Business
The untapped potential of Chile, Colombia and Peru
Global Banking & Finance Review®
Company
By David Lambert, CEO of Transact365
The rise of digital payment systems in Latin America (LATAM) is typically dominated by discussions on the region’s largest markets. Brazil and Mexico feature heavily in this discourse, a reflection of the economy’s respective sizes and untapped consumer potential. Yet this is only part of a bigger payments transformation taking place in the region.
During the pandemic, consumers once dependent on cash for daily transactions were compelled to online purchases. In LATAM, this instigated a spike in mobile adoption and a subsequent rise in e-commerce in fast-growing emerging markets.
Brazil and Mexico are regarded as the largest LATAM markets for e-commerce. Looking beyond these established markets, there are other countries whose e-commerce volumes are growing at a much faster rate.
Of these markets, Chile, Colombia and Peru are fast becoming some of the most exciting countries in LATAM for e-commerce.
In Chile, the shift to online payments was particularly profound. The introduction of lockdown measures meant that the temporary closing down of bricks and mortar shops meant consumers had to rely on online payments for the daily purchases of goods and services. With lockdown measures lifted, the temporary switch to online payments has become permanent.
A study undertaken by Mastercard in 2021, showed that two-thirds of Chilean consumers have embraced a new form of payment in the past year that they would have otherwise not used. In fact, a similar percentage (62%) said they would now not shop at a merchant that did not offer some form of digital payment.
As a result, nearly $12 billion of B2C e-commerce sales took place in 2021 in Chile, which is nearly double the figure recorded in 2019.
Colombia is another developing market with a burgeoning e-commerce sector. Similar to the experience witnessed in Chile, the COVID-19 pandemic and subsequent adoption of digital banking has led to a spike in e-commerce activities. Revenue is projected to reach over 10 billion by the close of 2022. Importantly, the majority of this revenue is generated in off-shore locations, showing the importance of international commerce in meeting local demand for goods and services.
Should current activities continue at the same rate, the number of active e-commerce users is expected to reach over 27 million by 2025, or approximately half of the Colombian population.
The Colombian government is actively incentivising consumer and business adoption of online payments. These include initiatives such as tax-free shopping holidays, with tax-free discounts on offer only for online purchases.
Similar to the experiences of Colombia and Chile, Peru’s e-commerce market is on the rise. Prior to the pandemic, smart penetration in the country was low, particularly in rural areas outside of the capital Lima. Now, the number of mobile phone connections in the country is equivalent to 109% of the total population.
Mobile penetration has spurred the country’s adoption of e-commerce shopping. Between 2020 and 2025, the e-commerce market is projected to reach $28.2 billion – a 42% rise. While this is positive news, there are still factors hindering the nationwide adoption of e-commerce avenues as a preferred shopping method, such as poor internet connectivity and reliability. However, new initiatives are spurring investment into internet infrastructure, ensuring more parts of the country have access.
LATAM is a dynamic region offering exciting investment opportunities in established and emerging markets. The payments industry in particular has sparked a digital transformation across the region, leading to the rapid adoption of e-commerce by consumers. Importantly, consumers in LATAM are seeking digital and subscription services offered by merchants offshore.
Through payment service providers like Transact365, which already has a presence in Chile, Colombia and Peru, alongside a host of other LATAM markets, merchants can offer local payments solutions. Doing so ensures merchants can access previously untapped markets and develop exciting scale-up plans in high growth e-commerce countries.
E-commerce refers to the buying and selling of goods and services over the internet, allowing consumers to shop online from anywhere in the world.
Digital payments are transactions that occur electronically, allowing consumers to pay for goods and services using online platforms or mobile applications.
Mobile adoption refers to the increasing use of mobile devices, such as smartphones and tablets, for various activities, including online shopping and banking.
B2C e-commerce, or business-to-consumer e-commerce, involves transactions where businesses sell products or services directly to consumers through online platforms.
Emerging markets are countries with developing economies that are experiencing rapid growth and industrialization, often presenting new opportunities for investment.
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