Cash is no longer the preferred payment method for Latin Americans, as debit cards, credit cards, and mobile payments have gained popularity. This presents new opportunities for financial services companies, according to a recent report.
The shift away from cash
Mckinsey & Company revealed in its latest report that in just two years, debit cards have surpassed cash as the preferred payment option among Spanish-speaking Latin Americans. Mobile payments have also quickly gained traction, particularly in countries like Argentina and Peru.
Comprehensive payments surveys
These findings come from comprehensive payments surveys conducted in 2021 and 2023, which polled over 15,000 people across Spanish-speaking Latin America. The 2023 survey respondents overwhelmingly indicated a preference for cards and mobile payments over cash.
This is noteworthy given that Latin America is still largely a cash-based economy with high rates of informal employment, where many are still paid in and use cash for many transactions, the study noted.
Opportunities for growth, benefits for consumers
The shift in payment preferences is significant, as Latin America has seen substantial growth in payments revenues in recent years, and this growth trajectory is expected to continue. The soaring popularity of noncash payments demonstrates ample room for further expansion, presenting opportunities for banks and other financial services companies, Mckinsey & Company highlighted.
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This could also benefit consumers through improved payment experiences and more personalized offerings.
The rise of bancarization
Moreover, Latin America is undergoing “bancarization” – the process of extending financial services, including online banking, to the unbanked population. In 2019, only 30-50 percent of people in several Latin American countries had a financial institution account, compared to over 90 percent in Spain, the U.K., and U.S., and around 80 percent in China. By 2021, the share of Latin Americans and Caribbeans with a bank account had grown to about 73 percent.
Driving factors
This has been driven by the proliferation of new payment options and the impact of the COVID-19 pandemic, which pushed more people to try online banking and e-commerce as physical branches and stores closed during lockdowns, the report explained.Â
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