Cash remains the preferred payment method in Latin America
In Latin America in 2018, approximately $1.7 trillion dollars were spent annually in retail sales with cash, representing 81% of all retail spending. Whereas in the United States, these sales represented 24% and in China, 18% (figure 1). The World Cash Report 2018, published by G4S Cash Solutions and Payments Advisory Group, reports that in Latin America, the yearly average number of card transactions per capita is less than three times the global average (figure 2). Even among eCommerce buyers in Latin America, for a segment of consumers more sophisticated than the general population, cash remains the preferred payment method for daily purchases among Mexicans, Colombians and Argentines. As can be seen in the data, when it comes to payments, the use of cash remains deeply ingrained in Latin America despite efforts to extend financial inclusion from banks, card networks and financial technology companies.
Some of the reasons why a user prefers the use of cash are the following::
● Low penetration rate of credit cards in Latin America. Lack of banking usage, where only a limited group of people have access to a credit card.
● According to data from Banxico, 95% of the population use cash to cover personal costs such as transportation, food and groceries; while 8% prefer debit cards and 4% credit cards
● Previous negative experiences with online payments.
● Lack of knowledge about how to use alternative payment methods.
● Rejection towards fees charged by banks as commission for their services.
The challenges and opportunities posed by the expansion of eCommerce in Latin America
On the other hand, in the last six years eCommerce has tripled its sales in Latin America, according to the latest report from the International Data Corporation (IDC), creating business opportunities for transnational companies that offer online services and products. This has provided great benefits both to companies and users, due to the possibility of acquiring goods and services online and the convenience that entails. Nevertheless, new challenges have appeared for large traders when looking for innovative ways to attract a larger market, among those that stand out are those related to payments, logistics, and inventory management.
In this context, the Mexican startup Openpay – a BBVA’s New Digital Businesses portfolio company – has developed a wide range of advanced online payment solutions and features, which allow eCommerce stores to be connected with banks, providing them services either through electronic payments or cash. Openpay’s PAYNET Network, with more than 30,000 associated points of sale, offers clients and businesses a solution that enables online purchases to be paid in cash, allowing businesses to offer online sales of products or services and users to make cash payments at any affiliated pharmacy, supermarket or convenience store.
Openpay and its PAYNET network launch Amazon Cash solution in Mexico
As mentioned above, payment methods and the adoption of banking services are some of the main barriers to eCommerce expansion in Latin America. This was the case for one of the largest players in the market, Amazon, who did not have the technology to receive cash payments for online purchases. For this reason, around mid-2017, through the technology leveraging by Openpay on its PAYNET network, they launched the Amazon Cash solution in Mexico, the easiest way for users to make cash payments to Amazon without paying a fee.
Today, Amazon is able to receive cash payments via Openpay’s PAYNET network, which counts with over 30,000 affiliated outlets, including pharmacies, supermarkets and convenience stores, where the user can add money to their Amazon Cash balance directly in an online store (www.amazon.com.mx).
Customers can add money to their Amazon balance in cash from 100 to 5,000 pesos, through their mobile phone number or using a barcode that they can download from the Amazon App or the site Amazon.com.mx/cash. Users will not have to pay commission and the balance will be shown as it is in their account.
Thanks to Openpay’s PAYNET technology, the payment will be shown immediately in user’s Amazon balance, so before leaving the establishment, users will already have their money credited. Additionally, Amazon has the Openpay administrative panel, which shows results with graphic reports for all payment-related enquiries.
It has been very important to have a diversification of payments, especially for those players who are looking to expand their sales reach. Companies Latin American eCommerce players should choose to offer their clients a variety of payment methods, including cash, to guarantee the conversion of all users who choose it as their payment method.
To find out more visit www.openpay.mx
● Internet.mx Association
● National Commission for the Protection and Defence of Financial Services Users (Condusef)
● Study on online sales Mexico 2019 AMVO
● Article: Latin America is losing the war on cash, Americas Market Intelligence
● Study on eCommerce in Mexico 2018
● World Cash Report 2018