Latin America Payments

Megatrends – 2021
Midway review
A presentation by Americas Market
Intelligence

July 2021

www.americasmi.com
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 Payments industry 25 years
advisory group experience
for companies operating in
AMI is the leading Latin America
in the region

analytical voice
in Latin America’s
payments industry Executed

300+
Full coverage
of Latin America and the
projects
Caribbean in the payments industry
since 2003

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 6 Megatrends to watch into 2022

Disappearance of the Instant payments E-commerce captures SMEs move to social Credit as the new Up-and-coming
“unbanked” displacing cash 10% of retail spend media and platforms enabler consumers leap-
frogging

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Trend #1

Disappearance of the unbanked

Total bank account penetration reaches 70% in top 6 markets
Considering accounts from both banks and fintechs

Penetration of bank and fintech accounts

88%
Traditional bank
82%
penetration
74%
56%
60% 60% 60%
52%
49%
46% 45% 43%
37%
Digital bank &
fintech
penetration
Argentina Braz il Chile Colombia Mexico Peru 33%
2017 2021

Sources: World Bank, local public sources, AMI analysis and estimates
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Digital banks and wallets have reached 50%+ penetration of
banked population and 33% of population overall

Millions of users, Q1 2021

60
50
40 100+ MM people using digital
30 banks and wallets

20
10
0

Banco Original
Ame Digital

Next
Yape
Nubank

MercadoPago
RecargaPay

Banco Inter

Uala
Pic Pay

MagaluPay
PagBank
Mer chants Consume rs

Sources: Local public sources, AMI analysis and estimates

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 A closer look at Newbies
While the absolute number of Newbies is lower this year, COVID continues to digitize a generation of (mostly female) informal
workers/consumers.

Newbies — online share of regular purchases Newbies

Before Quarantine
50% Used home delivery services 50%
Predicted: After Quarantine 51%
45% Past 3MO Bought other products online 49%
40% 48%
Bought food products online
% OF ONLINE POPULATION

35% 37%
33%
30% Used online banking services 36%
25% 38%
Used a digital credit or debit card 32%
20% 39%
15% Avoided using cash 22%
10% 23% 29%
17% Subscribed to a new streaming
14% 10%
5% 11% 22%
6% 6% 6% service
4% 4% 4% 4%
0% Other 8%
3%
0%

5%

as
0%

5%

0%

0%

0%

0%

0%

0%

m
1-

-1

-2

-3

-4

-5

-6

-7
6-

o
During 1st Quarantine Past 3MO
11

16

21

31

41

51

61

%
71

% OF REGULAR PURCHASES (excluding UBER & Netflix) MADE ONLINE Source: AMI survey of 2,000 consumers in Brazil, Colombia and Mexico in June 2021

Base: 241 / 85 Newbies

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Trend #2

Instant payments displacing cash

Within F2F retail, cash represents 53% of spend, down from 75% in 2020
While cash is still #1, electronic payment methods have made fantastic gains

2021 F2F retail by payment method

4% 2% 6%
10% 5% $556 MM
11% 11% 3%
6% 11% in cash
22% 15%
48%

42% $202 MM
79% 72% 20% 80% in debit card

26% 27%
$274 MM
BR MX CO CH PE in credit card
Cash Credit card Debit card Other*

*Checks and wallets

Sources: EIU, local Central Banks, AMI analysis

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Pix and Yape are true proofs of concept for P2P payments
True cash replacers gaining traction. Scaled P2M is still speculative

$81 BN 6 MM users
in transaction (60% of Peru’s banked
volume in June population)
2021

1MM
merchants

Compare to av. $18 BN No major competition

in monthly cc spend from wallets/fintechs

Sources: Brazilian Central Bank, local public sources

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Pix shows intensive experimentation by people and businesses
TED volume has remained stable, suggesting Pix is cannibalizing cash and boleto spend, not bank transfers

Registered chaves, millions Registered users, millions Pix volume by transaction type, June 2021

11 3%
11%

13%
Businesses
263
6 P2P
Individuals
B2B
92 74%
Business to Person

Person to Business

50% of Brazil’s banked

population
In transactions, PIX is already used more than TED ( 6x more as of
mid June/21), but considering volume, the value transferred via
TED remains roughly 2x that of PIX.
Sources: Brazilian Central Bank
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Shifts in Brazil’s e-commerce payment methods landscape
Pix will drive adoption of bank transfers in e-commerce

Forecasted CAGR Bank

through 2024 transfers
2%
12% 12%

11%
13% Brazil payment Brazil payment
method distribution method distribution

6%
2020 602%
7%
2024 (f)
63%
64% Credit 6%
Debit
card
Wallets card

Boleto
25% 28%
23%
10%

Credit card Debit card Cash vouchers Wallets Bank transfers

(f) forecasted. Updated AMI analysis available April 2021

Sources: AMI analysis
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 CoDi and MODO fall flat
In Mexico, only 5% of CoDi accounts have made payments, and even fewer have received them. In Argentina, the banks are figuring out how to
leverage MODO

10 million total CoDi accounts, as of June 2021

# of transacting accounts, ‘000 Cumulative transaction
volume,
3% monthly MM USD
growth
584 $104
May-July

448

• Unclear roll out strategy

• Banks starting to promote it

March '21 July '21 March '21

• Enables card and bank account payments

Mexico
Source: Banco Central de Mexico, AMI analysis Argentina 14
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In the absence of Central Bank leadership, debit card
rails provide a clear path to P2P and P2M, following the
Yape model

Central bank led

Private bank led

Fintech led

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Trend #3

E-commerce captures 10% of retail

Commerce shifted from the
physical to digital, permanently

E-commerce as a % of total retail

17%

14%
11%12% 11%12% 11%
10% 10% 10%
7% 8%
6% 6% 6%
5%
5%
3%

CH CO BR MX PE LAC
2019 2020 2024
Source: EIU, AMI proprietary research

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 Consumers purchase more and more online. E-commerce is still attracting
newbies in MX and CO
% of consumers by online shopper segment
All respondents Respondents by market

Brazil Mexico Colombia

2020 2021
41% 2020 2021 2020 2021 2020 2021
32% Retreaters - reducing 9 10 11 8 21 10
31% 23%
Maintainers –unchanged 38 19 28 15 24 17
17% 12%
12% 33 40 32 43 23 40
14% Adapters –slightly more
9% 9%
Disruptors – much more 18 27 11 20 11 17
es
rs

rs
rs

rs

to
te

ne

bi
te

Newbies –1st purchase 3 4 17 14 21 18

ea

ew
up
ap
ai
nt
tr

isr
Ad

N
Re

ai

D
M

Source: AMI/Echo survey, N = 3,026

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 E-commerce market volume in 2021
LatAm e-commerce grew 18% in 2020, reaching a total of $209bn; in 2021 it will grow 31% and maintain
nearly 30% y-o-y growth through 2024

2021 Latin America total

e-commerce market E-commerce in LAC is
$322
growing at a break-neck
$273 BN
E-commerce market size, USD BN

pace, with 29% CAGR

projected through 2024.
2020 market value
Regional giant Brazil is
2021 market value(f) projected to nearly triple
2024 market value (f) its e-commerce volume by
$148 2024. Mexico will grow at
a similar pace.
$97
By 2024, the LAC region is
$111
$50 projected to exceed
$35 $37
$34 $28 $500bn in e-commerce
$16 $17 $11 $4
$19 $10 $8 $4 $8 $4 $7 $3 $5 $2 volume.
$38 $16 $13 $12 $7 $3 $3 $2 $2 $2

(f) forecasted
Sources: AMI analysis
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Retail and digital e-commerce boom, but travel will struggle to recover
Retail and digital e-commerce are projected at 27% and 33% CAGR through 2024, respectively

E-commerce volume by vertical, all LAC markets

$275
With millions of LAC
$245
consumers homebound
due to COVID lockdowns,
retail and digital e-
commerce boomed in
2020. This rapid growth
$137
will maintain and mount
$105 $108 through 2024, with both
$78 verticals surpassing
$70 $200bn.
$55 $52 $51
$26 $29 In contrast, travel e-
commerce plunged more
than 50% in 2020 and will
Retail Travel Digital goods remain depressed through
2024.
2019 2020 2021(f) 2024(f)
(f) forecasted
Sources: AMI analysis
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 The era of mCommerce in LAC has begun
Mobile e-commerce (mCommerce) is projected for 39% CAGR through 2024, reaching 3x the volume of desktop-based online purchases

Mobile vs. desktop e-commerce volume, all LAC markets

$500
In 2020, mobile phones
surpassed desktop
$400 computers as the dominant
source of LAC e-commerce
purchases for the first time.
$300
The rapid growth of mobile
e-commerce (mCommerce)
$200 in LAC is attributable to the
region’s high smartphone
penetration – 70% as of
$100 2018. Millions of LAC
consumers made their first
e-commerce purchases via
$0 smartphones during the
2019 2020 2021 2022 2023 2024 COVID-19 pandemic.

Mobile Desktop

(f) forecasted
Sources: AMI analysis
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Trend #4

SMEs move to social media and

platforms
SMBs gravitated to social media during the pandemic

Most popular online sales

Millions of companies in Latin America channels:

53 1. Own website
2. Payment links – biggest
36 impact for small/micro
companies

3. Site builder platform

4. Marketplace
0.2 2 2 5. Delivery app
Large Medium Small Micro Informal companies

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Championing the small merchant – A top opportunity

Estimated retail e-commerce breakdown (volume) by

merchant type

Small merchants are driving

33%
45% growth through both online store
platforms (Shopify) and
marketplaces (MercadoLibre)
47%
40%

20%
SMBs - estimated 40% CAGR
15%
through 2024
2020 2024

Small merchants Marketplace Large merchants

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LL
Marketplaces bullish about enabling SMBs

Stated objective of attracting more local and global

brands and diversifying product offering
Emerging payment solutions to
promote SMB digitization

Full payment and commerce offering for small

merchants

Seeking to become Chile’s online shopping

mall and superapp

Full-service bank and marketplace for SMEs

Mexico-focused; building out local payment methods

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Emerging small business opportunity with new
marketplaces

Issuer engagement
around small business

• SMBs don’t have anyone

fighting for them at the issuer
level

• Large fintech/marketplaces
are a threat to banks

• Promoting platforms like

Shopify can help balance the
market in favor of issuers

Online store builders Smaller marketplaces

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Trend #5

Credit as the new enabler

Enablers of payment acceptance are partnering with credit providers to
provide credit for non-credit card holders
As a market with low regulatory barriers to offer credit, Mexico is a hub for companies offering solutions such as “Buy Now, Pay Later”

Buy Now, Pay Later Volume of e-commerce paid with

major players installments
65%

41%
28% 30%

13%

+
74k merchants accept RappiPay in Source: Local sources, AMI analysis
Mexico. Thanks to a partnership with
PayPal, Rappi users in Mexico can
now access interest-free installment
plans. PayPal is strategically pursuing
a global Pay Later initiative.
+

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Trend #6

Up-and-coming consumers
leapfrogging
What are consumers leap-frogging?
Payments newbies jumping to the next best thing

Paying Banking

From banks From bank accounts

To apps To crypto wallets

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Leapfrog effect driven by demographics and new consumer habits
Crypto currency flows to LAC, billions As a % of
2019-2020 e-commerce
volume

25 MM 55 MM Brazil $9.7 9%

100 MM+ neobank Venezuela $3.2

and wallet users Argentina $3.1 26%

Mexico $2.9 8%
7 MM 105+ MM
Colombia $2.8 18%

Chile $2.5 19%

50 MM
3 MM
Peru $1.2 17%
40 MM

Source: Public local sources, analysis

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What are consumers leap-frogging?

Shopping Socializing

From shopping on merchant From print and photo

websites/apps

To shopping on social media To video & streaming

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 Leapfrog effect driven by demographics and new consumer habits

Millions of social media users

198 201 193
152 153
133

64

5 16

Jul-19 Jan-20 Jul-20

Facebook Instagram Tiktok Brazil is #2 world

market after US
Social selling as % of retail e-commerce

China 12%
Social selling in LAC
• Pay links
US 4% • P2P payment
• Cash
Source: Public local sources, eMarketer, Comscore

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AMI 2021-2022 predictions

#1. Debit will become the #1 #2. SME online commerce will #3. Credit will become a top
payment method for center around Facebook and commerce enabler, more
everyone but the top 10%. Instagram, where wallets, bank finance options available at the
Credit to recover in 2022. transfers and pay links will compete point of sale
Bank transfers taking share for share
away from cash

#4. Pix will dominate as P2P and #5. Ecosystem players #6. Retailers will increasingly
become a major funding source (MercadoPago, Pagseguro, Rappi) become SME service providers and
for wallets, which will then fund will remain front-end ecosystems increase their overall market share
card-based purchases. It will running on top of card rails, with
also carve out a chunk of e- their eyes on banking/lending
commerce

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Q&A
AMI Coffee Chat series
Join us every other Monday at 11am EST
Scan me to register!

Lindsay Lehr
llehr@americasmi.com
 Working with AMI
LatAm’s top Payments Industry Market Intelligent Provider and Strategy Advisor

Available industry data

• Credit and debit card spend

• Top banks by cards and assets

Market Opportunity Competitive
landscaping benchmarking intelligence • Total retail spend and payment method breakdown

• 2016-2024 e-commerce data

• Wallets and estimated users

• Banking and smartphone penetration

Consumer/ Regulatory Thought leadership
end user research analysis and strategic • List of fintechs, payment facilitators, and industry players
Mystery shopping planning & capabilities

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Thank you!