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Why Latin America is the go-to-market for digital commerce businesses

Tuesday 13 August 2019 | 02:58 PM CET

Henrik Nilsmo, EBANX: With almost 440 million internet users, expected to have a smartphone adoption of over 70% by 2020, the LATAM market is ready and eager for international products and services

There is something counterintuitive about Latin America and its economy. Over the last few years, the region has faced economic and political challenges amid an unprecedented migrant crisis. Notwithstanding, one market has been growing steadily: the digital economy.

Not a lot of people realize, but Latin America already has more internet users than North America, becoming one of the largest digital markets in the world. Currently, 438 million people have access to the internet in these countries, in contrast with the 396 million in North America, according to Statista.

Access to the internet in the region has been growing hand in hand with the spread of smartphone penetration, which turned into a gateway to the world for Latin Americans.

Try to spend a few hours in a Brazilian city, for instance. You will soon notice the power of mobile internet in Latin America: everywhere you look, there is someone looking down at a cellphone. People communicate either with their neighbours or with total strangers, buy online from the local store or from a merchant in China -- everything over the phone.

By 2020, smartphone adoption in the region will be 71%, against a global average of 66%, according to a study by GSMA Intelligence. And, two years later, the digital economy will represent over half of Latin America’s GDP.

It is not a coincidence that investors’ enthusiasm for Latin America has been growing year over year. The region has been the apple of the eye of investments all around the world.

Uber’s second largest market worldwide is Brazil. Netflix is investing heavily in Latin America, where video on demand market is expected to double in the next five years. The streaming service has also recently partnered with young digital influencers from the region to boost the number of subscribers.

More than this, creativity and passion of people from Latin America have been fueling the creation of new, innovative technologies that solve problems and provide access in areas such as health, finance, and transportation.

Brazil itself has already at least six unicorn startups, and all of them have achieved this status since last year, in a rapid escalation. Colombia is the headquarters of Rappi, a delivery app which has taken over the region and expanded its services to pharmacies, office supply stores and other companies, bridging a logistics gap. It is also a unicorn.

Bearing this in mind, the Japanese group SoftBank announced earlier this year the creation of an innovation fund exclusive to tech startups in Latin America, with a USD 5 billion commitment. They are not the only ones to pour a significant amount of money in the region: venture capital firms and global companies such as Tencent, Series A, and DHL have also invested or partnered with Latin American tech local stars.

Growing online shopping

Access to local payment solutions, such as boleto in Brazil and Oxxo in Mexico, has helped boost online shopping in these countries. Last year, transactions reached USD 50 billion in the region, a growth of 18% over 2017, as shown by eMarketer. Five years ago, this amount was just USD 38 billion.

Take Argentina, for example, where the peso has gone through a rollercoaster ride, reaching its weakest level ever this year. Even so, online purchases in the country increased by 38% in 2018, according to Webshoppers. In the same year, 9 out of 10 Argentinians who have access to the internet made at least one online purchase.

In Colombia, the ecommerce market grew by an impressive 64% between 2015 and 2016. For this year, the expected growth is more modest, at around 20%, but still much more than the forecast for the national economy, which is expected to grow by 3.5%.

The fact is that Latin American consumers are eager to access global products and services. In a region with almost 650 million people, the middle class is growing steadily. In 2016, 44% of the region's online purchases were imported.

There is an old saying that in every crisis there is an opportunity. In Latin America, this has never been truer.

About Henrik Nilsmo

With over 10 years of experience in commercial and product leadership Henrik Nilsmo, based in New York City, is the Chief Commercial Officer of EBANX. He is leading the initiative to further grow and expand EBANX geographical reach and footprint, especially in North America, APAC and EMEA.

 

 

About EBANX

EBANX is a payments company that offers end-to-end payment solutions for global companies wanting to expand in Latin America. Founded in 2012 to bridge the access gap between Latin Americans and international websites, EBANX operates across the entire cross-border ecommerce transaction flow for international companies. It has operations in Brazil, Mexico, Argentina, Colombia, Chile, Peru, Ecuador, and Bolivia, and offices in Brazil, Mexico, Uruguay, Argentina, US, the UK, and China.

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