The growth projection of eCommerce in Latin America is 37% at the end of this year, consolidating the region as one of the largest eCommerce markets in the world. By 2025, Latin America’s two largest economies – Brazil and Mexico – are expected to maintain steady growth of 30% per year. At the same time, emerging economies such as Bolivia, Guatemala and Peru could accelerate further, with growth exceeding 40% per year. Jose Duarte, an entrepreneur and eCommerce expert from Costa Rica, explains what is behind the growth and what is coming next.
According to a study by Beyond Borders, the rise of eCommerce in Latin America is mainly due to two factors. First, the mass adoption of digital payment methods, such as digital wallets and, in Brazil, the PIX, which quickly became the preferred payment method of Brazilians, surpassing the traditional options, TED and DOC.
Secondly, there is the growth of so-called “mobile commerce.” This refers to purchases made through the cell phone – either through the eCommerce application or through social networks (social commerce). The study shows that, by the end of this year, almost 60% of all online purchases made in Latin America will be paid for with the cell phone.
Explains Duarte, “The rise of real-time payments is transforming Latin Americans’ relationship with digital commerce. This then creates a race for better shopping experiences, expanding payment options and even impacting logistics prowess and financial innovation.”
The PIX already has more than 112.6 million users, of which 105.2 million are natural persons, while another 7.4 million represent legal entities. It also has 348 million keys registered at the end of October, according to data from the Central Bank of Brazil. Since its launch, the PIX has already moved 3.9 trillion reais.
The PIX, not only in Latin America, but around the world, is seen as one of those success stories both from a perspective of engagement and acceptance as well as financial inclusion, adoption of online commerce and cash replacement.
One of the big reasons for the PIX’s success is the fact that the system first conquered P2P (peer-to-peer) transactions and then gained the trust of users for bill payment, eCommerce purchases and others. At the same time, the Brazilian experience also teaches other lessons: the importance of a roadmap for the launch of new features the offer of a degree of interoperability and openness to feedback.
“In Africa, when digital wallets arrived, they had the same purpose as PIX: to start with P2P payments, then move on to bill payments, online payments and then loans, repayments, etc. The PIX can be all that,” Duarte says.
Despite the meteoric advance of the PIX, the method is still unique to Brazil, so among the alternative payment methods booming in eCommerce, digital wallets already account for 11% of all online transactions in Latin America. The popularization of e-wallets also has to do with a kind of migration of the buyer, who went from the computer to the cell phone.
The intrinsic mobile experience offered by digital wallets is gaining momentum along with the high penetration of smartphones in Latin America. In many countries in the region, there are more adults who have a smartphone than those who have a bank account, which makes these mobile devices a key tool for digitalization and financial inclusion. They are a powerful digital innovation tool and a cost-effective method of delivering financial products.
With this scenario of hypergrowth, Latin America has become a key region for the sustainable growth of global companies, which are beginning to face the saturation of the North American and European markets. According to the study, local eCommerce giants, such as Mercado Libre, Americanas and Casas Bahia, are also starting to face stiff competition from global players such as Amazon, AliExpress and Shopee.
It’s an intriguing scenario for eCommerce in Latin America. It is a market that is now totally open to those who offer the best shopping experience, whether they are local or global, national or international players.