The future of finance in LatAm & the Caribbean

4 Key Trends that will Define LatAm Payments in 2021

Mar 16, 2021

By Fabiola Seminario
Digital payments, transaction-based lending, fraud prevention and crypto are the most dynamic areas in Latin America’s payments industry, according to a new report by iupana and SafetyPay


Latin Americans are fast changing the way that they pay: they are adopting digital wallets, QR codes and cryptocurrencies in increasing numbers.

For payment services providers, facilitating new purchasing preferences, while also preventing fraud, will be key in 2021. At the same time, new lending models that leverage payments data present a burgeoning opportunity.

Here is a snapshot of these emerging trends, based on a new report published today by iupana and SafetyPay: Payments in Evolution: Key Themes for Latin America’s Payments Industry in 2021.


1. Digital payments on the rise in Latin America

New forms of digital payments have grown rapidly across Latin America and the Caribbean in recent years, with a particular acceleration during the pandemic. That includes digital wallets and QR code-based transactions.

For the year ahead, that adoption is poised for further growth. Now, a large part of the acceleration comes from merchants – who had previously dictated payments terms – turning to new, digital alternatives for their clients.

Francisco León Velandia, chief commercial officer at PayU, says large numbers of traditional merchants are now entering the online world.

“We see merchants have a big problem trying to manage offline and online,” he notes. “The two worlds don’t talk together. The new wallets, interoperability, QR codes – to have one environment for that will be really important.”


2. Payments and lending converge

Payments companies will increasingly lend to their clients in 2021, either directly or through partnerships with financing institutions. Models set to grow include buy-now-pay-later and other forms of point-of-sale lending.

While this trend towards alternative credit models is already on the rise, industry leaders expect it to expand rapidly this year in Latin America.

“Up to now instalments and financing have traditionally been done by credit cards,” notes Alfredo Baños, SVP for Business Development at SafetyPay. “In the future we’ll be seeing a lot of players like Cuotealo in Peru, other merchants and companies that will offer lending to purchase high ticket items. I also see interest-free instalments, not based on credit cards going forward.”


3. Rethinking fraud-fighting tools

Payments fraud soared in Latin American commerce during the pandemic, and it is set to remain a serious issue for most payments channels and methods in the year ahead.

While artificial intelligence is rightly touted as a strong tool for minimizing fraud, payments processers also need to focus keenly on the data that they feed into such systems.

Capturing the right data to feed into those algorithms is difficult, especially in a country which lacks a centralized bureau of detailed financial data, says Diego Garaycochea, managing director at Krealo and board member at Culqi. Additionally, social media data – sometimes touted as an alternative data source – has little relevance for fraud processing.

“But if you know more about what their transaction patterns are, that is relevant. For that, you need consent and to get access via an integration.”


4. Crypto growth

Across Latin America, interest in cryptocurrencies is growing among traditional financial institutions and processors. At the same time, there is rising curiosity about how – and why – payments services providers can incorporate cryptocurrency functions into their product offering.

Mexican fintech Dapp is soon launching cryptocurrency payment options, responding to consumer demand to use cryptocurrencies.

“One thing that we saw is that it’s a way to send money cross-border,” says Antonio Pelaez, founder and CEO. “People in the US are sending crypto to their family in Mexico. Their family in Mexico pays with crypto, and the merchant receives pesos. So we’re doing a cross border thing, without the associated fees. It’s a very interesting development for sending money between countries.”

Understand these trends in detail with Payments in Evolution: Key Themes for Latin America’s Payments Industry in 2021, a special White Paper published today by iupana and SafetyPay.

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