About two-thirds of consumers prefer cash to credit in Latin America. However, that is quickly changing with the rise of e-commerce and the availability of digital payment options in the region. In recent years, Latin America’s e-commerce sector has experienced steady growth.
The coronavirus pandemic has only accelerated this tendency and online shopping has become one of the few options – if not the only one– for consumers to purchase certain goods and services, and for businesses to remain open. As a result, many businesses have had to accelerate digitization plans that were already in motion.
He commented, “In 2019 there was already significant growth in e-commerce, and it could be said that with this year’s events we have advanced the projected growth by three or four years. That’s why our work as payment platform developers is fundamental in enabling businesses and their clients to make secure, accessible, inclusive, and innovative transactions. Our objective is to integrate solutions so that they respond to the realities of businesses in Latin America, offering them the master key that will allow them to open the door to e-commerce.”
This change in consuming habits is reflected in the numbers, with 43% of Latin American consumers purchasing more online, and 12% purchasing online for the first time since the start of the pandemic. In Mexico, already 32% of consumers plan to increase their online grocery purchases post-COVID-19, while online shopping overall is expected to increase by 20%. Other reports from leading retail companies like Walmart indicate that retail e-commerce sales grew by 97% in the second trimester of 2020– the largest increase in online sales in its history.
Many companies are recognizing the opportunity in Latin America’s e-commerce industry and the importance of payment diversification to unleash its full potential. The region has almost 70% smartphone penetration, 454 million internet users, and 400 million people unbanked when combined with the Caribbean. In a region as diverse as Latin America, having payment options is essential for businesses to remain competitive in the growing e-commerce sector. Here are just a few of the options available for businesses in Latin America.
CREDIT AND DEBIT CARDS
Customers have traditionally preferred to pay through credit and debit cards, which is the most basic online payment method. However, there are other options that are growing in popularity.
DIRECT BANK TRANSFERS
This method allows customers to pay directly from their bank account in real-time, without the requirement of a proof of payment.
About 85% of transactions in Latin America are cash-based, meaning that payment options need to adapt to this trend to capture the large portion of the population that is unbanked or underbanked. E-commerce payments made with cash represent 21% of the payment breakdown of the region.
This payment tool allows business owners to charge customers without the need for a website or an app. For example, Openpay’s solicitudes de pago tool enables merchants to send a link to their customers through e-mail, social media, or text. Then, customers can pay using either credit or debit cards, bank transfers, or cash payments.
A lack of payment options can be a huge point of friction in the customer journey and can become an obstacle in retaining customers. In Latin America, the rate of shopping cart abandonment stands at 75.3%, and although there are many reasons as to why potential customers would abandon their journey, not finding a payment option that suits their financial situation is one of them.
Latin America is often treated as one homogenous region when the reality is that it is extremely diverse. Culture, demographics, internet and mobile access, social, economic, and political structures vary from country to country. That diversity needs to be reflected in the payment options to be more financially inclusive and create loyalty in customers. This is especially important in Latin America and the Caribbean, where about 70% of the population is underbanked and would not have access to the more traditional payment options. Digital payments also open up the possibility of cross-border payments, which, combined with facilitating payments for the unbanked, can substantially expand a market.
Therefore, providing more payment options can help create an environment of trust, convenience, and familiarity in customers when buying through e-commerce. The forms in which customers can pay has the potential to help promote financial inclusion in a region that is very diverse, and it can determine whether a business will find success in Latin America’s growing e-commerce market.
Openpay is a company that specializes in the development and marketing of digital platforms and tools for creating accessible, secure, and innovative commercial transactions, part of the BBVA financial group. Among the e-commerce solutions in Openpay’s portfolio is Paynet, a payment processing and cash collecting system that specializes in providing transactional solutions for different business models.
This post is also available in: Español (Spanish)