Payments Vibrancy in Latin America

Latin America has a culture known for being vibrant. This theme is spreading into its digital payments landscape and the payments community is taking note. While the region still contains a large unbanked or underbanked population, and cash is prevalent in many areas, meaningful digital gains are occurring. There is vibrant opportunity.

According to Worldpay, the eCommerce market in Latin America is projected to reach $256 billion by 2026, nearly double the size it was in 2021. Of that amount, $78 billion is attributed to Brazil and $70 billion is attributed to Mexico. For Q2 2024, Visa’s payments volume in Latin America & the Caribbean rose ~21% over the prior year (Constant USD), the highest of all global regions. Global payment brands like Visa and Mastercard and local payment methods like Pix in Brazil and OXXO in Mexico have highly influenced the area.

As a wide-reaching payments analytics and consulting firm, TSG is also seeing the payments community take a serious interest in Latin America. In collaboration with the Electronic Transactions Association (ETA) we take a further look below.

While each country in the region has unique attributes and opportunities, Brazil stands out as a major part of the region’s digital landscape.

Brazil: Big, Bold, Digital

Brazil should rise to the top when considering a Latin American payments strategy. As the region’s largest economy, population, and territory, the country is big and bold in several ways.

This theme spreads to Brazil’s digital payments landscape. Brazil’s culture is highly receptive to digital payments from various perspectives. During the pandemic, Brazil’s government underwent a major financial inclusion effort to reach unbanked individuals to receive emergency financial aid. State-owned bank Caixa Econômica Federal provided a digital savings account accessible via mobile device. As digital payment methods entered the market, they were welcomed. Examples include Visa, Mastercard, Elo, Boleto, Mercado Pago, Hipercard, PayPal, and, not least of all, Pix.

Pix is a real-time payment service that was introduced in 2020 and supports over three billion monthly transactions. This tool offers use cases for money transfer, tax/bill payments, refunds/social benefits, and merchant acceptance. Pix supports both eCommerce and in-store payments (via QR code) and has 150+ million users in Brazil, about 75% of the population. Pix connects to 700 financial institutions. From August 2023 to August 2024 alone, spending volume on Pix rose 59%.

Payment gateway LaFinteca reported that the Brazilian Association of Credit Card and Services Companies saw 42 billion card transactions in Brazil in 2023, a 13% increase from 2022.

These statistics are just a couple of examples of digital growth in the country.

In addition to the diversity of the region’s payment methods, the payment processing players in Brazil are diverse, with a mix of local and global providers. Beyond traditional financial institutions and merchant acquirers, TSG research shows Brazil has nearly 250 payment facilitators, second only to the U.S. market.

Here are a few tidbits on select players:

• Cielo: Cielo saw ~19% growth in eCommerce payments volume from Q2 2023 to Q2 2024.
• Rede: Known for its vibrant orange payment devices, Rede the merchant acquiring brand of Banco Itaú Unibanco, a major Brazilian financial institution.
• Stone: Acquired Elavon do Brasil in 2016.
• PagBrasil: PagBrasil’s gateway connects to Cielo, Rede and Stone.
• Adyen: Adyen has an acquiring licence in Brazil, giving the company a deeper ability to be involved in the market.
• Mercado Pago: Mercado Pago is both a payment method and a payment processing provider.
• EBANX: One of the early “unicorns” in Brazil, reaching a $1 billion valuation in 2019.

Some notable innovations are in the Brazilian payments market. One example is how Cielo, a player with a significant market share, uses AI to proactively maintain point-of-sale devices with predictive maintenance for connectivity issues and predictive battery replacement.

Mexico: Cash-Heavy, but Moving Digital

Mexico is the second-largest economy in Latin America, and its digital infrastructure is rising. According to the International Trade Administration, internet access, mobile engagement, and eCommerce are seeing upticks. The administration cited figures from the Mexican Federal Institute of Telecommunications that 81% of Mexico’s population are internet users. BBVA Mexico reported that 35 million Mexican adults lack a bank account but have a mobile phone, creating opportunities for financial inclusion through mobile banking. BBVA noted that withdrawal or spending via a mobile device is expected to rise to 23% of total activity in 2030 compared to 16% in 2023. Mexico has also been an early entrant into real-time payments, launching its SPEI system in 2004.

As the infrastructure continues to develop, a challenge to further digital payment adoption is the market’s extensive use of cash, linked to a large unbanked population. High cash use is prevalent in many Latin American markets. Mexico’s government is working towards reducing cash reliance and increasing bank access. The Bank of Mexico (Banxico) introduced Cobro Digital (CoDi) to enable mobile payments via QR code and NFC. This tool currently has ~18 million accounts. Banxico later created Dinero Móvil (DiMo) which allows users to pay with their mobile phone number. This system has ~7 million accounts. The bank has cited that adoption of these digital systems has been slower than anticipated but has been implementing promotional strategies to bolster usage.

Outside of CoDin and DiMo, a few other payment methods in the country include global credit/debit networks like Visa and Mastercard, local card network, Carnet, PayPal, Mercado Pago, and OXXO. OXXO is noteworthy because it allows users to shop online but pay in cash. Users receive a voucher with a code so they can pay cash at a local OXXO convenience store.

Mexico has a mix of bank-owned merchant acquirers and fintech-acquirers. Here are a few:

• E-Global: Owned by BBVA and Citibanamex.
• EVO Payments: Acquired by Global Payments in 2022.
• Prosa: In 2023, Visa entered an agreement to acquire a majority stake in Prosa. Existing shareholders include Banorte, HSBC Mexico, Invex, Santander Mexico, Scotiabank Mexico and Banjército.
• Clip: Clip is a payment facilitator with “unicorn” status at a $2 billion valuation.

Visa anticipates that its investment in Prosa will enable global payments players to be more involved in Mexico while also increasing collaboration between Prosa and the country’s issuers as part of its effort to enhance its technology and develop new services.

Payments player Clip serves hundreds of thousands of merchants and noted that 85% of them previously accepted only cash.

While further change and growth are needed for Mexico to expand digital payment adoption, with ~$1.8 trillion in GDP per the World Bank and close to 1 million fintech companies per Finnovista in 2023, the country is a prominent market experiencing a digital shift.

The Bottom Line

Mastercard stated that people in Latin America continue to be open to testing new payment methods and adopting digital technology, with a high trust in card payments. Accordingly, Mastercard’s purchase volume in Latin America increased 102% from 2018 to 2023, reaching $529 billion. Even in cash-heavy Colombia, a variety of sources cite that Colombian consumers are interested in digital payment products, with contactless cards, digital wallets, QR code payments, digital banking, and even blockchain-based payments, such as Transfiya, in the mix.

The region is getting riper for continued digital growth, and there’s still time to join in.

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