Mexico City, April 27, 2023 – We are currently experiencing a paradigm shift in Latin America, in which digital payments are winning the war on cash. This opens up important opportunities and challenges for the payment ecosystem, which were analyzed in a study by Americas Market Intelligence and Kushki and featured at the Kushki Talks event.
Latin America has become fertile territory for the fintech industry, with more than 2,300 companies in the field in the region. According to the study “Digital Payment Trends in Latin America 2023”, by Kushki and AMI, there are various challenges and opportunities to advance in the mass use of these technologies, which are mentioned below:
leap to innovation
One of the main challenges that the means of payment industry will face during 2023 in Latin America are payment providers that depend on legacy systems. For our region to reach the dynamism and market wealth present in developed economies, a leap is necessary in terms of innovation, quality and speed of payments.
In this sense, until now the fact that traditional acquirers continue to dominate the market with 80% represents a significant challenge for all members of the ecosystem. Given this situation, according to the study, the new players that have entered the acquisition market offer traditional and alternative payment solutions, adapting to the needs and demands of Latino consumers, who are increasingly technological.
On this, Aron Schwarzkop, CEO of Kushki, points out “the future of acquisition is not based solely on cards, but will represent a combination of payment methods and experiences. Those who do not embrace this future face possible attrition and loss of relevance, since businesses will be increasingly demanding when looking for business allies and paytechs will be required to be a “one stop shop” for payments”.
Grab digital payments without fees
Among the most relevant opportunities is the downward pressure on the fees charged to merchants, since now, in many markets in the region, merchants can accept digital payments free of charge. This is an opportunity for greater acceptance of digital payments for merchants who, historically, have had to pay fees of between 3% and 5% to accept card payments, thus promoting the use of new payment trends.
packaged model
Another opportunity is commercial services moving from transactional to packaged. According to the study, this means that these services “will increasingly evolve from a transactional model, in which merchants are charged a fee for each transaction, to a bundled model, in which merchants access a package of goods and services that add value to its operation”. Some of the services being implemented right now, which are only available for cards, are enhanced fraud, smart acquisition, and tokenization.
Taking a vertical approach
Verticalization strategies in businesses are positioned as a great opportunity. The study explains that this means that payment providers need to develop vertical strategies based on the types of merchants they seek to serve. One example of this is restaurants, which now need a suite of services ranging from table and reservation management, wireless POS devices, to a system for managing online ordering, payment collection, and delivery fulfillment.
Currently, access to new digital payment methods has become widespread, evidencing a paradigm shift in Latin America, where cash used to predominate. The study indicates that today alternative payment methods represent a total of 47% of electronic commerce. For example, in Chile, access to digital accounts represents a percentage of more than 90%, the same occurs with respect to contactless payment technology, which is expected to represent 70% in that country by 2023.
“Today, digital payment methods have taken ground from cash, because they offer more payment options suitable for different payment experiences, which will bring challenges and opportunities that will have to be addressed,” concludes Schwarzkopf..
The Kushki and Americas Market Intelligence report was presented at the Kushki Talks event: Challenges and opportunities for digital payments in Latin America, where ecosystem members such as Mastercard and FinteChile participated.
“As FinteChile we are very excited to be able to speak with leaders of the payment ecosystem at the regional level, since without a doubt there are still many pending challenges for me to reach my full potential in Latin America. In Chile, we continue advancing to create a robust fintech industry and competitive that will bring more competition and innovation in the digital payments ecosystem, improving the quality and financial services that people access”, said Ángel Sierra, executive director of FinteChile.
