Descubre el futuro de las finanzas en América Latina y el Caribe

The future of finance in LatAm & the Caribbean

O futuro das finanças na América Latina e no Caribe



Digital Payment Trends 2022: Interoperability, Crypto and Cash-out

Jan 17, 2022

By Fabiola Seminario
New business models, further gains in crypto-based payments and—hopefully—increased interoperability are ahead for LatAm payments in 2022, say leaders in Latin America's payments industry....



The digital payments industry in Latin America is set for a wave of innovation in 2022, including new business models, a push for interoperability between wallets, and the development of hybrid tools that facilitate the use of cash, mobile money, and even crypto.

In order to help you prepare for a new cycle of innovation, iupana consulted industry experts to understand the digital payment trends for the coming year.

(And if that wasn’t enough, we’ve invited digital payment gurus from Garena, Disney, and SafetyPay to discuss industry expectations this year at a live event on Tuesday, January 18th. Reserve your spot here).

New embedded payment models

After two years of proliferation in wallets and other virtual payment methods—largely driven by the pandemic—we’ll start to see a greater collaboration between players. Partnerships in embedded finance models will be key to producing solutions capable of differentiating providers in a market awash with alternatives.

“This confusion of multiple apps and payment methods is an opportunity to get a single account that has information from all these options,” said Jeffrey Bower, senior investment officer at International Finance Corporation (IFC), the World Bank’s private-sector financing arm for developing nations.

The success of Yape in Peru, which ended 2021 with more than 8 million users—about a third of the population — is an example of the growth potential of wallets. The next step is to see how profitable it is for institutions to channel their financial services through third-party applications.

In Mexico, for example, the Chinese taxi app Didi launched Didi Pay to allow drivers to receive payments from bank accounts. Uber offers its Mexican users a similar service in conjunction with BBVA. And everything indicates that we’ll continue to see an acceleration in these sorts of approaches.

“There’s a very clear need to establish alliances between all the players in the financial ecosystem, going beyond the way it was done before, which was a trend. Speed is very important, ” says Thiago Dias, vice president for Latin America and the Caribbean fintech at Mastercard.

See also: To scale, digital payments must be as easy as sending a message


Payment interoperability: an impossible dream?

At the same time, the construction of the ecosystem will continue to advance with a necessary push towards interoperability between platforms; an effort that will continue to be led by regulators in each country.

While the variety of payment formats is good for users, getting multiple wallets to connect to each other for instant transfers is a challenge for almost all local payment ecosystems in the region.

“More central banks will seek to provide solutions that interoperate with different banks, and eventually, that also provide access to fintech companies,” says Iñigo Rumayor, co-founder of Arcus, a B2B Payments-as-a-Service company.

Argentina is a prime example of the difficulties of interoperability, with some 30 wallets coexisting, the biggest of which is Mercado Pago. Late last year, the Central Bank launched its Transferencia 3.0 platform to streamline the connection between the platforms, but the technological side of incorporating QR codes remain a challenge.

“The great wave of interoperability hasn’t arrived,” says the IFC’s Bower. It’s “a disadvantage that reduces the possibility of jumping between these apps.”

See also: Crypto businesses of the future will leverage payments and credit


Crypto money and payments

The payments ecosystem has been expanding its radius of action, coexisting not only with physical and digital money, but also with cryptocurrencies.

“The use case for cryptocurrencies is very different from physical money, but I think the lines between the two worlds will disappear in the next few years,” says Bower.

Some global institutions are already preparing their own networks for this reality; for example, Mastercard operates a crypto-card program in which cards are connected to crypto wallets.

As far as the company is concerned, protecting payments from the volatility associated with cryptocurrencies is the most important thing, both for the user and for the business on the other side of the transaction.

That’s because decentralized currencies such as bitcoin are subject to constant swings in value, making them high-risk mechanisms for digital operations; the price can change in the critical seconds that it takes to process the transaction.

On the other hand, stablecoins, which are digital currencies whose value is anchored to fiat currencies such as the dollar, have allowed the card company to incorporate virtual payments where the price remains steady.

However, such operations still lack regulation in Latin America.

“We work hand in hand with all entities so that this becomes a journey towards the complete regulation, acceptance, understanding and use of cryptocurrencies with the different payment instruments,” says Dias.

A next step will also be to address central bank digital currencies (CBDCs). Central banks from Chile, Brazil and more recently Mexico, have advanced plans to issue their own digital currencies, in a sign that the crypto trend is having tangible effects.

“The idea of cryptocurrencies has already been accepted by the formal financial system and I don’t see them disappearing in the future,” says Bower.

See also: Digital Payments LatAm: Joint commitment needed, say industry leaders


Cash-out: the role of physical-digital payment bridges

We’re at a point where multiple payment vehicles coexist and where digital is gaining ground due to its convenience and flexibility. And adoption will continue to rise as technologies that use virtual money continue to get easier, safer and cheaper.

However, the industry can’t “expect the user to use digital, if it doesn’t suit them,” says Arcus’ Rumayor. “Digital for [the sake of] digital, I don’t see it.”

While virtual methods offer a better customer experience, it’s not a total migration. The hybrid payment structures that also permit the use of cash will remain, allowing this gradual change to continue during 2022.

“This model is going to boost digital. They are not in a fight: If you offer cash in and cash out solutions, people are going to migrate to digital. But you have to have that bridge of physical money to encourage it,” he says.

In economies where cash is still king, the situation is not only potentially detrimental to the migration to digital, but also negative for competition between fintechs and banks. In Rumayor’s opinion, banks have somewhat of an advantage due to the presence of ATMs and branches, while for fintech companies, the cost of using cash is high and the terms of deposit can be complicated.

“In Mexico, for example, it becomes super important for fintechs because if they don’t have branches and more than 80% of Mexicans carry out cash transactions, how do you offer them a bridge, as if they were branches where people can go and make deposits or withdraw cash? ” he says.


How do digital payment managers at Disney, Garena and SafetyPay see the outlook for 2022? We’ll discuss the subject live on Tuesday, January 18th in a special iupana Masterclass. Register here to participate in the event.

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