Account-to-account (A2A) payment methods such as instant transfer systems and electronic wallets will continue to gain ground in 2023, expanding their share of a market dominated by debit and credit cards, according to digital payment platforms EBANX and PayPal.
A2A payments, which dispense with bank cards and intermediaries for processing transfers, make it easier to move money between digital accounts. This streamlined user experience, together with the limited access to credit cards in the region and the rapid expansion of instant payment systems such as Brazil’s Pix, is driving growth of A2A platforms.
While the share of Latin America’s population that owns a savings accounts rose from 39% to 73% between 2011 and 2021, still just 28% hold a credit card, according to a recent report by EBANX.
“In this gulf between those that are account holders and those that are card holders, there’s a space for alternative payment methods to emerge, prosper and be successful,” Juliana Etcheverry, director of strategic payment alliances at Brazilian cross-border payment platform EBANX, told iupana.
“These alternative payment methods represent almost 40% of digital commerce: a good part of them are account-based,” she adds.
Americas Market Intelligence forecast last year that credit cards would remain the leading payment method in 2022, accounting for 53% of the total, but the consultancy expected they would lost ground to methods such as Buy Now Pay Later (BNPL), Pix and wallets.
Eating into the card market and... cash
EBANX and PayPal see potential in A2A payment methods since they alleviate a pain point that traditional acquirers have been unable to overcome: the payments are peer-to-peer (P2P) and almost real time. What’s more, they cost users nothing, making them even more enticing.
“We think they’re going to cannibalize cash. Potentially, they’ll also compete with bank transfers and other payments and even, in the future, the processing of credit and debit cards,” Mayrén Martínez, PayPal’s strategy and market development manager in LatAm, tells iupana.
The support that various regulators have given instant payment systems, such as Pix in Brazil, the PSE payment button in Colombia, and SINPE in Costa Rica, has produced ecosystems that have been swiftly adopted by consumers, Martínez says.
And the wave is expected to spread to other countries after the Central Bank of Brazil announced in November that it will open up Pix protocols, allowing the payment system’s source code to be replicated elsewhere.
Martínez also highlights the efforts made by businesses to generate account-based payment systems, such as MODO in Argentina and Yape in Peru, where the regulator has told banks to make the country's most popular wallets interoperable later this year.
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A space to cover: Social commerce
In addition to government initiatives, the use of social media for digital commerce has also fueled account-based payments. It’s an area where Martínez expects to see growth in 2023 and create opportunities for alliances.
“These social media platforms don’t have native payment solutions, so bank transfers or P2P, for example, could gain a lot of market share,” she says.
“Social platforms may even invest in payment solutions and integration with payment solutions,” adds Martínez.
Meta launched WhatsApp Pay in Brazil in May 2021 in an attempt to take advantage of the platform’s popularity. The service got off to a rocky start and by February 2022, only 17% of users who used WhatsApp said they’d registered their debit card to make payments, according to a study by Mobile Time and Opinion Box.
PayPal sees the potential for integration with social networks as an opportunity to manage the payments for sales generated via their platforms.
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Crypto in sight, but no implementation
EBANX and PayPal are closely following the use of cryptocurrency in payments but both companies say implementation in LatAm is still a way off. A lack of regulation and the currencies’ price volatility are the main barriers to implementation.
“We are constantly evaluating whether we’ll be able to implement or expand this solution to Latin America. It’s not something we’ll do in 2023. It could potentially happen in the coming years. It would be in the long term,” says Martínez.
The crypto winter of 2022 and the subsequent bankruptcy of FTX have undermined the credibility of cryptocurrencies. However, they’ve also become a refuge in economies suffering from acute inflation, as is the case in Argentina, according to a study published in 2022 by Rapyd, a payment processor with a regional presence.
“There isn’t a region in the world where consumers are more pro-crypto than Latin Americans. We have some important statistics: For example, one in three Latin Americans owns a crypto asset […] So it’s important to follow it closely,” says EBANX’s Etcheverry.