Given the region’s unique context, leaders in the payments space must understand these trends to position themselves effectively for the future.

1. Inclusion and trust

Financial inclusion remains a top priority in Latin America, where a significant portion of the population remains unbanked or underbanked. Mobile devices are central to expanding access, enabling low-cost, convenient payment options that bring millions into the financial system. Initiatives like Mexico’s CoDi, which uses QR codes to facilitate payments and transfers, show how digital infrastructure can drive inclusion. Smartphone penetration in Latin America is expected to exceed 70% by 2025, providing a robust foundation for digital financial services. Trust will be crucial, especially as central banks explore Central Bank Digital Currencies (CBDCs), demanding stronger privacy and security measures from financial supervisors.

2. Digital currencies

CBDCs and private sector cryptocurrencies hold transformative potential for Latin American economies, with several countries already exploring digital currency options. Brazil’s central bank is preparing for a pilot CBDC launch, while El Salvador took a bold step by adopting Bitcoin as legal tender. These moves reflect the region's openness to digital currency innovations that can help address currency volatility and facilitate remittances, a critical lifeline for many Latin American economies. However, skepticism remains among central banks regarding the potential implications for monetary policy, and they will likely continue evaluating these assets’ viability with caution.

3. Digital wallets

Digital wallets are rapidly gaining traction across Latin America, fueled by growing smartphone adoption and the need for flexible payment solutions. These wallets offer access to various payment methods, including cards, accounts, and even cryptocurrencies. Companies like MercadoPago and Nubank are helping redefine financial accessibility and convenience, as digital wallets become central to both e-commerce and in-store transactions. Projections suggest that digital wallets could account for a substantial share of e-commerce payments in the region by 2024, shifting the landscape away from traditional card-based transactions.

4. Battle of the rails

The underlying infrastructure of payments in Latin America is evolving, with digital wallets and domestic payment platforms challenging established international card networks. Countries are focusing on building robust, regional infrastructure to reduce dependency on foreign networks and improve transaction speeds. Brazil’s PIX, an instant payment system launched by its central bank, demonstrates how local innovations are reshaping the financial landscape. As more nations look to develop their own systems, competition between traditional rails and new digital ecosystems will intensify, leading to increased interoperability and enhanced local payment options.

5. Cross-border payments

The high costs and inefficiencies associated with traditional cross-border payments are driving demand for faster, cost-effective alternatives in Latin America. Remittances are particularly important in countries like Mexico, and the demand for low-cost, instant payments is accelerating. New platforms and fintechs are stepping in to disrupt the traditional correspondent banking model, using blockchain technology and real-time networks to facilitate transfers. Initiatives like the partnership between Brazil’s PIX and Chile’s potential cross-border payment infrastructure reflect a trend toward regional integration, enabling faster and more accessible international transactions.

6. Security and compliance

The surge in digital transactions, especially in e-commerce, has created new opportunities for fraudsters, and Latin America is no exception. Open banking and the expansion of digital wallets open up new vulnerabilities, with scams like authorized push payments (APP) becoming more common. Security and compliance risks are a top concern for Latin American banks, fintechs, and asset managers as they navigate new digital finance models. As fraud detection technology improves, financial institutions and payment providers in Latin America are likely to collaborate more closely to bolster cybersecurity measures, albeit with some trade-offs in customer convenience.

Implications for merchants expanding in Latin America

Understanding these macro trends is essential for merchants who want to grow their businesses in Latin America, where the payments landscape is rapidly evolving. Here’s what merchants should focus on to align with these trends and drive expansion:

1. Embrace digital wallets and flexible payment options: as digital wallets become increasingly popular, particularly through platforms like PicPay and Pix in Brazil, merchants should offer a wide array of payment options. Enabling payments through these wallets not only meets local consumer preferences but also captures the expanding e-commerce and in-store customer base that relies on mobile payments.

   
   

2. Focus on cross-border payment solutions: for merchants looking to serve regional customers or international buyers, it’s critical to provide cost-effective, fast cross-border payment options. Partnering with fintechs that offer instant cross-border payments can streamline currency exchange and simplify regional sales, especially for markets with high remittance flows, like Mexico.

   
   

3. Invest in security and fraud prevention: the shift to digital payment channels heightens the need for strong security protocols. With rising fraud risks, merchants should adopt payment solutions that include fraud detection tools and compliance features, especially those that protect against scams common in the region. Building customer trust is paramount, and investing in secure payment solutions will reduce fraud exposure while enhancing user confidence.

   
   

4. Explore partnerships with local payment providers: Collaborations with digital payment providers can help merchants gain access to valuable consumer data and new market segments. Working with regional payment providers can also improve payment processing efficiency and deliver a smoother, localized payment experience for customers.

   
   

5. Consider emerging payment technologies: Merchants should stay updated on CBDCs and crypto-friendly payment options. As more Latin American countries, such as Brazil, explore CBDCs, these digital currencies may become mainstream in local payments, providing merchants a new way to cater to diverse customer preferences.

   
   

6. Optimize for mobile: Given the region’s high smartphone penetration rates, mobile-first payment solutions are essential. Merchants should ensure their e-commerce platforms are mobile-friendly and that in-app payment options are optimized for seamless transactions, whether for digital wallets or other mobile-enabled payment forms.

As the Latin American payments ecosystem embraces these macro trends, it will face both opportunities and challenges unique to the region. From increasing financial inclusion and trust to securing digital transactions, the future of payments in Latin America will depend on strategic adaptations by industry leaders, guided by local realities and consumer needs. Embracing these trends will not only redefine how people and businesses transact but also potentially drive significant economic transformation across the region.

By leveraging these insights and adapting to the region's unique payment trends, merchants in Latin America can better meet consumer demands, reduce friction in cross-border sales, and strengthen their market position.