2018, e-commerce in Latin America totaled $109 billion —this includes all facets of card-not-present transactions spanning Mexico, Central America, South America and the Caribbean, and including retail, travel and digital goods, domestic and cross-border e-commerce, and all payment methods. Growing at 20% annually, this $109 will reach $187 bn by 2021 (see Figure 1).
This global view of e-commerce enables merchants to truly gauge the appeal of Latin America’s ever-growing digital environment. What’s more—cross-border e-commerce is growing more than double that of domestic e-commerce, at 42% annually through 2021. Attracted to international brands by price, variety, and security offered in the online shopping experience, Latin Americans are increasingly looking outside their region for myriad goods and services.
However, not all e-commerce is treated equally, and barriers exist that limit merchants’ ability to sell into Latin America, especially if they do not process their transactions locally. Because of the diversity of payment methods in each local market and the nuances in customer behavior and preferences, having a local payment strategy is crucial to accessing 100% of the addressable market.
Payment barriers limit cross-border commerce; local payment methods represent 68% of online spend.
Structurally, Latin America differs from other world regions with respect to payment methods. On the whole, internationally-enabled credit cards make up only 32% of total e-commerce spend, meaning the bulk of the market represents locally-offered payment methods (see Figure 2).
Thus, to truly penetrate Latin American markets and take advantage of 20% annual growth, merchants must be connected to local card acquirers and alternative payment methods.
The main considerations when developing such a strategy can be boiled down to three:
1. Credit card ownership is limited and not all cards can be used online
The World Bank reports that on average, only 19% of adults in Latin America own a credit card. Additionally, banks often apply restrictions to credit card use. In several markets, including Brazil, Argentina and Chile, around 70% of credit cards are not enabled for international use, meaning that cardholders cannot shop online at merchants outside their home country. This limits merchants’ ability to sell to Latin American cardholders.
Debit card penetration fares better in the region (42%) and is today the fastest-growing payment method within e-commerce. This is because in the past, most banks restricted debit cards for use in e-commerce, issuing them without a CVV code. Banks are now lifting this restriction, unlocking debit card usage for e-commerce, but still only a minority of debit cards in Latin America can be used internationally.
Finally, for merchants processing credit card transactions internationally, authorization rates rarely exceed 35% on average. This is because Latin American issuers often decline international transactions even if funds are available, for lack of sufficient data on the merchant and international acquirer/processor. Merchants who process cards through a local acquirer experience much improved rates, normally 75%-85%.
2. Cash and other alternative payment methods make up 22% of total e-commerce spend
Despite these restrictions on online card usage, there are 159 million online shoppers in the region, equaling 35% of the adult population; therefore, around 15% of online shoppers depend on non-card payment methods to buy online. These may include cash vouchers, such as Brazil’s famed boleto bancário and Mexico’s Oxxo payment network. In such instances, customers print out (or receive on their mobile device) a system-generated voucher, which they take to an affiliated bank or convenience store to pay in cash.
Although seemingly inconvenient, this method of payment is the best option for e-shoppers who do not have a credit card—which can include the affluent—are afraid of using their credit card online, or who simply prefer using cash.
Despite the advancing digital revolution in Latin America, cash is still deeply engrained in consumers’ everyday lives, accounting for an estimated 80% of brick-and-mortar retail purchases the region. Digital platforms that operate in the physical world, such as Uber, have experienced great success accepting cash; in markets like Mexico and Peru, it represents about 50% of all Uber payments. Food delivery platforms experience something similar. Anecdotal evidence tells us that delivery platforms like for Glovo and PedidosYa, up to 70% of orders are paid for in cash.
Shoppers’ preference for alternative payment methods need not be a hurdle for international merchants, for the truth of the matter is, many Latin Americans prefer international sites to domestic ones, because of the price and product variety they offer. Merchants can leverage these preferences by connecting to local cash payment methods and ACH networks. Doing so expands merchants’ addressable market by 33%.
3. The payment method used depends greatly on the ticket amount
In daily life in Latin America, the credit card is not typically seen as a payment method; it is viewed as a tool to access financing. Cash and debit cards are used for most day-to-day purchases; credit is reserved for high ticket items that may need to be financed, especially if special promotions or no-interest financing deals are available. Interest-free installments are exceedingly popular in markets like Brazil, Argentina and Mexico, where banks work out special deals with merchants to offer financing to customers at the point of sale.
In Brazil in 2018, 58% of retail e-commerce purchases were made using at least two installments (and up to 12)[.
E-commerce is no exception, and merchants who are connected to local card acquirers can offer installments to their customers. For low-ticket merchants, especially those whose products appeal to young people—online gaming, entertainment, mobility, etc.—debit card acceptance is becoming increasingly important.
 AMI analysis based on local public domain sources and in-depth interviews with industry players.
 Defined as purchase intent at a merchant located physically and legally outside the buyer’s home country
 Americas Market Intelligence, 2019. “Latin America is losing the war on cash.” https://americasmi.com/insights/latin-america-is-losing-the-war-on-cash/
 Ebit, 2019: Webshoppers 39th Edition.
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