Growing your business in the Latin American market

By Marius Costin, Head of EMEA High-Velocity Merchants and US Sales at PayU

Marius Costin, Head of EMEA High-Velocity Merchants and US Sales at PayU

Latin America’s e-commerce market has seen tremendous growth since 2019. The move to digital has enabled businesses not only to survive during times of economic volatility brought about by the COVID-19 pandemic, but also build new capabilities and optimise operations. As online services became more reliable, the region saw a significant increase in consumers and merchants alike becoming reliant on digital solutions. As a result of this, businesses have been pushed even harder to evaluate and adapt their digital payments strategy to meet growing demands for an optimised shopping experience.

In the face of mobility restrictions, e-commerce has been crucial for merchants to be able to recover and ensure business continuity. In fact, PayU data revealed that between January and August 2021, we recorded sales worth $5 billion across the region – a 70% increase over the same time the previous year.

The region’s shift toward e-commerce has been aided by government initiatives, as well as the popularity of shopping days such as Black Friday and Cyber Monday. What’s more, the convenience of online shopping has acted as a catalyst for a shift in customer behaviour and payment preferences. As we begin to emerge from the pandemic, merchants must take on an agile approach, and continue to adapt their business model to fit with the payments and consumer landscape of the future.

How have Latin American governments facilitated e-commerce growth?

Evidence of Latin American e-commerce growth can be seen during shopping holidays like Cyber Monday, Black Friday, Singles Day, and El Buen Fin (a dedicated day for commerce in Mexico). In 2021, PayU processed almost 27 million transactions worth $486 million in Peru alone, thanks to the popularity of these events.

Governments around Latin America have also made investments in establishing more inclusive settings to help e-commerce develop. This can be observed in places such as Colombia, where the government implemented three VAT-free days last year in June, July, and November. These initiatives were centred around online sales in acknowledgment of the tremendous e-commerce potential to drive economic growth. Over this period, PayU processed roughly $184 million in transactions within the country. This can be attributed to the growing demand for online services among consumers who wanted a fast, safe and convenient shopping experience.

Big retail brands such as Alibaba, Mercado Libre and Amazon are already recognising the growth opportunities that Latin America offers and have reaped the benefits of online shopping. Due to advancements in technology and the current industry trend of digital transformation, merchants worldwide now have the opportunity to compete with these household brands as they offer businesses the ability to accept and offer worldwide cross-border payments via a single API integration.

Emerging e-commerce leaders who can use these technologies will find tremendous opportunities in Latin America. With venture capital investments in areas such as financial technology and online retail topping $15 billion last year, coupled with consumers’ growing appetite for online shopping, Latin America will continue to see dramatic growth in the years to come.

How can merchants meet the demand of consumers in the region?

The Latin American market has become one of the most enticing in the world as a result of increased internet penetration and continued initiatives to promote digital and financial inclusion. Experts predict that 64% of the population will have access to mobile services by 2025 – this will be a crucial driver for ongoing innovation in financial services.

Additionally, as the Latin American consumer pool expands, retailers have the responsibility to further digitise their services while also familiarising themselves with the nuances of buying habits and payment preferences in each market. The ability to match payment preferences and external factors for each customer is a key component of a successful payments strategy. When expanding overseas, it is essential that merchants have detailed knowledge on the popular local payment methods and ensure that they are being offered during checkout at each of their target markets.

Mexico is a great example of how merchants can achieve this. As it stands, debit cards are the most popular payment method accounting for more than half of all purchases, according to PayU transactions. 60% of these cards are capable of international transactions, broadening their opportunities for cross-border transactions. Merchants looking to expand in Mexico would do well in ensuring that their debit card offerings enable overseas transactions to meet its consumer demands.

PSE (a popular alternative payment option) on the other hand, grabbed the lead in countries like Colombia, accounting for 66% of sales in 2021. From our analysis of these markets, we found that the decrease in credit card usage was caused by the lockdown restrictions in 2020 – this allowed PSE to earn an 8% market share. Since then, sales have increased by 69% to $2.66 billion compared to 2019 levels.

Expanding across borders

Payment innovation, government legislation, and a shift in consumer behaviour have clearly been key drivers for Latin American e-commerce growth. As we look to the future, it is becoming increasingly critical for businesses to observe and understand market nuances that require trusted local experience while navigating expansion into new overseas markets.

Understanding these market intricacies, however, is far easier said than done. To adapt to the shifting payments landscape, emerging e-commerce leaders need the capabilities that will enable this growth. They require a solid awareness of the local commerce environment, as well as the technology that gives merchants the opportunity to offer popular and unique-to-the-market payment methods.

This is where payment providers can offer unparalleled assistance. Working with the right partner offers merchants the chance to take advantage of the Latin American online consumer landscape. They provide the fintech solutions, localised market expertise and insights, that gives merchants wanting to expand across borders the opportunity to focus on what’s important – growing their business.