2019 was yet another year of payments disruption throughout the LATAM region. Thanks in large part to the proliferation of fintechs, Latin American banks and processors have been under immense pressure to modernize their offerings, while also gaining the agility to quickly bring new products to market.
Before we predict where payments is heading in 2020, it’s useful to look back on 2019 and some the key trends that shaped the year.
Seven Trends That Shaped Payments in Latin America in 2019
- The first was the opening of acquiring markets to new competitors, with new players forcing traditional banks and acquirers to evolve and innovate. This in turn has forced the old guard to become much more proactive and agile when it comes to innovation, lest they lose customer share to newer, more exciting competitors. This was a major trend that has already benefited consumers throughout Latin America.
- The second trend was the adoption of fintech services. Latin America has emerged as one of the fastest growing and most promising markets globally. This officially settled the “friend or foe” debate as it relates to fintechs, creating a new banking ecosystem that relies heavily on innovation. Consumers throughout LATAM had more choice than ever when it came to their banking needs, and financial institutions increasingly relied on fintechs to deliver the customized products and services that consumers wanted.
- Cloud implementation, even for large companies, is quickly becoming a consideration for long-term cost reduction. One of the main principles of cloud computing is to run elastic solutions that consume hardware resources based on volume, where traditional technology forces the company to allocate infrastructure that is often idle.
- New immediate payments schemes, such as CoDi in Mexico, and new regulations in Brazil have revolutionized the market and, in some cases, competed directly with the traditional card-scheme-based debit transaction.
- In addition to CoDi, companies including MercadoPago and Rappi have been actively developing their QR code schemes, which were implemented in the region and worked, for instance, in some closed loop environments with electronic wallets facilitating payments. These alternative payment methods are amongst those that are improving the customer experience.
- NFC (near-field communication) transactions grew quickly and supported the improvement of electronic transactions in some specific market niches, such as public transportation. In Sao Paulo, the public transportation system expanded the usage and integrated subway and buses.
- Insurtechs, retailtechs and agritechs grew fast in those markets that were investing in payment solutions. Retailers and the agribusiness—with long and complex supply chains, where buyers can bypass the middlemen and save significant cost—added transparency, trust and efficiency to settlements.
The LATAM payments market underwent a dramatic shift in 2019 thanks to the partnership of traditional financial institutions and fintechs. This ecosystem introduced a new level of consumer-oriented products and services into the market. With innovative products seemingly entering the market by the day, financial institutions were working harder than ever to create meaningful points of differentiation. This competition will continue to benefit consumers across LATAM markets.
Predictions for 2020
With the growth potential offered by LATAM, it should come as no surprise that big, global players will either look to enter the market or increase their investment within it. Increased competition and investment can only be a net positive for consumers.
2020 will see the benefits emerge of the more integrated payments ecosystem that developed throughout 2019. As financial institutions and fintechs continue to develop their partnerships, ‘anytime, anywhere’ payments will become the norm.
Finally, real-time payments will follow the global trend and become more prevalent throughout the market. Not only will institutions be able to offer real-time fund transfers, they will also discover newer and better ways to monetize real-time rails with exciting and convenient overlay services.
2020 will see more dramatic changes, therefore non-functional requirements such as scalability, flexibility and availability will be top of mind for financial institutions as well as retailers and processors. Overall, innovation capabilities will be sought to capture tomorrow’s payment possibilities. In the case of LATAM, this will result in a truly borderless payments grid, which will allow institutions to capture a world of opportunities.