Only 3.8% of the Brazilian cities have a developed payments ecosystem, shows an unprecedented study by Visa
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Is cash king? In Latin America, cash is in third place when it comes to payments in physical stores, says Visa

In December alone, 37 million transactions were made via contactless payments in Brazil, while 20% of Latin American consumers already use digital wallets in physical stores and 25% are willing to try cryptocurrencies

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If the COVID-19 pandemic has driven 52 million Latin American consumers to buy online for the first time, digital payments, either, have not been far behind. This is what the third round of the Visa COVID-19 Consumer Sentiment, a study on consumer preferences during the pandemic in Latin America and the Caribbean, points out. The qualitative study was carried out with 400 participants in Argentina, Brazil, Chile, Colombia, Mexico, Peru and the Dominican Republic, in November 2020.

“Everyone found themselves in a digital environment, so this also led to digital payments. In Latin America, where people always used more cash, the first peak of the trend, which we identified in March, was confirmed until the end of the year: the search for digital payments,” says Roberta Isfer, Visa’s Director of Innovation for Latin America and Caribbean, in an interview with LABS.

Roberta Isfer, Visa’s Director of Innovation for Latin America and Caribbean. Photo: Courtesy/Visa

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According to Isfer, in December of 2020 alone, 37 million transactions were carried out with contactless payments in Brazil. The exec says that, over the past year, the jump in this type of payment, across Latin America, was quite significant. “In the last round [of the survey], 48% of respondents said they used contactless payments in physical stores, in at least one of their last ten purchases. In the first survey, in March, this percentage was 23%.”

The penetration of contactless payments in the region also increased, and in November 2020, it surpassed the 15% mark, an increase of 130% in comparison with November 2019. 

For the executive, these numbers point at a new profile: a consumer who buys anywhere and at any time, especially if contactless payment options are available. “Some trends that emerged in March, at the end of the year we already had more evidence: this is here to stay,” she says, restating the growth of digital payments among Latin Americans.

According to the survey, consumption also followed this growth: 66% of consumers said they had spent the same or more in the last three months. In July 2020, this percentage was 49%. In addition to increased spending, Latin Americans have fancied card instead of cash: 74% of consumers said they use a debit card, while 53% use cash. “In physical store payments, cash is already in third place in Latin America. Credit and debit are ahead,” she points out.

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What also caught the attention, according to Isfer, was the downward trend in cash, while new payments, such as P2P transfers (person-to-person) and digital wallets, continued to rise. “The growth in debit card was also very interesting to observe. In the consumer’s mind, debit replaces cash payments because it comes out automatically. It’s what I have today and what I want to pay today.”

Along with contactless payments, digital wallets have also been attracting consumers in the region, including for payments in physical stores. According to the Visa study, 20% of consumers say they use digital wallets at these points of sale.  

In figures, electronic payments are likely to add up to BRL 2.4 trillion during 2021 in Brazil, according to data from the entity representing the sector, Abecs. “When we compare 2010 and 2020, we went from an industry that generated BRL 498 billion to BRL 2 trillion in 2020. In other words, it is an industry that has grown in double digits per year over a decade. And we see a growth around 18% to 20% only in the period between 2020 and 2021,” compares Pedro Coutinho, Abec’s president.

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But is not only Brazil that shows a fast rise in digital payments. “Even in countries like Argentina, the use of digital wallets has grown. Mexico, a country known for its strong use of cash, is also increasingly used to this type of payment.” For Isfer, what fosters the choice for these payments is the region’s connectivity. “The Latin American population is equipped with a mobile phone and one of the most connected in the world. The universe of smartphones in Mexico is 90% of the population that has a mobile phone – that’s 123 million users. People are equipped, their use of digital wallets is a matter of time and habit.” 

In Uruguay, the second smallest country in South America, the year 2020 marked the first time that electronic payments – such as debit and credit cards, transfers and payments by app – overtook cash and check payments.

The IPET, an index calculated by the Central Bank of Uruguay to compare the amount of electronic payments against traditional ones, went from 50 at the end of 2019 to 61 at the end of 2020. Released by the entity in its Retail Payment System Report last week, the unprecedented result means that out of every 100 Uruguayan pesos paid, 61 pesos were via electronic transactions, while 39 were paid using traditional methods. At the end of 2019, this proportion was balanced: $U 50 came from electronic payments, and the other $U 50 came from traditional payment methods, such as cash and check.

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In the online environment, Visa’s study also points out that interest in e-commerce remains on the rise. Almost half of Latin American consumers said they had purchased online at least once a month, while 71% planned to keep their current online shopping frequency. In addition to the increase in the use of credit and debit cards, digital wallets, once again, stood out: 26% of consumers say they have used this method when shopping online, as they consider them to be the safest way to pay online. 

For Isfer, the pandemic also spurred another trend: the digitization of small businesses. “The consumer says that he has been concerned with the community, on how to help small businesses. This sense of community has become more present, which has led to a strong trend: small businesses finding new ways to be in the digital consumer universe, especially via marketplaces.”

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Cryptocurrencies already attract 25% of Latin Americans

Latinos don’t live on debit cards, digital wallets and contactless payments alone. The demand for new technologies is also growing, and 78% of consumers interviewed by Visa already expect innovations such as purchases on social media, payments via messaging apps and cryptocurrencies.

According to the company’s Director of Innovation, Latin American consumers have been trying out other ways to use platforms such as Instagram, Facebook and WhatsApp, asking for innovations such as completing purchases on these channels without having to migrate to others. “In the third round [of the survey], this request for messaging platforms showed up again: 58% saying ‘yes, I would like to make the payment using the same channel’.”

As for cryptocurrencies, while global use of cryptocurrency is advancing in parallel with increased efforts by lawmakers to regulate and propose a new generation of digital currency in 2021, Visa believes that, globally, this is a trend that could become one of consumers’ favorite methods to pay for their purchases.

“Not necessarily everyone [in Latin America] is using cryptocurrencies, but the mentality that existed a few years ago, which was investment in crypto, today is already different: ‘I would like to make a payment in crypto, in the digital currency’. This is something that will continue on the agenda. The consumer is asking, it is our role as an industry to deliver,” Isfer points out. According to Visa’s study, 25% of Latin Americans already say they are willing to try cryptocurrencies for payments when these become available.

Globally, Visa has 35 cryptoplatforms that have chosen to issue with the acquirer. In Brazil, partnerships with companies such as the digital cryptocurrency account Alter and the digital multi-currency bank Zro Bank have been giving traction to Visa’s operation: both institutions have bitcoin cashback programs for purchases on Visa’s card. Argentine Ripio has been working on a digital wallet model with a Visa debit card to access, in Brazilian reais, the balance that was converted into cryptocurrencies.