In recent years, Latin America has experienced a remarkable transformation in the way people make payments.
Debit cards, credit cards, and mobile payments are quickly becoming the preferred methods of payment, displacing cash in the region.
This shift is opening up new avenues for financial-services companies looking to tap into a growing and increasingly digital payments landscape.
According to surveys conducted in 2021 and 2023, polling over 15,000 Spanish-speaking Latin Americans, debit cards have overtaken cash as the top payment choice, with mobile payments also gaining significant ground, particularly in countries like Argentina and Peru.
This is an important development in a region where cash has long been dominant, fuelled by a high rate of informal labour and small merchants that only accept cash.
However, as digital payments grow in popularity, there’s now a clear opportunity for banks and financial-services providers to capitalise on this shift by offering better, more personalised payment options.
The continued growth of noncash payments in Latin America signals a broader trend of “bancarization”, a term widely used in the region to describe bringing financial services, such as online banking, to previously unbanked populations.
Debit Cards Lead the Charge
The rise of debit cards as a favoured payment method can be attributed to several factors.
Latin Americans increasingly value the speed and convenience of debit cards, which offer greater control over their expenses.
In some countries, such as Chile, debit card adoption has been heavily influenced by government-backed initiatives like BancoEstado’s CuentaRUT program, which simplifies access to debit cards.
CuentaRUT, which is linked to residents’ national ID numbers, now boasts over 13 million users, covering about 70% of Chile’s population.
The increasing usage of debit cards underscores the region’s gradual but steady move toward formal banking.
In 2021, about 73% of the population in Latin America and the Caribbean had access to a bank account, a significant rise from previous years.
This trend is crucial for financial inclusion, as more people gain access to banking services that were previously out of reach.
Mobile Payments: The Next Frontier
Mobile payments are growing rapidly in countries like Argentina, Colombia, Panama, and Peru, where consumers appreciate the security, ease of use, and low costs associated with these platforms.
However, the adoption of mobile payments varies by country.
For instance, in countries where the use of QR codes is common, such as Argentina, mobile payments are more widely accepted.
In contrast, in places where contactless payment systems or tap-and-pay methods are the norm – such as Chile and the Dominican Republic – mobile payments are less popular.
Despite these differences, mobile payments present significant growth opportunities across the region.
With the right strategies in place, financial institutions can encourage broader adoption, especially by partnering with retailers and investing in infrastructure that makes mobile payments more widely available.
Merchants can also benefit from these systems as they reduce the need for expensive point-of-sale terminals by offering more affordable QR code-based solutions.
Cash Remains but Is Losing Ground
While the shift away from cash is clear, cash remains relevant, particularly among lower-income individuals and informal workers who are often paid in cash.
In fact, 70% of respondents in the 2023 survey said they had used cash in the past 30 days, even though only 30% preferred it.
Many small merchants still accept only cash, and more than half of Latin American workers are in the informal sector, making cash indispensable for certain transactions.
However, the growth of digital payment methods is not slowing down.
As more merchants begin to accept noncash payments and consumers continue to adopt digital banking solutions, we are likely to see an even greater decline in cash usage in the coming years.
Four Key Trends Shaping Payments in Latin America
Digital Payments Are Complementary, Not Competitive: Rather than one form of noncash payment overtaking another, Latin American consumers are increasingly using a mix of debit cards, credit cards, and mobile payments. Financial institutions should focus on offering a comprehensive suite of payment solutions that cater to this trend.
Regional Differences in Technology Usage: Payment preferences vary significantly across Latin America. In some countries, mobile payments via QR codes dominate, while in others, tap-and-pay technology is more common. Financial institutions must account for these differences when developing regional strategies.
Millennials and Men Are Leading Mobile Payment Adoption: Millennials, along with men in general, are more likely to embrace mobile payments. Financial institutions could develop targeted campaigns and promotions that appeal to these groups, while also finding ways to attract underrepresented demographics such as Gen Z and women.
Opportunities for Partnerships and Interoperability: By establishing partnerships with large retailers and expanding services to small merchants, financial institutions can accelerate the acceptance of noncash payments. Additionally, governments are working to improve payment system interoperability, making it easier for consumers and merchants to use different payment methods seamlessly.
Key Strategies for Financial Institutions
To capitalise on the ongoing shift toward digital payments, financial institutions should focus on a few key strategies:
Boost Merchant Acceptance: Encouraging more merchants to accept noncash payments, whether through partnerships or expanded services to micromerchants, will be crucial in growing the payments ecosystem.
Offer a Seamless Payment Experience: Financial institutions should offer a frictionless experience that integrates multiple payment methods, from debit and credit cards to mobile payments, giving consumers a one-stop solution for their daily financial needs.
Adapt to Technological Differences: Institutions must recognise the varying levels of mobile payment adoption across countries and tailor their offerings accordingly, ensuring they can meet local demand.
As Latin America continues its payments evolution, the region presents a fertile ground for growth in digital financial services.
For banks and financial-services companies that are able to navigate the complexities of this market and deliver personalised, seamless solutions, the opportunities are immense.
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