The extraordinary rise of Latin American fintech can be attributed to several factors, all of which are transforming the region – policy, government backing, escalating internet and mobile penetration, and obviously, massive adoption in e-commerce – both locally as well as internationally.
Across the public sector, strong government support for expanding foreign investments has proven quite effective, allowing businesses to capitalize on government tax and investment incentives offered in the region. Notably, these incentives have targeted not only businesses but also private consumers.
In Colombia, for example, the government initiated a series of days without value-added sales tax in order to drive online spending in the wake of last Spring’s lockdowns. On Colombia’s three VAT-free days in 2020, transactions on PayU’s payment platform in Latin America saw a sevenfold increase compared with that of regular shopping days.
Migration towards e-commerce
It hasn’t just been government driving the uptake of fintech products and services in Latin America. In the LatAm market, key fintech players are offering quantifiable benefits to consumers and businesses alike, which has been especially beneficial amidst the health crisis.
At PayU, in our capacity as an online payments provider, we’ve observed firsthand the significant fintech adoption, with a strong migration towards e-commerce being one of the most obvious trends. Both domestic and international merchants are working quickly to implement e-commerce based on the current changes in consumer behavior.
The impact of spending more time at home
During 2020, over the course of the first seven months alone, PayU processed over 120 million transactions for over 25,000 merchants throughout Latin America. Essentially, this is a 70% growth compared with 2019.
Primarily driven by the fact that consumers had to spend long periods of time isolated at home, the popularity of online entertainment increased significantly. As a result, payments for the use of streaming platforms in LatAm increased, on average, by 100%. Likewise, with homeowners having no excuse to put off DIY home projects, home improvement projected substantially increased on average 130% from January to July.
Given this increased demand, it is imperative that companies have the ability to grow and scale online to keep up. For international merchants eager to make the most of the Latin American online consumer landscape, having a global payments partner with regional knowledge is a must.