New technologies are increasingly embedded in society. The use of innovation tools influences, moves and transforms the global economy. The e-commerce market in Latin America, for example, has a strong annual growth rate. Between 2017 and 2021, we saw an annual expansion of 22% in the markets in the region. And the future? Ecommerce is projected to rise, with an average annual rate of 19% by 2025. The wide range of payment methods – credit and debit cards, digital wallets, BNPL (Buy Now Pay Later), real-time transfers, among others – encourages consumers to experiment and adhere to this infinity of new consumption options.
Consumer habits regarding the use of technology, consequently, reflect on the way they make their payments. According to The Global Payments Report 2022, ecommerce in Latin American markets will experience double-digit annual growth through 2025, including the largest in the region, namely Brazil (18%) and Mexico (17%). The Brazilian market –the largest in the region– exemplifies the upward curve. This year, e-commerce has seen a 16% increase compared to 2021.
Credit cards remain the primary payment method in e-commerce in the region. In 2021, they represented 39.3% of the value of transactions and stood out as the largest presence in the sector in all Latin American markets. In Brazil, there was the highest adherence with 44.7% of use. Debit cards made up another 18.2% of the region’s transaction value in the year.
Peru and Chile, where their banking populations are on the rise, should contribute to projected rates for card use by 2025. But even with a 3% reduction in their share, credit cards should remain in the lead of payments in ecommerce in the region, except in Mexico. In the country, the growing popularity of digital wallets will take the lead, in 2024, as the main payment method in e-commerce in share of the value of transactions.
Adherence to digital wallets does not happen by chance. They allow consumers to securely store payment and transfer credentials for their purchases in virtually all channels where commerce takes place, that is, online, through apps or in physical stores. And, in the case of Mexico, this trend is a reflection of the population’s adherence to the means of payment which, in 2021, represented 27% of transactions. And in the next three years, it should reach close to 36% share. Colombia and Peru are also open to the use of digital wallets, with a tendency to grow 13.6% and 17.8%, respectively, until 2025. In the regional context, the share of this payment method will be 25% in the next three years.
We have also seen significant changes in bank transfers, which accounted for 9.7% of regional spending on e-commerce in 2021, with a similar projection (9.4%) up to 2025. However, their use takes on different paths. There is an estimated drop in Peru, from 8.8% in 2021 to 3.8% in 2025, and in Colombia from 16.5% to less than 10% in the same periods. In Brazil, with the introduction of Pix instant payment, real-time transfers are expected to rise from 10.9% to almost 18% in 2025.
Real-time payments contribute to strengthening e-commerce in the region. Argentina and Colombia, which already had established solutions, presented evolutions in their products. Chile stood out in the lead with a 140% increase in transaction volume (almost two million per day), with Mexico and Brazil growing healthy at 66% and 33%, respectively (four and five million transactions per day) . In Brazil, all institutions, including fintechs, are being required to participate in Pix if they have more than 500,000 active customer accounts to promote its dissemination. Latin America today follows the global trend of supporting payments from businesses, corporations and government agencies through real-time schemes.
In this wide range of digital services and products, BNPL – payments that allow consumers to pay for goods and services, whether through a single invoice or finite installments – is beginning to gain traction in ecommerce. Transaction values remain low – below 1% – but growth rates will be one of the fastest in the world. An increase of 98% is estimated from 2021 to 2025, when it will account for about 2.2% of the value of transactions in Latin American e-commerce.
With this technological revolution in the financial system, which impacts electronic commerce, can we say that cash will disappear? Society evolves, renews itself and has an incredible power of transformation. Cash payment transactions are projected to halve by 2025 from the region’s 3.8% e-commerce spend in 2021. Fall, yes. Extinction, no. We need paper money to compose this mix of contemporary means of payment, which will always be renewed.
This movement in electronic commerce associated with the change in consumer habits will certainly bring impacts to the economy, from global to local. Each country will perceive the effects of this transformation according to its cultural profile, portfolio of technological products available on the market and, of course, current economic guidelines. In addition to the specificities of each nation, the fact is that we paved the way for new times in which innovation and technology permeate different aspects of the social and economic life of the whole society.
