Rapid development in Latin America is leading to high levels of innovation in FinTech. EBANX’s Beyond Borders 2022/2023 report explores the causes and potential effects this may have into 2023.
EBANX, a FinTech company that specialises in international payments in rising markets, has released its annual Beyond Borders 2022/2023 report.
This study – a bellwether for tracking online consumer behaviours, FinTech and payments innovation, new trends and business opportunities in emerging markets – is one of the first to cover 15 countries across Latin America. It relies on multiple trusted sources to provide meaningful insights – including internal EBANX data and fresh research and analysis from Americas Market Intelligence (AMI).
“The rapid growth of digital commerce in rising markets such as Latin America – a region with the one of the highest CAGR of digital buyers in the world through 2025 – is being catalysed by payments innovations that are breaking the mould,” said Paula Bellizia, President of Global Payments at EBANX. “The future of payments in this region is decidedly alternative and instantaneous.”
As an example of the explosion in Alternative Payment Methods (APMs) in Latin America, account-based transfers – which include instant payments from Brazil’s wildly successful Pix and Colombia’s fast-growing PSE – have been nearly doubling in volume (86% CAGR) every year in LATAM’s digital commerce sector since 2018, per the latest data analysis from AMI.
By the end of 2022, account-based transfer is expected to reach about US$70 billion in volume, with the most significant shares in Colombia (30% share of the country’s e-commerce), Brazil (24%), Guatemala (11%), Bolivia and Chile (both 10%). By 2025, this type of APM in Latin America should reach US$ 121 billion in volume after growing at a 33% CAGR.
Another fast-rising APM, digital wallets are expected to grow in usage by about 20% per year through 2025 across the region’s digital commerce landscape, driven most notably by an uptick in Latin Americans’ demand for digital services where they register their largest share.
Within that same time frame, AMI forecasts e-wallets’ payments volume will surpass US$70 billion, or approximately a 10% share of LATAM’s entire digital commerce market, with Argentina and El Salvador leading the way – having a 23% share of their respective digital commerce markets being paid with e-wallets. This will followed by Bolivia (14%), Peru (13%), Uruguay (12%), Brazil (11%) and Mexico (8%). Due to their instant confirmation, good user experience and rewards/cash-back programs, digital wallets are especially popular with streaming entertainment and gaming enthusiasts.
The study also shows how Latin America – a region where instalments have been very popular since the 1980s – has been adopting BNPL solutions in digital commerce. A global trend on the rise, BNPL is expected to reach US$400 billion in digital commerce transactions by 2026.
In Latin America, it is in its early stages when compared to traditional instalments, however, it has a 300% growth year-over-year in 2022 and it should keep pace, tapping into the region’s diverse payments landscape. Additionally, it will stand as an alternative to consumers who don’t have a credit card or a high enough credit limit but want to split their payments.
“The meteoric rise of alternative payments in LATAM is a direct consequence of financial inclusion and consumer preference for the new, instant payment technologies across the region,” said Juliana Etcheverry, Director of Strategic Payments Partnerships at EBANX.
Meanwhile, cash-based payments seem to be reaching a plateau in Latin America’s digital commerce sector, after years of intense digitisation. In 2018, cash-based payments represented almost 20% of online purchases in the region and now it only accounts for 8%, per AMI. This is a sign that cash is moving to digital and its traditional adoption, with vouchers used to pay with cash, should decrease in the upcoming years.
Other key findings from the Beyond Borders 2022/2023 study include:
LATAM’s cross-border digital commerce sales will boom through 2025
The cross-border online market in Latin America is back on its high-growth track.
In 2022, almost 75% of Latin Americans have bought online and this share of the digital market is expected to expand almost 45% by the end of the year – nearly 10% higher than the domestic digital commerce’s (36%), according to AMI. This trend should continue over the next several years, with international online sales in LATAM accelerating at an average of about 34% per year through 2025.
“Latin America accelerates above global averages in all digital verticals and the region has a very interesting combination of good cross-border share while keeping high growth rates. While smaller markets have the largest cross-border portion of their overall digital commerce, it’s in the larger ones like Brazil, Mexico and Colombia where cross-border grows the most,” added Etcheverry.
High-ticket SaaS/cloud payments in LATAM and Africa emerge as a ‘mega’ opportunity
With so many major challenges to address – from banking to online security to healthcare – the SaaS/cloud market in LATAM was already one of the fastest-growing in the world last year. Adding more fuel, new regulations such as eFX in Brazil – which allowed financial institutions to process foreign exchange transactions up to US$ 100,000 with immediate settlement and through an e-commerce platform – are expected to push new solutions and business models for ‘macro payments’.
The B2B market for SaaS/cloud has become a mega-opportunity in Latin America, with a projection of almost 30% annual growth through 2026, per EBANX calculations based on IDC and Statista’s data. With an average value of US$45,000 today for a B2B SaaS contract purchase in the region, these high-ticket items are about 80% of the total SaaS/cloud online payments volume in LATAM, versus 20% of the B2C SaaS/cloud services.
“LATAM is seeing a strong expansion of cloud services for companies, directly linked to the digital market expansion and the evolution in the payments ecosystem,” said Erika Daguani, VP of Product at EBANX.
