New Contactless Payment Options
For years, contactless payments have been on the rise, particularly with the outbreak of the pandemic and due to greater reliance on mobile devices. Analysts believe that Latin America will soon overtake the United States as the region with the most mobile wallet users. Credit and debit cards appeared to be totally supplanted by mobile wallets by 2020. In such a scenario, banks would lose a significant portion of their market share in retail transactions. However, new contactless card technologies, particularly near field communication (NFC) technology, arose to meet the challenge.
NFC allows smart gadgets to communicate wirelessly when they are touched or brought close together. NFC-enabled cards can be used to confirm a payment simply by holding them near a mobile phone, making it simple and painless for most sellers to accept bank payments via NFC at the moment of purchase.
Sellers in Latin America that want to stand out in 2023 will need to include contactless payments into their business strategies, whether through NFC or another technology.
E-Commerce payment methods in Brazil, Chile, Colombia and Mexico. (Source: AMI, Americas Market Intelligence)
Merchant Fees Are Falling
In any business, fierce competition tends to bring down rates, and this is certainly true in the world of Latin American payment service providers (PSPs). Because transaction rates are quickly dropping, several Latin American merchants can now take digital payments for free or with extremely low fees. This trend is also lowering the cost of goods and services for consumers, allowing the payments market to prosper like never before.
Additional P2P Payment Options
Over 50% of all work in most Latin American countries is still “informal”. Prior to the pandemic, this informal job would typically entail the exchange of money. However, with the rise of digital payments, many of these transactions are now conducted via peer-to-peer (P2P) transfers.
As a result, P2P apps are growing more popular in Latin America as a fast payment option. Pix in Brazil, Yape in Peru, and MACH in Chile are some local examples. These apps let two people to send and receive money directly to each other in seconds, rather than the minutes or days required for a regular bank transaction.
Interoperability Has Improved.
Despite all of the payment trends and possibilities, there is one key hurdle to overcome: interoperability. Assume a merchant provides four alternative digital wallet purchase options, and a buyer has a fifth option in mind. The buyer must either register a new account or cancel the purchase.
Certain PSPs are aiming to facilitate payments to and from a broader range of platforms and payment providers. For example, banks, fintech firms, peer-to-peer apps, and others. An application programming interface (API), for example, might act as a link between multiple software programs. This allows platforms with diverse architectures to communicate and transmit money.
Businesses can benefit from these new trends and technologies. Here is one of the most effective approaches for sellers and service providers in any business to start adapting and gaining a competitive advantage.
These businesses should provide their clients with more payment options. If you already accept payments via five various ways or mobile wallets, consider adding a couple more. Investigate the most popular solutions in your area and collect data on what your consumers are utilizing so you don’t lose business. Include NFC and other contactless payment options in your list.
Conclusion
In conclusion, the shift to digital payments in Latin America is accelerating and redefining how payments are managed and processed. Contactless payments, lower merchant fees, more P2P payment options, and improved interoperability are all contributing to this trend.
This reform has the potential to boost foreign investment in Latin America by establishing a more effective and streamlined payment system. That will entice more companies to invest in the region. The simplicity and ease of digital payments may also inspire consumers to spend more, contributing to economic growth. However, it is important for businesses to adapt and integrate these new payment options into their strategies to stay competitive in the market.
