Digital B2B Payments Will Surge in Latin America as the Region’s War on Cash Intensifies

Current State of Payments in Latin America

The world has been in a war on cash for over half a century, as governments, businesses and consumers have moved to more efficient, secure, and traceable digital payments. However, some emerging markets have lagged behind, due to a number of structural and banking challenges. In Latin America, the numbers may look daunting, leading some to understandably suggest that the region is “Losing the War on Cash”. In Latin America, 81% of retail spending was still transacted through cash. The two top countries in the region — Mexico and Colombia — had a cash penetration of close to 90% in 2018. This compares to cash penetration of 24% and 18% in the US and China, respectively.

Source: AMI Analysis, 2018, “Latin America is losing the war on cash”, Lindsay Lehr
Source: United Nations Department of Economic and Social Affairs, 2019.
Source: World Bank, 2019
Source: CBS Insights, 2019

COVID-19: An Unexpected Catalyst for Digital Payments in Latin America

The ingredients for the wide adoption of digital payments in Latin America had fallen into place. All that was needed was a catalyst. We believe COVID-19 is that catalyst. Since the onset of the COVID-19 pandemic, we have already seen a meaningful uptick in online commerce, which is positively correlated with growing digital payment adoption. According to Forbes, over 63 million people (50% of the population) are now shopping online and are expected to drive online commerce growth of over 20% YoY in 2020. Based on a survey of Mexican Consumers, moreover, the Asociación Mexicana de Ventas Online (AMVO), (which studies trends in Mexico e-commerce) many consumers are shopping online for the first time. These consumers are going online to purchase a wide range of products and services, ranging from groceries to online banking…

Source: Netquest and AMVO, 2020
Source: JP Morgan Payment Trends, 2019

Implications for B2B Payments in Latin America

Latin America offers an impressive growth runway for digital B2B Payments solutions as the market is significantly underpenetrated. In the US and much of the developed world, B2B Payments Automation is playing catch up to B2C Payments when it comes to digital. But in emerging markets, including Latin America, both B2C and B2B Payments are allies in the war on cash. This is particularly the case for Small and Medium-Sized Enterprises (SMEs). A World Bank report on Global B2B Payments estimated that the Latin American B2B market reached $1.4 Trillion in 2016. Only 45% of that was electronic with the remainder being cash. This was lower than the global average for SMEs (53% of B2B Payments were electronic) and significantly below the High-Income OECD average (81%).

Source: World Bank, 2019
Source: INEGI, 2019
Source: Atradius Payment Practices Barometer, 2019
Source: Atradius Payment Practices Barometer, 2019
Source: Atradius Payment Practices Barometer, 2019
Source: Atradius Payment Practices Barometer, 2019
Source: INEGI, 2019
Fuente: INEGI, 2019
Sources: Netquest and AMVO, 2019

Our Investment in Yaydoo, the “Coupa of Latin America”

The COVID-19 crisis has opened a window of opportunity for companies focused on accelerating digital transformation initiatives in Latin America. We are convinced that CFOs across the region will need to adopt new technologies that automate the finance stack in order to better understand their cash positioning and make better capital allocation/budgeting decisions. While there are several structural challenges at the microenterprise level, we believe that the mid-market and enterprise-level will embrace increased automation of their finance/payment workflows.

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