Latin America has witnessed a remarkable surge in digital commerce in recent years, and leading the way is Brazil, which has emerged as the largest e-commerce market in the region, accounting for more than 30% of online sales.
Today we are gonna show you how you can increase your sales in retail by offering local payments in Brazil.
For businesses looking to venture into that market, it is crucial to have a comprehensive understanding of the payment methods preferred by consumers.
In Brazil, two payment methods, namely parcelamento (installment payments) and Pix, dominate the e-commerce sector, constituting approximately 80% of all transactions.
Before we delve deeper, we would like to introduce you to CambioCheckout, our innovative international payment technology designed to cater to the unique demands of the Brazilian market.
Unveiling the Growth of Online Shopping in Latin America
Online shopping has gained significant traction in Latin America, reflecting the region's strong appetite for e-commerce. The online retail sector, for instance, is projected to expand by a substantial 43% this year.
It is worth noting that the online retail landscape in Brazil is predominantly composed of small and medium-sized enterprises.
Diverse Payment Methods in Latin America
The online retail landscape in Latin America offers a diverse range of payment methods, mirroring the region's cultural and economic diversity.
In Brazil, where the e-commerce market reigns supreme, consumers exhibit specific preferences when it comes to payment methods.
Approximately 80% of e-commerce transactions in Brazil are facilitated through installment payments, a popular option that allows consumers to divide the total amount into manageable installments.
This payment method holds significant appeal for Brazilian consumers as it grants them easier access to higher-value products and services.
Furthermore, Pix, an instant payment system introduced by the Central Bank of Brazil, boasts an impressive user base of around 150 million Brazilians.
This innovative payment system offers real-time transactions available 24/7, eliminating some intermediaries and reducing transaction fees. Pix is also a fraud-proof easy method that naturally translates into higher conversion rates for businesses.
At CambioCheckout, PIX conversion rate accounts for an average of 90%.
Pix has experienced remarkable growth in Brazil, with over 70% of the population embracing this payment method, positioning it as the fastest-growing payment method in the country.
Inflation and Taxes as Influencing Factors
Inflation and taxes have emerged as critical factors shaping the payment landscape in Latin America.
The devaluation of local currencies against the US dollar prompts many Latin American consumers to opt for installment payments when purchasing imported products.
As for taxes, digital transactions are easily traceable for revenue purposes, which is why some consumers still prefer to pay with cash through "boletos."
In Brazil, using an international credit card in an international purchase is taxable at 6.38%.
This is one more reason why offering local payments is so important. When an international company has a local payments provider, such as CambioCheckout, it is able to charge locally while also eliminating currency exchange risks.
This way, customers pay 1.1% in IOF instead of 6.38%.
The Importance of Understanding Consumers' Preferred Payment Methods
Understanding consumers' preferred payment methods is crucial for international companies wishing to enter the e-commerce market in LATAM. In Brazil, the largest market in the region, installment payments and Pix are the primary methods used.
Therefore, it is essential to adapt payment strategies while expanding a business to Brazil.
By doing so, companies can enhance the shopping experience for consumers and increase their chances of success in the growing e-commerce market in the country
As mentioned earlier, Latin American consumers face various challenges when making international purchases. Ideally, the payment method should not be one of them.