In a country that has a 62% preference for the use of cash as a form of payment, the ability to build a bridge between the physical world and digital transactions could result in one of the most important challenges in this digital transformation.
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6 min read
This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.
By: Eric Rosenthal, VP for America at Rapyd, Fintech-as-a-Service Global Unicorn.
One of the effects of the new normal has been that electronic commerce continues to gain ground. Mexico is one of the Latin American countries that presents the greatest opportunities for international retailers and online markets. It is important to mention that, in 2020 alone, online purchases in the country grew by 30%, resulting in digital payment methods beginning to prosper. In the coming years, Mexico’s ecommerce revenue is expected to grow at an annual rate of 6.5%, resulting in sales of $ 21.8 billion by 2024.
But, in a country that has a 62% preference for the use of cash as a form of payment, the ability to build a bridge between the physical world and digital transactions could be one of the most important challenges in this digital transformation .
Also, taking into account that only 37% of Mexicans have a bank account, from the company we identified that in the country there are several ways to complete digital transactions for those who commonly handle cash. Among the most used are: printed coupons, payments made through mobile phones, prepaid or gift cards, and electronic purses in which points are accumulated (for example, plastic from supermarkets), in this way Mexican consumers they can take advantage of it to digitize their money in convenience stores.
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We continue at a time when many people, if possible, limit their mobility, and highlighting that only 34% of Mexicans have a credit card, offering more locations that accept alternative payments to cash benefits consumers and merchants alike. Even without the pandemic, it has been shown that providers need to offer a variety of payment options, and Mexico’s shift to online shopping is very likely here to stay, although for the next several years cash will continue to be critical to both online payments as well as those made physically.
Constant evolution
It is interesting to stop at one of the points that was pointed out at the beginning: 62% of Mexicans prefer to use cash. And this occurs in this context in which the growth of ecommerce had an acceleration like never before in history.
Now, why is this favoritism given for continuing to use cash. It goes without saying that Latin America is one of the least banked regions, but it is also true that virtual wallets and neobanks have thrived there. So why does this situation continue to occur? Undoubtedly, it is necessary to invest in financial education, since many people in Mexico and Latin America still believe that to use a digital payment method (MDP) it is necessary to have a bank account and, this false belief occurs both among consumers and merchants.
Of course, the feeling of insecurity also weighs heavily (fear of being a victim of fraud, hacking or suffering theft of the device in which the account is installed), and not being sure of “where” their values are, since they do not know the security of virtual wallets. Without a doubt, this is a shame, because many users are losing the opportunity to have more and better payment alternatives. Even better prices and a greater variety of products and services offered on digital platforms.
However, while users are slow to get on the new means of payments, fintechs have a large market ahead in which they can continue to develop, and even offer services that would grow their billing exponentially.
Part of this was warned by the Latin American Federation of Banks (Felaban) in its 2019 financial inclusion report: “The lack of financial education in Latin America is an obstacle to expanding access to financial products and services.” So, it is in this scenario that fintechs, with their flexibility and agility, become much more competitive and accessible to consumers.
Fintechs are closer platforms, which offer transparency and which, in addition, when the client begins to use them, they perceive their intuitive design. In addition, they have great strength in the face of what is coming: they can provide both B2C and B2B services.
This moment does not imply only a technological revolution, what we are experiencing is a cultural change in which those who best adapt will be those who can quickly reap the benefits. In this transformation, digital services are the heart of change, hence their exponential demand and also that they are so essential for everyone, consumers and organizations. And, of course, it is no less important that they have a lower cost for users and that they open the game of finance to those who until now have been ignored by the traditional system.
