Mobile Payments are Important Driver in Latin America’s E-Commerce

Elizabeth Gonzalez, media associate at Americas Society and Council of the Americas talks about how mobile digital payments are expected to make up over a quarter of e-commerce retail sales.

The world is increasingly mobile and increasingly digital. The number of adults age 15 and over that made a digital payment in 2017 was 52 percent worldwide, according to the World Bank, which gathers the most comprehensive data of financial inclusion indicators in its Global Findex report every three years.

Though the share of Latin Americans that made a digital payment stands below the world average at 36 percent, several countries have made significant leaps in recent years and are contributing to one of the fastest growing e-commerce markets in the world.

E-commerce retail sales in Latin America and the Caribbean are expected to reach $53.2 billion this year—a 17.9 percent increase—and a full $14.6 billion (or 27.5 percent) of those sales were made on mobile phones, according to eMarketer. That marks the first time retail sales carried out on mobile phones will account for more than a quarter of the total.

Overall, however, financial access through mobile payment systems is still in a nascent state. But it’s this room for growth that is boosting optimism in Latin America’s prospects, particularly when it comes to e-commerce. In this arena, Latin America ranks as the world’s fourth largest retail market and is growing faster than more saturated markets like the United States and China.

Room for growth

With about 55 percent (or 270 million) of the region’s adult population (age 15 and over) with access to a bank account, closing the region’s financial inclusion gap would bring on even more Latin Americans to the mobile payment sphere. That means the region can gain some 220 million new banked adults and thus potential mobile payment users. While there may not necessarily be a direct correlation between the two, such a link can be witnessed among the region’s most banked countries.

For example, Chile, Venezuela, Brazil, and Costa Rica are Latin America’s most financially inclusive countries, where a majority of adults have bank accounts at typical financial institutions. These are also the very same countries that had the greatest share of their populations making digital payments, each surpassing the 2017 world average of 45 percent.

These don’t include all the countries that have made the biggest leap in recent years. While the share of people that used mobile payments in both Venezuela and Chile grew 17.2 percent and 9.4 percent, respectively, smaller countries like Bolivia, Honduras, and Nicaragua also landed among the top five countries that saw the greatest increases in comparison to the World Bank’s previous 2014 Findex. In Bolivia, 33.1 percent of the population carried out digital payments in 2017, a 12.3 percent jump. Likewise, in Honduras, 30.5 percent of the population made mobile payments, an 11.8 percent increase, and Nicaragua made a 9.6 percent leap, accounting for 17.9 percent of the population.

With widespread smartphone use and network access, no doubt Latin Americans are picking up on the advantages, including the convenience and cost-effectiveness, of using their phone to make financial transactions. For one, it reduces expenses related to time and travel as traffic congestion worsens, while also reducing the risks associated with carrying cash. Additionally, mobile payment systems provide a degree of transparency unmatched by typical financial institutions, an important element for Latin Americans highly distrustful of the old guard and set on rooting out corruption.

Plus, more Latin Americans than ever have smartphones, and with the second fastest growth rate in the world after Sub-Saharan Africa, 63 percent of the region’s population is expected to have access to the internet on their phones by 2020. At that rate, there may be more Latin Americans with smartphones than with traditional bank accounts, an opportunity to leapfrog outdated services and industries and expand financial inclusion by way of technology. For example, in Brazil—Latin America’s largest smartphone market—57 percent of respondents in a 2017 Ernst & Young survey said they preferred to “manage as many aspects of their lives as possible through digital channels.”

No doubt, everyday financial decisions like shopping falls among the items that can be easily checked off the to-do list with the electronic device readily at hand. Measures taken to strengthen the regulatory frameworks of digital payment systems in the South American country are another great indicator of the sector’s growth and stability.

The Brazilian government has responded to the trend with a series of regulatory changes since 2013, encouraging competition in the mobile payment industry, while protecting merchants and consumers. As other governments follow suit, and the region continues to expand financial access, the future for mobile transactions, and thus, ecommerce is bright.


World Bank Findex 2017 report
World Bank Database
E-commerce in Latin America
Brazil regulations
EY Study