Changes in Regulations are Accelerating Digital Payments Growth in Colombia, Mexico and Chile

Changes in Regulations are Accelerating Digital Payments Growth in Colombia, Mexico and Chile

Latin America is a market of 650 million people, almost twice the size of the US and 30 per cent larger than the EU.

PayRetailers, paytech expert in online payments in Latin America, has localised presence and operations in more than 12 countries in the region.

PayRetailers logoThe growth of fintech in Latin America – driven by Latin Americans’ demand for greater access to new financial services, and the increase in the number of global companies operating in the region – has driven the move towards a new culture of regulated digital payments in LATAM. Open Finance is an important step towards an inclusive and efficient payment ecosystem.

Colombia, Mexico and Chile are three of the largest markets in terms of size and fintech influence in the region. They are the birthplace of several technological unicorns and are the most proactive in terms of public policy oriented to the development and regulation of new technologies, including payments as a vertical of the fintech phenomenon.

Innovation in the Latin American financial market

New players in the economic market are changing the traditional financial landscape in Latin America. Thanks to new technologies, payment platforms such as PayRetailers are shaping a new scenario in which more and more global companies are integrating the payment process into their user experience.

PayRetailers has local operations in more than 12 countries in LATAM. We collaborate with financial institutions and Fintech associations to create local payment solutions and drive the expansion and growth of international businesses.

In the Latin American financial ecosystem today, the payments system is becoming increasingly robust thanks to the hybrid capabilities offered by payment platforms. Industry and authorities are taking action to overcome regulatory hurdles associated with cultural barriers and to further strengthen interoperability in the region.

Colombia, Mexico and Chile: Fintech expansion increasing financial inclusion

Financial inclusion in Latin America has become a local priority in recent years. Like the rest of the digital-based ecosystem, it accelerated in the wake of the pandemic with the demand for digital, contactless payments, the growth of merchants that were already omnichannel, and alternatives for merchants forcibly accelerated into the digital world. As a result, the entry of new players accelerated in the form of Fintechs.

In Colombia, a specific demand of the Fintech ecosystem is the significant change in the habits of Colombians: three out of four transactions are now carried out through digital channels.

Country Manager of PayRetailers in Colombia, Juan Francisco Schultze explains that the Colombian Central Bank (Banco de la República) is working on launching an immediate payment system, like the Brazilian PIX. This will be a game changer enabling PayRetailers to strengthen our local product offering and further support merchants in obtaining greater benefits from their operations and investments.

“As a provider of digital payment solutions, PayRetailers can be defined as a vehicle for integrating and facilitating the access of more Colombians to businesses to which they previously had no access.

“We provide a full range of online payment alternatives that promote not only financial inclusion, but general access to options and the supply of the goods and services that the population need.

“We work with the full range of entities and payment methods required locally to achieve the highest possible conversion and payment methods for our merchant clients.”

To capitalise on Open Finance in LATAM, you need a local partner to provide you with global experience and local know-how.

In Mexico, the Law to Regulate Financial Technology Institutions, popularly known as the ‘Fintech Law’, came into effect in 2018, the first on the continent. This law establishes Open Banking, or Open Finance, fostering transparency in the flow and type of data circulating in the financial ecosystem. This will be a great catalyst for financial inclusion in the next few years.

Diego Suárez, country manager of PayRetailers in Mexico, explains that: “In addition to accessing information flows, Open Finance guards the privacy of its users, by separating open, aggregated and transactional financial data.

“Mexican Fintech law states that users’ individual transaction data can only be shared with express authorisation, and pays particular attention to security mechanisms in case of any kind of database leakage.”

These new accesses to non-bank financial information are a perfect fit for Latin America, as it is a region where consumers’ financial patterns are outside traditional banking models.

In addition to helping financial innovators gain a broader view of the real financial behaviour and needs of the population, the potential customer base of companies increases, as does our ability to develop more relevant and tailored services for them.

Chile has also taken a big step in regulatory advances this year as Carlos Varas, country manager of PayRetailers in Chile explains: “With the objective of establishing a regulatory framework that guarantees the pillars of proportionality, neutrality, comprehensiveness, flexibility and modularity of all actors in the local financial system, the approval of the Chamber of Deputies will make it possible to proceed with the publication of a Fintech Law, establishing the Chilean financial system as Open Finance, at the height of the proliferation and consolidation of technological innovation in this industry.”

Mexican Fintech law states that users’ individual transaction data can only be shared with express authorisation, and pays particular attention to security mechanisms

APMs and their strong local adoption process

PayRetailers offer immediate access to the most popular payment methods on the continent, such as OXXO in Mexico, Webpay in Chile, Efecty in Colombia and PIX in Brazil.

This ensures that Latin American users can enter the financial system without having to rely exclusively on a bank. International merchants in industries, such as eCommerce, retail, travel, financial services, e-learning and gaming can achieve the highest conversion and acceptance rates, as well as the highest efficiency of their transactions.

With PayRetailers, all leading traditional and non-traditional payment methods are available to our customers and end-users in all the markets in which we operate. We have relationships with local card operators, online bank transfers, vouchers and cash collection. Integrating all locally relevant payment methods into a single connection enables merchant customers to create a comprehensive and successful payment strategy.

Cash payments are continuing as the most widely used means of local payment in most Latin American countries. Integrating APMs into online transaction flows as a hybrid alternative presents a great opportunity to leverage digital methods.

Depending on the country and industry, the most commonly used digital payment methods can change from APMs and online bank transfers to credit cards. PayRetailers integrates all alternatives into a single solution. Agility, timing and security of the payment process, are key factors in achieving a high conversion rate.

Recent figures in Chile show 25.3 million debit cards issued, 15.5 million with movements: a 20 per cent growth since 2021. These numbers reflect the trend in Chile to the extensive use of cards, especially debit cards, as the most used payment method.

“We are seeing how, after years of operating with a single acquirer such as Transbank, today new acquiring players are appearing such as Banco Santander, Banco BCI, Banco Estado, Mercado Pago, Kushki,” says Varas.

The growth of digital wallets in Latin America

There is also a growing use of digital wallets in Chile. The penetration of smartphones in the Chilean population is high – more than 25 million devices and 20 million with access to the network. The popularisation of digital wallets provides coverage of the industry’s means of payment to the digital population in Chile, in addition to providing value-added services to users such as transfers, savings and payment of services.

In Juan Francisco Schultze’s opinion, country manager of PayRetailers in Colombia, the key to the exponential adoption of digital wallets has been the rapid migration of online commerce to mobile devices. Other payment methods, such as software points of sale ‘soft-pos’ are increasing the pace of change in payers’ habits and needs.

Schhultze continued: “In Colombia, digital wallets have presented an annual increase of 195 per cent in financial transactions since 2021, positioning Columbia as the third largest online sales market in Latin America, after Brazil and Mexico. These markets have driven e-commerce sales in Latin America from $36.9billion in 2016 to $115billion in 2021.”

Diego Suárez commented on the trends in Mexico. He said: “In Mexico, there is a strong tendency towards the familiar. Payments in self-service shops such as OXXO, and payments linked to a reference, will continue to be the most popular and in-demand payment methods in the country, despite the strong trend toward e-wallets and neobanks, which will undoubtedly experience exceptional growth in the next few years.”

In Colombia, digital wallets have presented an annual increase of 195 per cent in financial transactions since 2021

PayRetailers’ solutions

All these payment solutions are incorporated and offered by PayRetailers. They enable merchants to operate a cross-border model to replicate the success of their global operations in the emerging markets of Latin America.

PayRetailers has local experts in each country we operate. Each has a thorough understanding of the particularities of the local market – the economy, compliance regulations, cultural context, consumer habits and consumer payment preferences.

A real understanding of the market makes the difference between success and failure for merchants looking to expand globally. Having an experienced local partner such as PayRetailers is a critical element in taking that step towards success in Latin America.

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