Digital Wallets in Latin America

As the months go by, digital wallets have been increasing their boom exponentially. This is due to its effectiveness and great ability to organize, verify identities and store confidential information in a practical, comfortable and most importantly, secure way.

That is why they are highly attractive both for companies and for users who are looking for complementary services and value offers beyond volume in transactions, thus increasing their level of benefits and decreasing adjacent costs, which is why:

• Currently, online payments are the preferred method of collection and payment by most businesses in Latin America.

• Global e-commerce transactions are expected to exceed a CAGR (Compound Annual Growth) of approximately USD 8.3 trillion, which would mean 12% by 2025.

This is demonstrated in the statistics since e-commerce had an annual increase of 22% in the period from 2017 to 2021 as well as e-com through digital wallets in LATAM accounted for 19.2%.

If we talk about regions, we can notice that Mexico stands out thanks to the great use and consumption of digital wallets that its inhabitants have, which by 2021 represented 27% and is estimated to increase and approach 36% by 2025.

However, there are other countries that stand out by preferring digital wallets as a payment method and we detail them below:

• We have that, at the general level of Latin America, Argentina had the highest percentage in year-on-year profit through e-commerce, which represented 70% in 2021 and is expected to rise to 26% annually by 2025.

• The most significant LATAM markets are not far behind as an estimated 18% increase in transactions through digital wallets is estimated in Brazil, as well as 17% in Mexico.

In fact, all the statistics, reports and research reflect that this payment method is going to become a fundamental part of our lives and will definitely transform the way we do business transactions because as time passes and it takes more boom, it can be used without so many limitations globally facilitating everything for its users.
We can take as a reference Mauricio Fernández, Director of Operations for the Americas of the BPC, a leading firm in global payments that seeks to intelligently solve the needs of users, which comments that:

“Latin America is a market in continuous expansion and that offers possibilities for merchants in the region to incorporate methods that impact the life of the final consumer and meet their financial needs,” he also adds: “The modernization of payment platforms for banks, transactional service providers (PSPs) and other entities that offer solutions focused on methods of acquisition are evolving rapidly around the world.”

And it is that consumers demand a different, comfortable and consolidated experience, so technology has evolved to offer it, thus making digital wallets the main financial and transactional tool today.

This is reflected in the report called: “Drivers of Change in Payments: Modernization of Payments to create a new value” made by the BCP in which it is detailed that currently 3 types of payment methods have been mainly consolidated:

1- Alternative payment methods: Hand in hand with the digital trend and the search for innovation in purchase and payment solutions, there has been an increase of 14% which is estimated to continue growing and that more than half of this is done through mobile devices.

2- Credit and debit cards: Known to everyone, they are still the main form of payment in LATAM even when their usability may vary depending on the region, this is demonstrated in statistics since their year-on-year growth in 2021 was approximately 13% (debit cards) and 21% (credit cards).

3- Cash Payments: According to studies conducted by the World Bank, it has been shown that more than 50% of the population still prefers to make cash payments. Stating that an important factor that makes it remain in force over time is the lack of dependence on external devices at the time of its execution.

And we can not leave aside the BNPL system (Buy now, pay later) which has presented a great boom in LATAM digital commerce because:

• It generates a great increase in the conversion rate in the companies that apply it since, as the user does not have to pay immediately, the decision process is facilitated, completing purchases and sales quickly.

• It offers users the possibility of covering their needs without any type of cost overrun, interest, approval or analysis of their finances, thus facilitating their expansion and preference.

This has led to estimates that in LATAM the BNPL will have an increase of 98% between 2021 and 2025, which represents 2.2% of the approximate value of e-com transactions in the region.

In turn, Mauricio Fernández concludes that: “Today merchants expect payment processing organizations to act as true allies of their business, to understand their needs and to be able to adapt to what their customers are looking for to facilitate their processes, guarantee security and promote the adoption of different payment methods.”

Undoubtedly, the use of digital wallets will increase its impact and expansion margin by offering security and privacy hand in hand with freedom for both companies and users who seek to facilitate processes and save time when making their transactions, therefore it is not surprising that by 2025 the use of this payment method is expected to increase 19% on average in LATAM, making it the preferred method of payment in the market.