Collaboration between private and public entities will be key to drive greater adoption of digital payment methods in Latin America, according to representatives of major industry players, including Visa and Mastercard.
After last year’s pandemic-induced technological disruption, LatAm’s payments industry is hoping to keep up the pace of adoption of new solutions – now driven by the more certain outlook and the quality of the infrastructure in place.
Experts argue that a commitment by governments and businesses could drive sustained uptake of digital payments.
“Collaboration between financial institutions, non-financial institutions, governments and fintechs is a fundamental factor for this industry to continue to grow with the boom that is projected for the coming years,” says Jorge Becil, executive director of new business development at Visa.
Some 78% of Latin Americans plan to use new payment technologies in the near future, Becil says.
The comments came during a panel discussion “Major trends in payment methods”, sponsored by Minsait Payments, the payment methods subsidiary of the digital transformation and information technology consulting firm in Spain and Latin America.
While specialists say that greater financial education is needed to discourage the use of cash, they added that this must be done in a way unique to each country.
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“In LatAm, culturally, we have to make it something that’s an everyday thing – rather than a disruptive one – so that people can accept it,” says Heye Guo, co-founder and CEO of Nanopay, a Mexican credit card company.
Along with cultural awareness, focus on niche use cases will accelerate not only the pace of adoption, but also of innovation among ecosystem players, says Pablo Cuaron, director of new payment flows at Mastercard. One of the biggest challenges faced by the financial system in Mexico, for example, is the lack of differentiation in terms of services, he says.
Now, technology can deliver the data and analytics capabilities needed to better understand consumers and, consequently, to offer products that better meet their needs.
“If we can bring specific solutions, the odds that adoption will be permanent or higher improves dramatically. Where there is a tangible benefit, there is a direct impact,” he says.
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Tax incentives to drive digital payments in LatAm
Informality is a key barrier to payments digitalization in Latin America.
Here, regulators play an important role in driving greater formalization, say speakers. In some jurisdictions, tax incentives have had a huge impact, says Ernesto Terríquez, director of business development for LatAm North at Minsait Payments. In turn, that has had an impact on discouraging the use of cash and promoting other payment methods.
“In Mexico, some solutions to this issue have been proposed, but it is also very complicated to get the actors to agree,” Terríquez says.
Visa’s Becil says there are some basic principles to drive long term use of digital payments in Latin America.
Protection of sensitive information tops the list, to give certainty to ecosystem users. Next, data analytics infrastructure will also be another valuable component for the industry, to make experiences more efficient and useful for the consumer. These could be applied for example to granting credit according to payment capability, personalized financial management tools, and others.
Finally, he says everyone in the ecosystem should be empowered. “This starts with consumers and technology enablers who play the role of maintaining quality and service standards so that people and companies have trust, and thus increasingly adopt payment methods in the way we all expect”.