News

How eCommerce Sites Reach Mexico’s Unbanked

Online commerce is growing slowly but steadily in Mexico, thanks in large part to the ways in which digital merchants are reaching the unbanked population of the country.

As a recent Wall Street Journal article explains, although eCommerce presently only makes up about 2 percent of Mexico’s approximately $203 billion in annual retail sales, that’s four times what the percentage was five years ago, and consulting firm Euromonitor International predicts that it will double again by 2020.

The obstacle for online retailers, the WSJ story goes on to share, is that only 22.6 million credit cards are in use among a population of 119.5 million, which obviously limits the ability for many consumers in the region to pay for goods via the Internet.

The solution has been to expand those consumers’ payment options.

WSJ gives the examples of Linio — a major online store in Latin America — accepting PayPal, cash-on-delivery and cash payments (made at Oxxo convenience stores), in addition to credit and debit, and regional eCommerce site MercadoLibre, which has its own payments system in place called MercadoPago that is similar to PayPal and, in Mexico, also allows for payment at retail outlets such as Oxxo.

Amazon, which began fully operating in Mexico in June, has followed the lead of these regional online retailers, WSJ goes on to explain, beginning last month to offer gift cards that can be purchased with cash at Oxxo locations (which total over 13,000 across the country); the eCommerce titan also accepts Oxxo brand prepaid cards.

“We’re acknowledging there’s a big opportunity among the unbanked,” Amazon Mexico Country Manager Juan Carlos García told WSJ, also noting that more than 80 percent of consumers in Mexico still prefer to buy with cash.

Linio Chief Executive Andreas Mjelde shared his belief with the outlet that allowing novice eCommerce customers to pay via cash-upon-delivery often leads to them paying online in future purchases, remarking, “It breaches the gap of the lack of trust that the average Latin American has to shopping online.”

Central to the growth of eCommerce in Mexico, the WSJ story posits, is the rapid growth of smartphone use in the country, its usage rates having increased, according to telecommunications research firm Competitive Intelligence Unit, 40 percent in 2015.

“Soon, a majority of the population in all our markets will be able to shop online,” said Mjelde. “By 2020, there won’t be any limit to Latin America in terms of Internet penetration or payments.”

——————————–

Latest Insights:

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. In the December 2019 Mobile Card App Adoption Study, PYMNTS surveyed 2,000 U.S. consumers for a reveal of the four most compelling features apps must have to engage users and drive greater adoption.

TRENDING RIGHT NOW