To grow your business, you need to know what your customers want, and not just in terms of your products and their features. You also have to know what kind of customer experience they’re hoping for, and that includes payment options. Different audiences have different payment preferences, especially when you start selling in international markets.
Outside of the US, merchants may find that credit card payments are far from the standard, especially in burgeoning markets like Latin America. What payment methods should merchants be considering in order to win over Latin American consumers?
E-commerce is on the rise in Latin American (often shortened as LATAM) markets, projected to reach a volume of more than $700 billion by 2025. This market consists of more than twenty different countries, with the majority of e-commerce activity occurring in Brazil, Mexico, Colombia, Argentina, Chile, and Peru. North American merchants are right to see their neighbors to the south as potential customers, but understanding how the LATAM market works and how its consumers pay for their purchases is crucial.
US consumers may have been raised on plastic, but credit cards don’t have nearly the same market penetration in other countries, especially in the global south. Alternative payment methods have helped to fuel the growth in e-commerce: digital wallets, fund transfer apps, and voucher systems.
To help merchants better understand how to make their products more accessible to LATAM consumers, we’ll break down some of the most important payment methods you should know about.
Widely-used, versatile, and easy to accept, digital wallet acceptance is one of the easier ways to expand your international customer base.
- Apple Pay should need no introduction here, but it’s worth mentioning that it is supported in Argentina, Brazil, Colombia, Costa Rica, Mexico, and Peru.
- Google Pay can be used in Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Uruguay.
- Mercado Pago, based out of Argentina, is a digital wallet that is widely used in several LATAM countries. Consumers can load up the wallet with money from a variety of funding sources and use it to make electronic payments on websites, over social media, or via QR codes.
- Samsung Pay is accepted in Brazil and Mexico.
Fund Transfer Apps
Apps that transfer funds from one bank account to another are popular in Latin America, and there are a number of platforms local to certain regions.
- Pagos Seguros en Línea is a Colombian payment platform that runs on ACH rails. The app (abbreviated as PSE) connects to the customer’s online bank and allows them to make payments without the use of a card.
- PayPal works in several Latin American countries, including Argentina, Brazil, Colombia, and Mexico.
- Pix is an ACH payment platform provided by the Brazilian Central Bank. It has started overtaking cash payments and may soon make noticeable dents in card usage.
- SINPE Móvil is the Central Bank of Costa Rica’s ACH platform, with a transaction volume that already rivals debit and credit card spending in that country.
- SPEI, developed by the Bank of Mexico, allows customers to make instantaneous fund transfers and is accepted as a retail payment method. SPEI payments generate invoices that can be paid through online banking.
Vouchers and Other Methods
Many consumers in Latin America do not have traditional bank accounts, and voucher systems are a widespread and safe method of paying for bills and online purchases. One benefit for merchants is that these systems do not allow chargebacks.
Customer can select a voucher as their payment method when they shop, which generates an invoice that they can pay in cash at participating locations.
- Boleto Bancário is one of the most popular payment methods in Brazil. It’s a cash-based voucher that can be used to make payments in person or online.
- OXXO was developed by a convenience store chain and is the number one voucher payment system in Mexico.
- PagoFacil is an Argentinian payment platform that uses vouchers.
- RapiPago is another voucher voucher-based platform in Argentina.
- Sencillito is Chile’s preferred payment voucher platform.
Somewhere between digital wallets and fund transfer apps are platforms allow customers to make payments through a variety of funding sources, including bank debit, prepaid cards, or cash vouchers.
- SafetyPay serves as a payment processor for Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Mexico, Panama, Peru, Argentina, Paraguay, and Uruguay. It offers various electronic payment options for banked and unbanked customers.
- ServiPag is a billing portal used by millions of consumers in Chile. It supports 21 different payment methods.
Installment payment plans, such as Buy Now Pay Later, also see a lot of use in Latin America. It’s also not uncommon to see Cash on Delivery still in use for e-commerce payments, especially in Peru.
We can’t forget cryptocurrency, either. While the looming possibility of regulation leaves much uncertainty about the future of crypto as a method for day-to-day payments, economic instability and a lack of traditional banking access has helped increase crypto adoption in Latin America. El Salvador has even declared Bitcoin to be a valid form of legal tender.
Is Payment Fraud a Problem in LATAM Markets?
In a word: yes. This is hardly unusual, as fraudsters attack indiscriminately, but emerging markets tend to be more vulnerable, as they haven’t had as much time, experience, and investment to build robust defenses. As many as 1 out of 5 new bank accounts opened in Latin America may be fraudulent.
Digital identity verification is key to preventing fraud attacks that utilize compromised or fake accounts.
The good news for merchants is that fraud that takes place over alternative payment systems cannot result in typical credit card chargebacks, but these payment methods may have their own dispute mechanisms that can cause headaches for merchants.
Merchants are always free to develop their own payment acceptance strategy, but one way to ease yourself into the LATAM market—without having to become an overnight expert in dozens of different payment systems—is to look for a payment processor that specializes in serving this region.
Making the leap from being a strictly domestic merchant to an international one can be challenging, particularly when new and unfamiliar payment systems are added to the mix. Even if you’re going through a full-service international payment processor, it’s a good idea to study how these payment methods work, as it gives you a better understanding of your customers’ expectations and experiences.