PYMNTS Intelligence: Why Seamless Payments Are Key for Latin America’s Growing Subscription Economy

The global health crisis prompted consumers worldwide to experiment with new hobbies and consume new media. Extra time at home, as well as limits on in-person shopping, led to a surge in subscriptions for everything from video and music streaming services to retail, including pet care, dessert kits and beauty products. Latin America’s streaming and subscription market is poised to expand rapidly, with its total value predicted to reach $16.9 billion by 2025, including 116 million streaming video-on-demand subscriptions.

With the market representing such a golden opportunity, capturing potential subscribers in the region is becoming a top goal for subscription-based businesses. Streaming services Disney+ and HBO Max have taken steps to expand their services into this market, but engaging and retaining LatAm subscribers may not be straightforward. Platforms must be prepared to accommodate the unique needs of Latin American consumers, many of whom remain unbanked even though financial penetration is rising. One recent study found that 37% of Mexican adults still lack access to bank accounts, for example.

Subscription companies hoping to grow in the region will need to develop well-informed strategies to meet these consumers’ particular needs and preferences. This month, PYMNTS examines the growth trends in the LatAm subscription and recurring payments space and the challenges service providers in the region must overcome to offer seamless customer experiences.

The Growth of the Latin American Subscription Economy

Subscriptions, especially those for virtual streaming services, have swiftly become part of daily life for many LatAm consumers. Streaming is becoming more commonplace everywhere, with a 2021 Visa survey finding that 99% of consumers globally pay for at least one subscription, with digital streaming at the forefront. Another study revealed that 40% of individuals in the Caribbean and Latin America, in particular, watch content on their streaming services three to four hours each day.

Subscriptions’ increasing popularity also has prompted a growing number of Latin American businesses — both consumer-facing and business-to-business entities — to adopt subscription business models to grow customer engagement and revenue. Companies that adopt subscription models have achieved six times the growth of those that do not, according to one report.

Other publications have described an influx of retail subscription services in Argentina, ranging from monthly homemade cannoli kits to home beverage delivery service Siempre en Casa, which now boasts a total of 23,000 subscribers throughout Greater Buenos Aires.

These trends denote a clear upward path for subscriptions in Latin America, but growth is also making the market more competitive. This is especially true as regional consumers seek convenient, affordable pricing along with engaging new products and content.

Another recent report found that while the LatAm subscription economy certainly is growing, many consumers actually have reduced the number of virtual streaming subscriptions they purchased over the last year, citing both cost concerns and a lack of new content. The report noted that 41% of consumers had signed up for new subscriptions because of special offers, and 57% said they would cancel their subscriptions if streaming platforms raised their monthly rates.

Beyond competitive pricing, subscription services also must offer a seamless recurring payment experience to capture and retain consumers’ loyalty. In Latin America, that means supporting a variety of unique — and changing — payment preferences.

Keeping Pace With Changing Payment Needs

An all but invisible payments experience is one of the key draws for consumers when signing up for subscription services, but offering this seamlessness can be challenging.

The LatAm payments ecosystem remains fragmented, with consumers in various markets turning to unique, local payment methods to make their daily purchases and pay their recurring bills. These circumstances certainly do not rule out digital experiences, however. Even markets in which many consumers remain unbanked or do not participate in the traditional banking space still see rising adoption of digital, and especially mobile, tools.

There are approximately 34 million unbanked adults in Brazil, for example, but usage of the country’s mobile payment solution, Pix, nevertheless is booming, with 62% of Brazilian consumers now utilizing the payment method. Other markets in the region still rely heavily on cash-based payment systems for online services.

Clearly, subscription services must move to support payment and financial tools outside the traditional banking experience before they can count on winning the loyalty of Latin America’s newly digital consumers. Failing to keep pace with such shifts could see the sector stall despite the opportunity ahead.