The importance of digital wallets has increased in the business sector. Learn more.
As the world restructures from the pandemic, the importance of digital wallets has increased in the business sector. E-commerce is more relevant than ever, and digital wallets provide a stable, flexible business model that can withstand even lockdown environments.
Digital wallets offer consumers the ease and convenience to make purchases anywhere, any time. Consolidation and streamlining are key to the consumer experience. Any technology company today should build or expand their digital payment capabilities to include wallets.
Even in the economic fragility of 2020, the use of digital wallets in Latin America rose 6% in 2020. Throughout Latin America’s biggest economies, digital wallets show a pattern of growth and promise. This article breaks down digital wallet’s importance to e-commerce in the Latin American region and points to the technology’s future. As Latin America thrives in the tech sector, digital wallets are a must-have for any company doing business in the region.
Digital Wallets: What Are They and Why Do They Matter?
Not to be confused with e-wallets or mobile wallets, digital wallets store payment information on the web that can be accessed through a site or a mobile device. Consumers save their card information in the wallets for easy, fast payment. Because you can use a digital wallet on a computer as well as on your phone, this quick, interactive technology is an important feature for any e-commerce business. Even better, global payments are easily accepted, too. For today’s worldwide retail infrastructure, an all-encompassing method of payment is imperative. With digital wallets, this alternative payment method can be easily accepted from all over the globe.
Digital Wallet Safety and Security Explained
Digital wallet providers change between countries, but each is designed to supply the highest level of security. While nothing is completely hack-proof, digital wallets are safe. Using encryption technology, information is considered more secure in digital wallet platforms than through credit card payment. For in-person transactions, digital wallets are not only easier to manage than shifting through a wallet, they also provide several levels of security – no card theft, and with the safety of a phone’s password code combined with the wallet encryption, there’s no question that digital wallets are incredibly secure.
How QR Code Payments Work
A QR is a “quick response” technology. These square symbols are scannable using the camera function on a mobile device to deliver information, not unlike a traditional bar code. QR codes are encrypted with coded details for events, information, product and purchasing information, and more. Many restaurants used QR codes as menus during the pandemic to avoid virus transmission through a touchless system. While QR codes hold more data and have more usability, they do not replace bar codes. QR codes are made for consumers, whereas bar codes are predominantly useful for companies to track inventory and buyer activity.
QR codes are important when it comes to digital wallets because this is part of a contactless payment system. Using a QR code for payment, a consumer can pay for a product or service with their digital wallet.
How Contactless Payments are the “New Normal” in Latin America
Just like QR codes offered a contact-free method to peruse a menu, trends set during the pandemic will continue into a “new normal.” In Latin America, contactless payments were already fast on the rise for their ease and quickness. Contactless payments are done with smartphones and are a global phenomenon. That makes a simple transition for businesses expanding to the Latin American region.
In large economies such as Brazil, Chile, and Costa Rica, 7 out of 10 were aware of contactless payments as of 2019. In a fall of 2020 study by Visa, numbers indicated that in-person payments rose by 30% in Latin America and the Caribbean, and in those transactions, debit cards were the preferred method of payment 72% of the time, and credit cards at 63%, while cash was favored in 44% of purchases. These transactions often occur through contactless swipe and chip methods, widely considered safer and healthier.
Latin America’s e-commerce, with 11% of all online transaction. They are having an enormous uptake across the region, helping to bring new people to e-commerce and becoming a hub for financial services and shopping experiences.
The above mentioned movement only accelerates an already evolving trend, as seen in the earlier 2019 account. Contactless means companies doing business in Latin America can spread a wider net in a faster, more efficient way. The massive potential for global business in Latin America means this region is lush with opportunity in our “new normal” world.
The Pandemic and the Rise of Digital Wallets in Latin America
While contactless payments are a rising trend along with QR codes, the biggest stake in Latin American contactless payments is the digital wallet itself. Comparatively, Latin Americans have low bank account numbers – as high as 70% of the population is underbanked or without an account, and so a number of different card-based ways to pay for goods are used. For foreign businesses, this may be a challenge. But, with digital wallets, the retail game stays mostly the same. Consumers distrust banks, but with a digital wallet, they can store and use their cash digitally, just like if they had a bank account.
Due to the pandemic, wallet-based payments in Latin America rose 6%. Many have found new opportunities through the use of a digital wallet or digital bank account.
The pandemic has definitely forced people to change their money management. The digital wallet opened doors formerly closed to the bankless. That means more opportunities and a probable rise in commerce through digital wallet technology.
Digital Wallets in Brazil
The e-commerce potential in Brazil is huge. The rise of digital wallet and debit card purchases was already evident in 2018 and 2019 which saw a $10.3 billion increase, but in 2020 the trend continued with a rise in revenue from $48.6 billion in 2019 to $54.1 billion in 2020. Brazil’s high, youthful population makes it a prime place to expand business using a digital wallet platform.
The time of digital wallets has come to Brazil.
Even though the use of digital wallets is already a reality around the world, in Brazil the scenario is a little different. When using a digital wallet Brazilian consumers can use their pre-saved card or their digital wallet’s balance to pay for the purchase.
Those who don’t have a credit card can use digital wallets as an alternative to the traditional financial system and make the top-up with alternative payment methods such as Boleto Bancário and bank transfer
Digital Wallets in Mexico
As the second-largest economy in Latin America, Mexico’s digital wallet growth is no surprise. In Mexico, digital wallets are a top choice for retailers. With high internet connectivity, already 43% of e-commerce took place through mobile devices in 2019. The option for an electronic payment method without a bank account makes digital wallets particularly attractive for Mexican consumers – and that means big opportunities for global business.
The impact of digital wallets in Mexico
Mexico’s high internet connectivity among the population is an opportunity for international merchants. With a youthful and tech-savvy society, Mexico has the second largest online population in Latin America.
To give you an idea, 43% of Mexico’s e-commerce transactions were made through a mobile device in 2019.
63% of the adults don’t have a bank account
3 High levels of internet penetration
More than 2 new million e-commerce users in 2020
Huge potential for new payments methods, such as Digital Wallets
In a market where the main payment method for online purchases is the card (debit and credit) and less than 37% of the population has a bank account, the question is: how to prevent the low level of banking from becoming a problem for the growth of e-commerce?
The answer lies in digital payment methods, such as wallets. In 2019, digital wallets payment method represented 11% of all e-commerce transactions, and this number has been increasing day after day4. The reasons that make this payment method so attractive are diverse. But, mostly due to them’ benefits, such as convenience, simplicity to pay - since the customer data is already tied to the digital wallet, the special promotions that make it possible to pay with installments free of fee for customers and merchants and security.
Ready to grow your business in Latin America?
Digital wallets are growing on a daily basis, offering security, speed and convenience. Now, more than ever, it’s the right time to embrace this payment method.
As a feature expanding the reach of our clients, FacilitaPay platform is already integrated with several local wallets, enabling users from these wallets to interact directly with international clients using the payment ecosystem provided.