Digital payments have taken the world by storm in the past several years, but Latin America lags compared to other regions like Europe and Southeast Asia.
Just 18% of consumers in Latin America use a FinTech, digital wallet or neobank to make purchases, for example, as opposed to 46% of consumers in the Asia-Pacific (APAC) region. This figure is changing fast, however, with digital payments doubling as a share of total payments in the region since the beginning of the pandemic.
Chile serves as a prime example of the exploding popularity of digital payments in Latin America. The use of digital wallets in Chile grew 32% in 2020, for example, representing $400 million in purchases throughout the year. Chileans also are eager to deploy new payment types, with a study finding that 66% of Chilean consumers had embraced some form of new payment method they otherwise would not have used without the pandemic.
Digital payments providers looking to expand into Latin America are using Chile as a jumping-off point. The reasons are clear, as any technology that fails in Chile has little chance of succeeding elsewhere in the region. Those that succeed have a perfect launchpad for further expansion.
In the November/December Digitizing Payments In Latin America Playbook®, PYMNTS explores the emerging popularity of digital payments in Latin America, Chile’s leadership role in expanding these payments to the rest of the region, and obstacles that could stand in the way of greater digital payments proliferation.
Latam Digital Payments Developments
One key driver of digital payments adoption is the ongoing pandemic, according to a study. Just fewer than half of the businesses in Latin America accept some form of digital payment, although the exact type accepted can vary greatly. QR codes made up 32% of digital sales, followed by sales and transactions via cards or mobile devices. Small businesses or microbusinesses especially ramped up digital payment adoption amid the pandemic, with 80% of these businesses beginning to accept them.
Chile has emerged as a pioneer for digital payments in the region, with money transfers from bank account to bank account taking the top spot in consumer popularity. This process can be riddled with complications, but payment platform Khipu and transaction portal Sencillito.com have partnered on a new system that aims to simplify these transfers by skipping Transbank, the company in charge of administering bank credit and debit cards in the country and the intermediary between such exchanges. Sidestepping this intermediary also helps reduce interchange fee costs leveled by Transbank’s variable fee system.
Why Payments Providers Use Chile as a Blueprint for the Rest of Latam
Digital payments have seen slower adoption rates in Latin America than much of the rest of the world, but payments providers are working quickly to fill the gap. Chile is often the first recipient of these new products and services in the region.
In this month’s Feature Story, PYMNTS talked with Josip Jercic Hollub, director of marketing and communications at Chilean eCommerce firm Justo, about why Chile’s high banked rate and enthusiasm for digital payments makes it a fertile testing ground for new technologies in Latin America.
Digital payments are on the rise worldwide, but few countries serve as a better example of their full potential than Chile. The country has the highest rate of bank account ownership in the Latin American region, and digital payments providers are working to deploy several new solutions in Chile first before expanding to the rest of the region.
This month’s Deep Dive explores why digital payments have hit it big in Chile and why the rest of Latin America is soon to follow suit.
About the Playbook