Rising Streaming Costs Threaten LatAm’s Digital Shift

Latin America is a continent as case study when it comes to digital modernization from payments to streaming, blazing trails that emerging and developed markets can learn from.

In a region shaking off cash dependence, converting to digital recurring payments for streaming subscriptions and leveraging insightful data is powering retention strategies and bringing more unbanked people into the connected economy.

“The more you automate payments, the better retention gets. It’s that simple,” Kushki Senior Vice President of Product Partnerships Gustavo Monteiro told PYMNTS.

“Anything that requires user action on a recurring basis will retain less just because life happens, you forget, you delay, and especially if you are a new customer to a service and you haven’t grown fond of or dependent on it,” he said.

This is where digital makes its mark. A new wave of instant payment solutions is making it easier for people outside of the traditional banking system to upload money and spend it like anyone else.

Expansion of streaming and adoption of digital payments pair well in Latin America as the region experiences impressive growth in both areas, creating new connected economy opportunities.

“The more people you can bring from the offline economy into the digital economy, the more people interested in those services you will have,” he said. “On our side as a payments provider, what we try to figure out what are the best avenues, the best ways of bringing that offline money [online].”

See also: Latin America’s Digital Payments Transformation Passes the ‘Grandma Test’

Experimenting With Price Sensitivity

Subscription services seeking expansion in Latin America are dealing with many of the same issues as other markets, namely the paradox of choice combined with rising subscription costs.

Digitizing Payments In Latin America Playbook, a PYMNTS and Kushki collaboration, notes 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.”

That makes it a tricky time for streaming in emerging economies where price sensitivity is more acute than in more developed markets, and where far fewer have bank accounts.

“A streaming subscription of Disney+, Netflix, you name it, proportionally for the average Brazilian or the average Mexican is more expensive than it is to the average American or the average British [subscriber],” Monteiro said. “There is a sensitivity factor for sure. More recently, in the top [Latin America] markets, there’s now more competition.”

He said that fact has subscribers in a region marked for expansion thinking about what to cut and what to keep from the batch of streaming services accumulated during the pandemic.

This is where experimentation is proving useful in generating and analyzing payments data to land on new retention strategies tailored to the market its dominant consumer profiles. That’s more difficult in regional economies still heavily reliant on cash, but it’s changing fast.

“Experimentation of nonrecurring payment methods is certainly harder, especially if it’s an in-store initiated flow,” he said, using an example of the person who walks into a physical store and buys a gift card with cash. Until that card is used, no data is being generated.

Monteiro said, “However, if you have something that is service initiated … into the checkout of a streaming service, [with] some cash at retail option there and that option that generates some token, some code, then you go in store and pay. That is easier to track. That is easier to A/B test because the whole experience is started in service.”

Kushki and others are enabling these transactional flows now to “pinpoint that consumer and follow their journey and see if they truly paid for that code and started streaming and then how engaged they were, if they came back for a top up, for a second payment, etc. But of course, instrumentation is harder than your average credit and debit card experiment.”

Get the report: Digitizing Payments In Latin America Playbook

A ‘Virtuous Cycle’

If one factor is acting as the digital front door for consumers in Latin America, it’s the smartphone. With penetration high and increasing, mobile is driving subscriptions, payments and retention.

“I think it all converges to allow more people to consume more of those services,” Monteiro said. “It’s sort of a virtuous cycle where being able to access streaming services or any subscription services from your mobile pushes you to use your mobile as a payment method and one thing facilitates the other, then you start consuming more.”

That makes the next payment easier, adds value to the experience, and allows people to use smartphones as the “remote controls for life. More and more people are getting into that mindset of I want to be mobile first. I want to solve things through my mobile phone, so I don’t have to spend time in lines away from the fun stuff that I really want to do,” Monteiro said.

See also: Mobile-First LatAm Consumers Pull Merchants Into eCommerce, Digital Payments