Alternative payment methods (APMs) have taken the region by storm, reaching a 39% share of total digital-commerce volume – a value of nearly USD 400 billion – as of the end of 2022. This rise in APMs follows four years of upward growth since 2018, while credit and debit cards have seen their shares shrink.
The three Latin American countries that use APMs the most for digital commerce are Colombia, El Salvador, and Brazil, where APMs have already reached peaks of 50%, 49%, and 44%, respectively.
The rise of APMs in the region is a result of a sharp increase in digitization and financial inclusion. The share of Latin Americans who have an account has jumped from 39% to 73% between 2011 and 2021, according to the World Bank’s Global Findex, while only 28% of people in LatAm have a credit card. It is within this gap between accounts and card ownership that APMs have found a unique growth opportunity.
The fast-growing alternative payments landscape in Latin America is shaped by diversity, with account-based transfers, such as Pix in Brazil and PSE in Colombia; e-wallets, such as Ualá in Argentina; cash-based payments, such as OXXO in Mexico; Buy Now Pay Later (BNPL) solutions, such as Sistecredito in Colombia, and others.
In Latin America, this growing momentum for account-based transfers is being pushed by two major players: Pix in Brazil and PSE in Colombia. Developed by the Central Bank of Brazil, Pix is expected to represent more than 20% of all online purchases in Brazil this year and has been used as a global benchmark for other regions seeking fast, safe, trustworthy, and instant transactions. Meanwhile, PSE became the most used payment method in Colombia’s e-commerce sector in 2021, with nearly 35% of all online purchases in the country – ahead of credit cards, which had a 30% share. In 2022, the instant payment created by Colombia’s clearinghouse should reach USD 9.3 billion in total online sales.
The fast growth of these alternative payment methods with real-time confirmation is driven by a change in consumers’ behavior and expectations regarding payments and online shopping – and therefore shows no signs of slowing down.
The key aspect here is accessibility; it is giving credit in an easy way to the right people who are good payers but have difficulties in proving their scores.