Promoted feature: Understanding payments in Latin America

AstroPay’s CEO Mikael Lijtenstein examines some of the complexities and challenges of the Latin American payment landscape and what it means for solution providers

Latin America harbours roughly 300 million digital buyers, a figure forecast to grow over 20% by 2025. It is home to one of the world’s most racially diverse group of countries and populations that share many attributes such as language and historical experience. Both the size as well as the myriad of cultures, people and customs make this region an attractive market to be explored thoroughly. However, each country in the region is unique and deserves to be defined in its own right based on its characteristics, people and economic landscape that are influencing the growth trajectories.

Companies that are looking to expand their operations into the Latin American market need to understand the complexities and challenges specific to the individual markets within that continent. Cultural context, regulations and customs differ from country to country. Companies wanting to make their entry as successful and smooth as possible must employ a careful, well-planned business strategy, and consider each market’s context.

Payments landscape in Latin America

When it comes to the payments landscape in Latin America, the region has a variety of payment methods used from country to country. Each country has its own popular local payment method that is widely used across the region, for example Oxxo in Mexico, Pix in Brazil and PSE in Colombia.

A great number of adults in Latin America are ‘unbanked’ and they don’t have access to many financial services like a debit card, credit card, or even a bank account. This means that those services available in other countries such as the US or Europe might not be able to capture the same amount of market in Latin America. This is why the local payment methods provided by local banks, payments network and fintechs are more popular.

While the unbanked population remains high and cash transactions still predominate in the region, smartphone and internet penetration has increased, and the use of digital wallets and contactless mobile payments have become popular among consumers. Various countries in Latin America have adapted and innovated to develop alternative payment methods to accommodate those without access to financial services. This led to an increase in the number of fintechs, banks and even governments across the region boosting the use of digital payments to improve financial inclusion that is inherent in this part of the world. An interesting example is Pix.

Brazil’s Pix

Pix is a mobile payment system created by the Brazilian Central Bank (Banco Central do Brasil) in October 2020. The payment method in which funds are transferred between accounts, in under 10 seconds, is a practical, instant and secure payment option that can be used from a checking account, savings account or prepaid payment account. Anyone with an ID and a mobile phone can be part of the inclusão financeira (financial inclusion in Portuguese).

In a country of 213.3 million people, 104 million Brazilians have already signed up for a Pix account or paid through it. According to data released by the Central Bank of Brazil (as of October 2021), Pix had processed more than 1.6 billion transactions in the first 12 months since its launch. The transfers between November 2020 and October 2021 have already moved almost four trillion Reais, the Brazilian local currency.

Any payment or transfer that is currently made using different options (TED, card, Boleto etc.), can be made with Pix, simply by using a mobile device. The popularity of this instant payment option is such that even people who sell their products in the street use it – calling out “Make me a Pix!”.

Pix is an interesting example of how instant payments can further real-time payments and foster financial inclusion in a country where almost 34 million adults still do not have access to traditional financial services. The payment method has been adopted by over 62% of the country’s adult population, as reported by the Central Bank of Brazil.

According to some specialists, the impact of Pix on Brazilians has been more positive than imagined. The solution has become an agent of democratisation for the unbanked population. AstroPay’s records show that 82% of the payments in Brazil received in our platform in the last month were done through Pix, which has replaced bank transfers and another payment method, Boleto.

Entering a new market: challenges and opportunities

Entering a new market has numerous challenges to be sorted out: generating brand awareness and engagement, having a deep understanding of the population and its needs and developing a local team, to name a few. Regardless of the industry, being able to collect clients’ payments is a defying part of the business where trust and security play a very important role.

We’ve learnt that offering a seamless payment experience to our users has been proven to increase the conversion rate at the checkout point. Creating a journey where pain points are avoided, with single-click-experiences and automatic payment fulfilment, are imperative to provide users with a smooth user experience.

Timing is another point to consider. Introducing a new payment method as a way to adapt to changes in trends and new developments in the market needs to be done at precisely the right moment in order to stay ahead of consumer demand and keep pace with the latest trend and regulations. For example, when Pix was launched in Brazil, AstroPay’s specialised team started working to integrate it into our payment solutions, making sure it was instantly available to our users.

AstroPay has operated in Brazil since 2009, having acquired a great deal of experience in the country. Our dedicated local teams have gained insights and deep know-how of the population which make it possible for us to offer a solution that is well-positioned and well-received among users in the market.

The variety of payment methods to be offered by a company depends on where in the world customers are located, therefore having a clear profile of a country’s payment landscape and the access that the population has to payment options is key to ensuring the success of a business.

Due to the pandemic and the ever-growing popularity of e-commerce across the world, countries in Latin America have had to innovate and bring in alternative payment methods to include consumers without access to a debit or credit card. Brazil has developed its own solution and other countries in the region are walking a similar path, conducted either by government policies or in some cases by financial institutions such as fintech.

Mikael Lijtenstein, AstroPay

Mikael Lijtenstein is the CEO of AstroPay, a pioneering payment solution for consumers making online purchases on international sites. Before becoming CEO in November 2019, he was AstroPay’s chief operating officer, responsible for sales and operations, product development and innovation across multiple markets including Latin America, Asia, Africa and Europe. Lijtenstein has considerable technical expertise and experience in providing cross-border payments and connecting global merchants to emerging markets.

AstroPay | Brazil | Latin America | Payments | Technology