Digital Payments in Latin America
According to Inter-American Development Bank (IBD), digital trade has never been more popular in Latin America and the Caribbean than today. Between the first and second quarters of 2020, e-commerce website traffic from five of the major markets in the region increased by over 150%. Digital payments are critical to enabling this transformation at both domestic and cross-border levels. But many challenges still exist that preclude the broadening of digital payment use throughout the region – lack of access, harmonization, and affordable payment solutions-.
Main conclusions of the analysis:
- With the onset of the global COVID-19 pandemic, the value of digital payments for individuals and businesses became even more apparent. In Latin America and the Caribbean (LAC) digital payments emerged as the preferred method of purchase: e-commerce grew 18% in 2020.
- Digital payments play an important role in financial inclusion. Research shows that when people have access to digital payments, these act as a gateway to other financial services, like credit and insurance; and people are more likely to use those services to save money, start or expand businesses, manage risk, and better sustain financial shocks.
- Micro-, small, and medium- sized enterprises (MSMEs) greatly benefit from the use of digital payments as it allows them to attract more customers and bring their business online, creating opportunities to sell beyond their immediate geography. Most importantly, digital payments level the playing field between large and small merchants.
- The following key principles can help overcome the barriers to digital payment growth in Latin America:
- Build good regulatory practices to reduce market barriers and promote innovation.
- Encourage public-private sector collaboration.
- Explore digital trade agreements to secure safe cross-border digital payments.
- Facilitate new technologies and innovation.