Digital Renaissance in Latin America: A deep dive into the region’s e-commerce industry in 2022
As local economies recover from the pandemic and online shopping becomes a daily habit for more and more Latin American consumers, the region presents huge opportunities for merchants who know how to make the most of the markets of LATAM.
If it was already true that Latin America is a rapidly changing market when it comes to technology, the “new normal” has made it even clearer: post-pandemic, LATAM has greatly accelerated the process of digitization that it traversed, transforming e-commerce and the consumption of digital goods into preferences on a regional scale. Along with it comes payment innovation: from e-wallets to digital payments, Latin American consumers are increasingly mobile-first.
What does this mean for businesses? How permanent are the changes accelerated by the pandemic? What is the role of each local payment method in this context? After all, they range from declining, but still very popular, cash payment methods to disruptive instant payments. And how can foreign traders better understand this market and its opportunities?
Fifty million Latin Americans made purchases online for the very first time in 2020. An additional 51 million did so in 2021, bringing e-commerce penetration to 67% of the population. The e-commerce market in Latin America reached $268 billion in 2021 – and it is expected to reach $646 billion by 2025. This and other proprietary data was shared in BoaCompra by the recently published white paper by PagSeguro The Digital Renaissance in Latin America: A deep dive into trends, opportunities and challenges in the Latin American e-commerce industry, conducted in partnership with Americas Market Intelligence (AMI). In the study, we provide exclusive insights and up-to-date information on this exciting and rapidly growing market.
Focused on LATAM’s six main markets (Brazil, Mexico, Chile, Colombia, Peru and Argentina), the white paper was written based on internal AMI data and public sources, as well as in-depth interviews with cross-border traders. and local actors. of the aforementioned countries across multiple industries, including retail, video and music streaming, gaming, travel, and B2B digital goods providers.
Expertise to boost business in LATAM
Our goal with the study was to share some of the expertise we have gained over our 17 years of providing local payment methods to foreign merchants selling in LATAM. During all these years, we have observed closely how Latin America has become increasingly digitalized, how open customers are to innovative payment and shopping experiences, and how digitalization is an ongoing trend. which goes further every day without stopping.
After all, nowadays Latin America has an average of 77% internet and smartphone penetration, and these users are looking for smooth and agile experiences in the palm of their hand. So much so that mobile shopping, which now accounts for 65% of total online shopping volume, grew even more than desktop shopping in 2021. used a mobile device for their initial purchases. .
M-commerce is also growing due to the fact that Latin America still experiences huge levels of inequality, which makes internet access difficult for a considerable portion of the population. Being able to buy a smartphone and access 4G internet is easier than being able to get a fast Wi-Fi connection: in Colombia, for example, where high-speed internet and Wi-Fi are very limited, e-commerce remains a possibility for the majority of the population: in the country, 70% of the volume of e-commerce comes from mobile devices. While international credit cards are in the minority, local payment methods allow all consumers to shop online.
The impact of local payment methods
And so we reach one of the main challenges of selling in Latin America: understanding the particularities and rapid changes of the region. Very innovative, but still very unequal; is home to some of the most disruptive fintech companies in the world, but still with a considerable rate of unbanked citizens.
On the other hand, this is also one of the main reasons why digitization is so strong in LATAM: with innovation comes more access. When traditional banks are not at hand, instant payment methods such as Pix can be used by virtually any adult citizen. If Wi-Fi is lacking, buying a smartphone in installments and using it for everything – studying, working, shopping, streaming, gaming – is a possibility. When prices are high and national currencies are devalued, innovative shopping experiences and cross-border merchants come with greater product variety and more competitive prices.
To better understand this context, the white paper details the payments landscape in Latin America – from the importance of accepting domestic credit cards, which account for 30% of e-commerce volume, to the rise of instant payments, which are a type of wire transfer. Driven by the steady increase in instant payments in LATAM, online purchases paid by bank transfer are expected to grow from 13% in 2021 to 21% by 2025.
There are regional trends, but also different opportunities in each country. In Colombia, for example, bank transfers account for 40% of e-commerce sales, an amount higher than the region’s norm – one of the reasons behind this is the low penetration of credit cards in the country (16%) . This highlights the major importance of offering local payment methods when selling to LATAM, since each country has its own payment preferences – and its own challenges that come with specific market regulations.
Latin America is a challenge, yes, but with knowledge, data and expertise, it is a very open market for new merchants from all over the world. If you already sell to LATAM, you probably already understand its potential; If you’re still not, our whitepaper will help you understand why it’s a good idea and how to better navigate its quirks, thus making the most of its full potential.
The “new normal” is here, and it is highly digital, especially in fast-moving Latin America. To take advantage of this, it is fundamental to understand the region and its e-commerce and payment landscape. So if you want to learn more about how e-commerce thrives more than any other type of shopping in Latin America and the fundamental role local payment methods play in total e-commerce volume, click here to download the full white paper.
About Karina Mata Farina
Karina Mata Farina is Marketing Manager at BoaCompra, a PagSeguro company. She has over 16 years of experience in digital marketing, performance management and e-commerce. Prior to BoaCompra, Karina worked in e-commerce companies, startups and digital agencies.
About BoaCompra by PagSeguro
BoaCompra by PagSeguro is a local payments platform that allows merchants around the world to accept local payments in LATAM or send payments to Brazil. A one-stop payment solution that offers local processing in local currency with local or international setup in 17 LATAM countries, BoaCompra is part of PagSeguro, one of the region’s largest fintech companies and a disruptive provider of financial technology solutions focused on robust infrastructures.