FIS Worldpay’s latest Generation Pay Report provides crucial insight into how people in different age groups paid for goods and services in 2020 – information that online merchants can use to shape their sales strategy, billing infrastructure, and targeted marketing campaigns in different regions of the world.
The report’s conclusions are based on a survey of over 15,000 consumers spanning 15 different countries conducted in June 2020, with the results split into Gen Z (18-23yr olds); millennials (24-39); Gen X (40-54); baby boomers (55-73); and beyond boomers (74+). The first of a series of DOCOMO Digital blogs outlining its findings focus on four of the biggest economies in Latin America – Argentina, Brazil, Colombia and Mexico.
Cash still widely used for in-store purchases
There’s no doubt that the coronavirus pandemic has accelerated the adoption of contactless, digital and mobile payment mechanisms in all most every region of the world, mainly as a replacement for cash transactions. Even so, cash payments remain popular with specific segments of the population in Latin America.
Cash transactions amongst the over 23s in Argentina, Colombia and Mexico still account for almost anywhere between around one quarter (26%) and one-third (37%) of in-store purchases in each case, and 43% amongst the youngest Gen Z age group specifically. Brazilians, though, are generally much less reliant on cash to fund everyday transactions than their counterparts in the three other countries. Less than a third of its Gen Z consumers use cash for in-store purchases, for example, numbers that drop by almost half for the other three age groups.
Twice as many Brazilians in all four age groups (including 38% of Gen Z consumers) also rely on their credit cards to buy products in physical stores. That is probably down to the higher percentage of Brazilians aged over 15 who have an account with a financial institution (70%) according to World Bank financial inclusion data, double that of Mexico (37%) and significantly ahead of Argentina (49%) and Colombia (46%). The World Bank also estimates that 27% of Brazilians have a credit card, significantly more than in Colombia (14%) and Mexico (10%) but only slightly ahead of Argentina (24%).
Credit card usage is higher when it comes to online shopping in Argentina and Colombia, particularly among older Gen X and Baby Boomer generations. And with its higher ownership of both bank accounts and credit cards, it is especially pronounced in Brazil. But FIS Worldpay data also shows few Mexicans of all ages use credit cards to fund eCommerce purchases, partly due to the popularity of schemes like OXO PAY, allowing the country’s citizens to make cash payments for online transactions at banks and convenience stores.
eCommerce and mobile commerce activity is high
Lockdowns and social distancing restrictions that closed physical stores or restricted the number of people that could visit at any one time inevitably pushed more people to buy goods online.
All four Latin American countries saw considerable spikes in consumer e-commerce sales in 2020, according to Statista’s Market Outlook for E-Commerce data compiled in January 2021. Mexico saw sales expand 32% to almost US$19bn, with the average annual spend per user measured at US$371. Brazil followed a similar trajectory, with consumer e-commerce sales up 23% in 2019 to US$21bn, representing an average annual spend per user of US$202. Even more, pronounced rates of expansion were evident in Argentina (38%) and Colombia (34%) though from a much smaller base, to reach around US$5.5bn in both cases and the average annual spend per user is hitting US$223 and US$245, respectively.
Mobile commerce activity rates, too, are high across all four countries, according to GlobalWebIndex data. As of the third quarter of 2020, around 79% of Brazilians between the ages of 16 and 64 were using a shopping app on their smartphone or tablet to purchase at least once a month, for example. The figures were similar in both Argentina (78%) and Mexico (77%) but dropped to 66% in Colombia. Over half of those in Mexico (54%) and Brazil (51%) also purchased a product online via their mobile phone, compared to 45% in Argentina and Colombia.
Mobile wallets establishing a user base
With smartphones playing such an integral part in the shopping process, it’s unsurprising that the use of mobile wallets now looks well established across all four age groups in Latin America. Over a third of Brazilians in the Gen Z (37%) and Baby Boomer (35%) demographics use mobile or digital wallets. These figures rise to 46% for Millennials and 40% for Gen Xers according to the FIS Worldpay report.
The figures are almost identical for Mexico and Colombia, which again see around half (50%) of Millennials using mobile or digital wallets compared to just over a third of those in the Gen Z and Gen X categories. However, rates of usage drop significantly to 23% amongst the older generation of Baby Boomers in Colombia. Of all four countries, Argentina shows the highest penetration of mobile and digital wallets, with 57% of Millennials making a purchase using their smartphone apps and 51% of those in the Gen X age group.
Separate estimates from GlobalWebIndex suggest the total percentage of Argentinians and Colombians aged between 16 and 64 using or paying for mobile payment services such as Apple Pay, Google Pay or Samsung Pay at around 21% third quarter of 2020. The figures jump to almost 27% in Mexico and 36% in Brazil, however, almost certainly because they were earlier targets for global expansion amongst larger digital payment providers.
Mobile commerce sites driving payments growth
The tight (often default) integration of Apple, Google, and Samsung eWallets on new smartphones has undoubtedly helped drive the adoption of mobile payments in Latin America. But their growth is also down to the runaway success of Argentinian digital payment platform Mercado Pago, launched in 2003 and subsequently rolled out across Latin America. Mercado Pago is owned by the online marketplace and eCommerce giant MercadoLibre. The latest financial earnings indicate that Mercado Pago’s consumer base grew 125% to 13.7m active users in the third quarter of 2020.[i] Statista estimates the Buenos Aires-headquartered company handled US$5.6bn of transactions in the third quarter of 2020 via Mercado Pago, up 67% from US$3.4bn from the same period in 2019.
MerdacoLibre’s eCommerce app is extremely popular amongst Latin American consumers. It was the ninth most popular mobile app by monthly active users in Brazil during 2020, according to App Annie, and 8th in Colombia. SEA’s mobile eCommerce app Shopee also ranked ninth by the number of downloads in Brazil after first launching in October 2019, an early success that has led the company to announce it will scale up its operations this year.[ii]
App Annie also ranks both MercadoLibre and Mercado Pago as the fifth and sixth most popular mobile apps in Argentina by monthly active users in 2020, with Mercado Pago 7th in terms of total app downloads. MercadoLibre is ranked 8th in Mexico by engaged users, with fast fashion eCommerce platform SHEIN also placed ninth according to an unlimited number of downloads last year.
Many analyst firms predict significant growth in the volume and value of mobile commerce transactions over the next three to four years. Forrester estimates that the global value of smartphone purchases will grow at a CAGR of 13.6% to reach US$2tn by 2024, for example. And Juniper Research has predicted that the total global value of mobile commerce payments will reach US$3.1tn in 2025, up from US$2.1tn in 2020.
As the FIS Worldpay report shows, not everybody will want to use their smartphone to fund purchases. But a growing proportion, particularly amongst the younger generations, are now likely to eschew cash and credit cards in favour of eWallet payments, which are secure, contactless and easier to use.
[i] MercadoLibre, Inc. Reports Third Quarter 2020 Financial Results, MercadoLibre, 4th November 2020
[ii] REFILE-Sea group’s Shopee scales up Brazil operations, eyes Latam potential- sources, Reuters, 25th January 2021