Latin America’s Informal Economy Becomes FinTech’s Biggest Opening

Latin America’s digital economy is advancing at a steady pace, yet much of the region’s commercial activity still operates beyond formal financial channels, leaving payments firms to contend with a fragmented and, at times, largely cash-based merchant landscape.

The informal economy is a structural feature of Latin America’s economic system. According to the OECD’s “Latin American Economic Outlook 2025,” large segments of the population participate in informal employment, with entire households dependent on unregistered or loosely structured economic activity. Elsewhere, the United Nations Development Program (UNDP) estimates that smaller firms—micro, small and medium enterprises—represent more than 99.5% of the merchant roster in Latin America.

The informal settings generate employment at scale, particularly among small and microenterprises that lack access to formal credit, digital tools or tax frameworks. The OECD report underscores that informal employment remains widespread across the region (with one of every two workers informally employed), shaping income distribution, productivity and access to financial services.

For payments providers, growth is not limited by consumer willingness to transact digitally. The flipside of the coin is whether merchants can accept those transactions.

From Consumer Adoption to Merchant Enablement

Consumer behavior is already shifting. In Brazil, 61% of consumers used a mobile device for their latest retail purchase, according to PYMNTS Intelligence’s “Global Digital Shopping Index.” In Mexico, that figure stands at 47%, reflecting rapid adoption of mobile-first commerce.

Consumers are ready for digital commerce, but many merchants remain tied to manual processes, fragmented acceptance tools or cash.

The result is friction. In Brazil, nearly all consumers reported experiencing at least one payment-related issue in their latest transaction, often tied to processing failures or limited acceptance options. In Mexico, nearly a third of online shoppers encountered payment friction.

Real-Time Rails Begin to Bridge the Gap

Brazil’s Pix system illustrates how real-time payments can begin to formalize informal commerce. Since its launch, Pix has reached mass adoption, with widespread use among both consumers and businesses.

The system processed roughly 196 billion transactions and moved about $16 trillion, with 90% of the population having used it. Across the broader ecosystem, Pix is extending into merchant workflows, including small businesses that historically relied on cash.

The expansion of Pix into platforms such as PayPal’s SMB offerings, as announced this week, indicates a move toward embedding acceptance directly into merchant operations, from checkout to invoicing to working capital flows. That integration reduces friction and aligns payment methods with how consumers already transact.

Platforms Are Scaling the Ecosystem

Large regional platforms are reinforcing this shift by building ecosystems that combine commerce, payments and financial services.

Earlier this year, MercadoLibre reported 45% revenue growth, supported by the expansion of its FinTech arm and improvements in merchant acquisition and engagement through data-driven tools. Its Mercado Pago platform provides accounts and payment processing to merchants, effectively serving as a bridge between informal sellers and formal financial infrastructure.

Nubank is pursuing a parallel path through scale. PYMNTS reporting has noted that the digital bank expanded its customer base by 15% to 131 million users, while increasing revenue and profitability. Its growth reflects the demand for accessible financial services, particularly among populations that have historically been underserved by traditional banks.

The informal economy presents both a constraint and an opening. It limits visibility, tax collection and access to capital. At the same time, it offers a vast addressable market for providers that can deliver integrated financial tools.

The next phase of competition will center on embedding payments into daily business operations. That includes inventory management, supplier payments, lending and cash flow visibility. Real-time rails such as Pix provide the foundation.