Local Payments in Latin America:

A Guide to Increasing Conversion

Local Payments in Latin America: A Guide to Increasing Conversion

Contents

1 Introduction

2 LATAM facts & figures

3 Cash-based payment methods driving e-commerce inclusion

4 OXXO in Mexico

5 Boleto Bancário in Brazil

6 How paying in installments became the norm in LATAM

7 The importance of local cards

8 The difference between local and international cards

9 The barriers to doing business in LATAM

10 PPRO powers doing business across borders

Local Payments in Latin America: A Guide to Increasing Conversion

Introduction

A young consumer base and rapidly growing

middle class – combined with the highest
internet penetration globally – makes
Latin America one of the most attractive

“
e-commerce regions for businesses who
want to tap into new markets.
Latin America is one
But the payments preferences of each country in of the most attractive
Latin America vary widely from country to e-commerce regions for
businesses who want to

”
country, and each market has its own complex
local regulatory and tax requirements.
tap into new markets.
These factors and more make increasing
conversion in the region incredibly difficult.

In this report, we’re breaking down the

e-commerce culture in Latin America, revealing
sharp insights into the payment behavior of
certain countries, expert knowledge of the
preferred local payment methods in the region,
and tips for businesses who want to expand
across borders.

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Local Payments in Latin America: A Guide to Increasing Conversion

LATAM
facts & figures
LATAM’s e-commerce is experiencing unprecedented growth.

In 2019, 155.5 million people in the region purchased goods and services online, according to Statista.
That's a dramatic increase from 126.8 million in 2016.

55%

74%
Region World
Banked
Population 484m 7.6bn population
Population (15+) 370.5m 5.6bn
GDP 4.5tr 85.8tr

World
GDP per capita 9.342 11.299
20%
B2C e-commerce 79.4bn 3.4tr
21%
B2C e-commerce growth 27% 18%
Credit card
Online population 322.6m 4.5bn penetration

Region
Smartphone penetration 65% 58%
Mobile e-commerce 38% 50%
Average online spend 517 2.594 67%

E-commerce % of total retail 3% 16% 60%

Internet
penetration
Currencies in this report are always depicted in $USD

2% 1%

1%
11%
12%
Card Visa

Cash Mastercard
14% Payment Card
50%
method Bank transfer scheme AMEX
53%
breakdown breakdown
E-wallet 37% Local schemes

19% Other Other

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Local Payments in Latin America: A Guide to Increasing Conversion

Cash-based payment
methods driving
e-commerce inclusion
Brands who want to expand business in Latin
America, or anywhere in the world for that
matter, need to take into account the way the
regions’ payment infrastructure is built.
They also need to note the specific payment
preferences of the region’s consumers.

Many consumers in LATAM are either underbanked

or unbanked, which is reflected in the payment

“
breakdown of the region showing up to 26% of
e-commerce payments made with cash.
Cash vouchers are the
So, how do customers pay in cash for online definition of innovation,
purchases? Payment methods like Boleto
adaptation and helping
Bancário (Brazil), OXXO (Mexico), or Rapipago
bridge gaps in global

”
(Argentina) enable LATAM consumers to use
cash for e-commerce purchases. e-commerce.

The consumer experience

VALUE
STORE
$1234.56

OXXO PAID

1 2 3 4
At online checkout, the The consumer receives The consumer takes The merchant receives
consumer chooses, for an instant voucher the voucher to an confirmation of payment,
example, OXXO (MX) online, with a specific OXXO store to make then ships the goods
payment reference payment or credits an account
and barcode

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Local Payments in Latin America: A Guide to Increasing Conversion

OXXO
in Mexico
Cash-based payment method OXXO is one Overview
of Mexico’s favorite ways to pay online. Markets Mexico
OXXO is a chain of convenience stores Payment flows Cash based
from Mexico, with over 17,000 stores across Recurring payments No
Latin America. One-click payments No

Over 60% of Mexicans don’t have bank accounts, Currency

and just 10% have credit cards. But Mexico also Processing MXN
has an internet penetration of 66% and Settlement MXN
consumers there spent 9.2 billion US dollars Consumer MXN
on cross-border e-commerce last year.

“
Transaction Info
By accepting OXXO,
Maximum amount MXN 10,000

Timeout 3 days
merchants can boost
conversion in the market Features

”
much more easily. Refunds Yes

Partial refunds Yes

Multiple partial refunds Yes

Risks
Payment guarantee No

Chargeback risk No

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Local Payments in Latin America: A Guide to Increasing Conversion

Boleto Bancário
in Brazil
Boleto Bancário is ubiquitous in Brazil – Overview
where only 27% of its 210-million-person Markets Brazil
population hold credit cards – Payment flows Cash based
generating 50 million transactions per month. Recurring payments No

One-click payments No
It’s a cash-based payment method that is
especially popular for high-end transactions, Currency
as many consumers do not feel secure providing Processing BRL
credit card details online. Settlement BRL

Consumer BRL

Benefits of Boleto Transaction Info

Bancário for PSPs Minimum amount EUR 0.01

Maximum amount None (bank can reject)

Low fraud risk
Features
Payments not subject Refunds Yes
to chargebacks Partial Refunds Yes

Multiple partial refunds Yes

Good conversion rates
of up to 70% Risks
Payment guarantee No

Chargeback risk No

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Local Payments in Latin America: A Guide to Increasing Conversion

How paying in installments

became the norm in LATAM
High inflation rates, devalued currencies, and The mindset of paying in installments is still so
consolidation of the banking industry in the ingrained in the payment culture of LATAM, that
1970s triggered small credit limits and even consumers who can afford big-ticket
restrictions on international purchases. purchases in a single payment often opt to pay in
installments on a card.
The restricted access to credit together with
high unemployment rates created another And installments aren’t limited to big bills, either.
particularity in the LATAM market: Examples of installments can range from your
a huge popularity for installments. standard installment to extreme cases of
48-month credit installments in Chile for
Consumers couldn’t afford to pay for expensive common goods like a week’s worth of groceries.

“
goods all at once or didn’t want to commit to a
large debt once they couldn’t rely on a steady
income. The mindset of paying
in installments is ingrained
in the payment culture

”
Consumer credit attracted one of the highest
interest rates in the world and so retailers started
offering installment payments to shoppers.
of LATAM.

This was later adopted by the banks and

incorporated as a key feature on local cards.

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Local Payments in Latin America: A Guide to Increasing Conversion

The importance
of local cards
Local credit cards are a commonly used In the early 2010s, three of the biggest issuers –
payment method in Latin American Banco do Brasil, Bradesco and Caixa Economica
e-commerce. – created a joint venture of a new local card
scheme (Elo), which has since taken a significant
The unsteady economic climate of LATAM’s share of all newly issued cards in the region.
modern history triggered high interest and fraud
rates, which caused local banks to issue cards In addition to Elo, Hipercard in Brazil, Naranja in
with small credit limits and bigger restrictions – Argentina, and a few local schemes in Chile
such as disabling international purchases. have been growing steadily in recent years.

“
All this drove down authorization rates for foreign
currency expenditures. Soon, as the vast majority Local credit cards
of the transactions were domestic, banks
realized there was no need to keep paying
dominate the card market
higher fees to international card schemes in LATAM; merchants who
for every transaction. accept only international
cards exclude the majority

”
That model has persisted. Brazil, for example,
currently only has 30% of cards enabled for
of consumers.
international purchases, and those are usually
high-end cards with elevated credit limits and
authorization rates.

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Local Payments in Latin America: A Guide to Increasing Conversion

The difference between local

and international cards
Local cards, even those issued by Visa and
Mastercard, may seem like international credit
cards, yet these cards are restricted to local

“
purchases and cannot be used cross border.

There are a few additional differences as well:

Retailers who don’t
authorization rates for local cards are higher,
only high-limit international cards can process in
accept local cards in
LATAM risk missing out on

”
the local currency, and – of course – local cards
are popular due to much lower fees than a majority of the market.
international cards.

Retailers who wish to sell goods and services to

LATAM consumers need to offer access to these
specific local card schemes, or risk missing out
on a majority of the LATAM market.

Popular card schemes

in LATAM
Brazil Mexico Colombia Argentina Chile Peru

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Local Payments in Latin America: A Guide to Increasing Conversion

The barriers to doing

business in LATAM
It’s clear: offering the preferred payment Further, in Latin America, merchants must be
method is essential to converting customers in domiciled in order to reach the market’s
LATAM. But the diversity of each country’s consumers. This means establishing entities in
market makes this easier said than done. the countries they are looking to offer their
products and services, and meeting each
Many merchants are not aware of the nuances of country’s unique rules, regulations and technical
the region and barriers to capitalizing on this nuances.
booming market. Each country in Latin America
has different cultural, regulatory and technical These factors make entry into this region difficult
factors that influence the success of a merchant for merchants, but not impossible.

“
expanding into LATAM.

For example, in the US or EU, it is a simple

Each country in Latin
process to connect to a card acquirer, while
improving in Brazil, this process is still fairly slow
America has different
and unaccommodating for foreign merchants. cultural, regulatory and
technical factors that
influence the success of
a merchant expanding

”
into LATAM.

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Local Payments in Latin America: A Guide to Increasing Conversion

PPRO powers doing business

across borders

“
In addition to providing the technology and
PPRO enables you to
services that makes it possible to accept local
payment methods – including locally issued
increase conversion rates
in LATAM, essentially, with

”
cards – PPRO offers a complete, compliant,
and tax-efficient solution for helping payment the push of a button.
service providers and merchants with their
expansion into LATAM.

Eliminate all the hassles inherent to setting

up a local operation, such as:

Setting up a local entity

Ensuring compliance with the complex regulatory and tax

requirements in each country

Assembling teams with local market knowledge and local

payments expertise

Integrating with local payment methods and managing

technical documentation

Ensuring better authorization rate by processing transactions

in the local currency, directly with local acquirers

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Local Payments in Latin America: A Guide to Increasing Conversion

Increase your local payment

method offering in LATAM
Email us at:
contact@ppro.com
to speak to someone about adding popular
LATAM payment methods to your package.

Local Payments.
Worldwide.
PPRO is the world’s leading local payments
platform-as-a-service, removing the
complexity of domestic and cross-border
payments for top-tier financial institutions,
payment service providers, and their
merchants.

PPRO provides partners with the ability to accept

locally preferred payment methods like
e-wallets, bank transfers, cash, and local cards
in more than 175 countries across the globe.
Through one contract and one API.

PPRO’s powerful platform does it all –

processing, collecting, reconciling, reporting,
settling funds, and more – and we’ve got market
experts in every region so that partners can
turbocharge their speed-to-market and increase
conversion in every corner of the world.

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