Acceptance Considerations for the E-Commerce Market in Latin America
Latin America is one of the most attractive e-commerce merchant acceptance markets in the world. Despite structural challenges that require acquirers to find creative ways to meet customer needs, we expect to see significant growth and activity in this market over the next several years.
Robust Growth Forecast
The company, Practical Ecommerce, estimates the current number of online buyers in Latin America at approximately 34 million and expects this number to nearly double by 2019, to over 60 million. E-commerce sales are growing at double-digit rates in most markets throughout the region, with e-commerce retail sales estimated to be over $40 billion in 2015. While e-commerce sales growth rates are expected to decelerate in the next few years due to unfavorable macro-economic conditions in a few markets (most notably in Brazil), they will remain in the 15% to 20% range, with retail e-commerce sales in Latin America approaching $80 billion by 2019 (see Figure 1).
Figure 1: E-Commerce Sales and Growth in Latin America
Brazil accounts for the lion’s share of the market, with sales volumes representing between 50% and 60% of e-commerce sales in the region according to eMarketer and PagBrasil. Following Brazil, PagBrasil estimates that Mexico and Argentina account for 14% and 6% of the market, respectively. All major markets in the region experienced double-digit growth between 2014 and 2015, with Argentina and Mexico having the largest year-over-year (“YoY”) growth rates (30% and 39%, respectively) (see Figure 2). The region’s e-commerce growth is being fueled by increased Internet access and the rapid growth of smartphone usage, with adoption expected to reach near 70% by 2020, according to GSMA.
Figure 2: Latin America Market Data
Structural Impediments and Creative Solutions
This growth is not without challenges, however. The Latin America region has a large unbanked population, low penetration of electronic payment methods, and unreliable postal services that make product distribution challenging. As a result, e-commerce retailers are finding creative payment and delivery solutions:
- Many online retailers in Latin America offer cash on delivery as a payment option.
- Others, particularly in Brazil rely on the Boleto Bancario, a printable invoice that can be paid by consumers at supermarkets, post offices, ATMs, through Internet banking, or at any bank agency in Brazil.
- For product delivery, many online retailers resort to using their own shipping services.
Even in the face of these challenges, many international e-commerce PSPs, mostly e-commerce gateways, have taken note of the large opportunity in the region and are already present in several markets (see Figure 3). We anticipate more players to enter the market as its growth continues.
Figure 3: Sample of E-Commerce PSPs in Latin America
For more information, please contact Janinne Dall’Orto, Senior Manager, firstname.lastname@example.org; or Ted Nelson, Consultant, email@example.com, both specialize in Merchant Acquiring.
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