Op-Eds

Why is it so hard to pay online in Chile?

Per capita, Chile has the most online transactions in all of Latin America. In fact, Chileans make more than 35% of their purchases online.

However, Chile’s most common online payment processors have relatively low conversion rates, rejecting a significant percentage of payments because they cannot properly authenticate the card or buyer. It is not uncommon that payments bounce at the time of check-out for some unknown reason, especially when the card is foreign or there are recurring payments involved. 

Chile clearly needs to modernize its online payment methods. These current pathways are not prepared to manage Chile’s growing number of users, the complexity of transnational payments, nor the issues of local fraud.

Fear of fraud is one of the main reasons that payments cannot be processed; the more layers of authentication used in the payment process to prevent fraudulent accounts, the lower the customer conversion rates become, meaning payments bounce. 

 Businesses that sell online can ask for details from their clients to help confirm identity before buying a product online, such as asking for more personal details, demanding a password to verify the payment and more. However, with each barrier that they create for the customer, the more the conversion rate goes down. Each drop in the payment conversion rate means lost customers; if this percentage gets too high, it can hurt business. 

A successful conversion rate would be one that maximizes company’s income while keeping the risk of fraud under control, which, depending on the type of good or service, typically tends to vary between 88% and 93%.

Although increasing, the fraud rates in Chile remain low at around 0.28%, and as transnational businesses continue to open up the accessibility of e-commerce, there is growing pressure on Chilean payment methods to maintain a careful balance between fraud and conversion rates. In other countries, the fraud rates are noticeably greater than that of Chile, reaching 1.84% in Mexico and 1.35% in Brazil.

So what is the solution? Currently, more people than ever in Chile have access to a bank account or a debit or credit card, yet the  payment processors have not adapted at the same rate as the market.

Although there are local startups attempting  to resolve this issue in each country across the region, there is a need for a single system to connect regionally in order to simplify the process of digital payments in Latin America.

Simplifying digital payments in Chile and Latin America is not easy, yet the creation of a connected international system of payments could be the first step in improving this service in our regional ecosystem.

Aron Schwarzkopf is the Co-Founder and CEO of Kushki, the leading online payment gateway for Latin America.

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