What can we expect from e-commerce in Latin America this year?

By Monica Vergara, Country Manager Colombia & Panamá at PayU

2020 will live long in the memory for the way it overhauled how we live, work, learn, play and shop. Anyone who works in or around the e-commerce industry will never forget the whirlwind, especially in markets where the sector was already growing rapidly. Following a year of scaling to meet unprecedented demand it’s important to take a step back and look at what we’ve learnt and how this might inform 2021.

The year that was

Prior to the pandemic, e-commerce in Latin America was growing by 20% year on year, and was on course to reach a value of 187 billion USD by 2021. Due to COVID-19, however, this changed almost overnight.

As governments implemented lockdowns across the world, we witnessed a strong surge in e-commerce. More than 120 million online transactions were processed by PayU across the continent in the first seven months of 2020 alone, with purchases in June up by 68% against 2019 levels. Our data showed that almost every sector benefited from the transition to e-commerce, with transactions in department stores up 295%, delivery services up 233% and home and garden up 138%. Merchants sought to capitalise on this increase in demand, and in Colombia we witnessed nearly 1,500 new merchants sign up for payment solutions in the second half of April alone.

It wasn’t just the closure of shops driving consumers online, however. In order to stimulate spending, the Colombian government created three VAT-free days for consumers in June, July and November. These were a huge success for merchants across the country, and each day we processed more than 81 million transactions, well above our daily average. Most importantly, two of the three days were online only, highlighting the government’s recognition that e-commerce is an integral ally to economic health.

The idea of a “new normal” dominated conversations in 2020, but e-commerce will continue on an upward trajectory in Latin America. A recent survey by UNCTAD, showed more than half of the respondents would shop online more frequently, regardless of the pandemic. As a result, many merchants are turning their attention to the continent, with its fast-growing, and relatively unsaturated markets, presenting perfect opportunities for success.

No matter how the pandemic plays out in 2021 though, it won’t be plain-sailing. Emerging e-commerce leaders in Latin America will need payment technologies that make the shopping experience frictionless and safe if they are to capitalise on the surge in consumer demand. Conquering new markets also requires a deep knowledge of the local commerce ecosystem and consumer preferences, which can be costly and resource-intensive to develop. This is exactly where payment providers can offer unparalleled assistance.

So what should be the top resolutions for merchants in 2021?

The rise of integrated partnerships

For merchants to win lifelong customers from the new legion of online shoppers, they must harness learnings from 2020 to drive innovation and heighten services for consumers. This is where payments partners can provide a golden ticket, developing integrated services for merchants that increase efficiency and cost-effective experiences, providing better experiences for the customer.

The most successful partnerships will be where payments providers not only add support for merchants, but also help to grow their businesses. This is where emerging technologies such as AI and machine learning can disrupt the market, granting merchants the ability to predict consumer behaviour and build solid understandings of their financial situation and preferences. This elevates the experience for the customer to a level beyond what they could achieve in stores.

Put simply, building in integrated services will be business critical for any merchant.

Prioritising peace of mind

Prior to the pandemic, one of the main concerns consumers had around online shopping was the fear of suffering from identity theft and fraud. The hesitancy is likely to have been exacerbated by ongoing economic uncertainty, making consumers more likely to micro-manage their money.

Early into the pandemic, as e-commerce transaction volume grew, card-not-present fraud rose by 78%. This is exactly why a trusted payments provider is imperative, especially one who understands the nuances and behaviours of the local market. As more sensitive customer data is shared with merchants across Latin America, every member of the multifaceted payments ecosystem must ensure that customer data is protected.

Technology will be key here, and to address growing cases of fraud, tokenization will become an increasingly common way to protect payment details. The software allows service providers to replace sensitive account information with untraceable tokens. These tokens are controlled by a relationship which means, for example, a recurring bill of a certain amount can only be routed to the selected service provider. Tokenization will play a huge role in shaping the payments and security landscape in 2021.

As I look ahead to the coming months, I can’t see the pace of disruption slowing across Latin America. Consumer habits have changed for the long term and governments are truly incentivising e-commerce for both customers and merchants. No matter what 2021 brings, I truly think that the payments industry is ready to rise to the challenge.