internet banking.
• Must-have payment methods are cards, cash on delivery, and bank transfers.

While LATAM’s diverse mix of payment preferences can be a little tricky to cater for, luckily there’s no shortage of providers ready to help you navigate the process and offer a customer-friendly checkout process. Four of the main players are Mercado Pago, dLocal, EBANX, and Stripe.

At the time of writing, each of these providers offer international, local, and even offline payment methods – although exact regional coverage can vary. For example, both dLocal and EBANX operate in all LATAM markets, while Mercado Pago is only available in six countries, and Stripe just two. Likewise, EBANX offers cash/voucher payments, local credit cards, local debit cards, and digital wallets in Argentina, but just local credit cards and debit cards in Costa Rica. We recommend discussing your specific needs and objectives with each provider, and finding a pan-regional solution that works for you.

While LATAM consumers have embraced online shopping, cross-border payment declines are still a major issue in the region. A big part of the problem is that less than a third (29 percent) of LATAM consumers have credit cards enabled for overseas payments.

That said, there are some actions you can take to reduce the risk of declines, and ensure a successful transaction. These steps include a combination of engineering work, partner management efforts, increased reporting and monitoring, and urgent customer communications. If you have a recurring payment model, the changes are likely to be more comprehensive.

One of the best ways to reduce declines is to process them locally – which can improve authorisation rates by as much as 20-30 percent in some cases.¹ In Brazil and Mexico especially, using a locally-sponsored merchant identification number (MID) can significantly reduce declines, resulting in successful cross-border conversion rates of 78 percent and 84 percent respectively.

Fraud is another big problem in most of Latin America – and understanding the type of fraud you’re experiencing is key to fighting it. Typical examples include payment fraud (identity theft), friendly fraud, or clean fraud. When developing your fraud management strategy, ensure it covers three main phases. Firstly, stopping fraud in real time. Secondly, resolving disputes before the chargeback occurs. And thirdly, disputing chargebacks after receiving them. You can choose to manage these steps in-house, or via your payment processor or third party fraud management vendor.

Here are some tips on developing an effective fraud management strategy:

• If you support multiple payment methods (e.g. cards, eWallets, bank transfers), check that your fraud management strategy covers all of them.
• Remember, fraud protection should happen throughout the customer lifecycle, not just at the point of payment. The best fraud management tools use behavioural information to identify anything suspicious in real time.
• Make sure your chosen solution lets you adjust and balance the desired risk threshold for false positive rate or fraud detection rate, based on your business needs.
• Your fraud management solution should also incorporate data on known types of fraud. That way you can build detailed, individual real-time profiles to spot anomalies and catch fraud as it occurs.
• A good fraud solution should provide clear reasons as to why a particular fraud decision was made – so you can feed back to customers and treat them fairly.

Consumer payment preferences in LATAM have changed significantly since the pandemic. While cash is still a popular option, credit cards and e-wallets are emerging as the front-runners, with shoppers no doubt appreciating their contactless nature and ease of use. While declined payments remain a frustratingly common problem, this can be addressed by using locally-sponsored MIDs. Arguably, the key to success is being able to offer consumers a wide choice of localised payment methods – credit cards, debit cards, e-wallet and, of course, cash. Last but not least, you’ll also need to choose the right payment provider, or combination of providers, to ensure you’re offering consumers a seamless range of options throughout the region.

For more information on taking your business global, including how-to guides, articles, and consumer and market insights, head over to the Market Finder by Google's website. You’ll also find a tool for assessing your export readiness, identifying the most suitable markets, and tips of the best way to get started.