PYMNTS Intelligence: How the Rise of the Gig Economy Is Influencing Latin American Consumers’ Payment Needs

Consumers worldwide have altered various aspects of their lives during the pandemic, including how they shop, pay bills and work. Digital-first remote or freelance positions that give workers more flexibility are fast becoming the norm for many individuals. This change is especially notable in regions such as Latin America, where digital connectivity and smartphone penetration is rising in parallel.

One 2020 report noted that home food delivery sales within Latin America — those taken to consumers’ doors by couriers and rideshare drivers working for app-based gig economy platforms — have nearly quadrupled within the region during the past five years.

These and similar jobs can prove particularly attractive to cash-reliant and underbanked consumers, with a separate study finding that 140 million Latin Americans — approximately 55% of the region’s population — work informally. Working for a food delivery service or rideshare can allow these individuals to gain faster access to funds by funneling them directly into platform-provided mobile wallets without requiring workers to connect bank accounts.

The region’s merchants and banks must keep a close eye on Latin Americans’ work behaviors and preferences, especially as the ongoing migration to digital and gig economy work affects their payment preferences and behaviors. One recent report found 83% of Latin Americans would now consider using emerging payment methods such as contactless payments or mobile wallets for their transactions, indicating a broad shift away from cash throughout the region.

This month, PYMNTS examines how the gig and sharing economies are expanding or shifting throughout Latin America and how these developments affect consumers’ payment needs and expectations.

The Gig Economy and Changing Payment Expectations

Joining the gig or sharing economy has become more intriguing for Latin Americans in the past two years, especially as emerging payment methods and technologies have become more widely available throughout the region. Delivery and rideshare services, in particular, have seen rapid growth, with one study finding that on-demand delivery platform and mobile wallet provider Rappi had 30,000 delivery drivers by the end of 2020. The same study also found that approximately 600,000 Chilean consumers were working as freelance drivers by mid-2021, indicating that this type of gig work is quickly taking off across the region.

Many delivery, rideshare and other gig economy platforms also offer virtual payments to participants, and in many cases, underbanked or unbanked individuals can have funds transferred to mobile wallets rather than bank accounts.

The rise of the gig economy and the growing adoption of digital- and mobile-focused payment methods throughout Latin America appear to be occurring in tandem, with consumers more frequently turning to online channels and transaction methods each day. In fact, a new study found that more than half of Latin American consumers would no longer do business with companies that did not accept electronic payments.

These trends indicate that such payment methods are well on their way to becoming ubiquitous across the region, a trend that could prompt more Latin Americans to consider receiving their paychecks or other incoming disbursements digitally. The gig economy’s ongoing expansion could shift how Latin American workers find work and receive payments, especially as businesses worldwide warm to the concept of hiring remote freelancers. A September 2021 study found that 53% of United States businesses are more willing to hire remote freelancers, and 71% of hiring managers plan to increase the use of freelancers at their companies.

Keeping a close eye on how the gig economy is expanding and how consumers’ payment preferences and needs are shifting throughout Latin America will be crucial for merchants, FinTechs and other entities looking to establish themselves within the region. Gaining gig workers’ trust and understanding how digital payment methods can best fulfill their needs will be key to keeping workers engaged and satisfied for the foreseeable future.