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Nubank IPO highlights LatAm digital payments growth

November 8, 2021

latin man working and call by phone in a creative office in Mexico city

Luisa Muneratti

SVP – Iberia and Latin America

The imminent US$50bn IPO of Nubank, regarded as the biggest digital bank in the entire world,[i] let alone its native Brazil, illustrates how quickly Latin America is embracing new forms of payment. The company estimated contactless payments more than doubled in 2020 over 2019, leading to a partnership with Google in February this year, allowing its customers in Brazil to use their smartphones to make purchases linked to their debit/credit cards.

Research companies point to a rapid expansion of the Latin American digital payments market over five years. In its Contactless Payments: Trends, Opportunities and Market Forecasts 2021-2026 report, Juniper Research forecasts that Latin America will experience growth of over 400% in contactless mobile transaction volumes between 2021 and 2023.

Close eCommerce alignment

As in other regions of the world, increased consumer appetite for eCommerce, over the top (OTT) video and audio streaming services, and online food deliveries have played a pivotal role in driving the adoption of digital wallets during the lockdowns impacting Latin America over the past 18 months. Being contactless also provided a boost to citizens concerned about touching shared surfaces during a pandemic that saw high rates of coronavirus infection in Brazil, Argentina, Colombia, Mexico, Peru, Chile and neighbouring countries.

The continent has become one of the fastest-growing mobile app markets, fuelled by expanding smartphone penetration and rapid increases in mobile network speed, coverage, and capacity. A recent report compiled by App Annie (How to Win on Mobile in LATAM) estimates that consumer spending on mobile apps in Argentina, Brazil, Chile, Colombia, Mexico and Peru swelled 26% year-on-year to reach US$2.9bn (read more in my recent blog here).

The rise of digital wallets is also aligned closely with more people on the continent shopping online. Retail e-commerce sales in Latin America will be worth around US$85bn in 2021, according to Statista, up 15% in 2020 and forecast to reach US$160bn by 2025. Such is the opportunity that Southeast Asian eCommerce giant Shopee recently revealed plans to expand its initial Latin American presence beyond Brazil and Mexico and into other countries over the next few years, starting with Chile and Colombia.

The company currently offers two digital wallets of its own – ShopeePay and Airpay – in Southeast Asia, expected to make their debut as it scales up its fast-growing digital financial services activity (see Shopee building business in Latin America).

Cash still dominates but on a downward trajectory

Despite the growing popularity of electronic wallets (eWallets) and other forms of digital payment, the use of Cash continues to prevail in Latin America because so few people have bank accounts. The latest estimates suggest Nubank now has 35m users, for example. That’s just a fraction of the country’s 213m citizens, around 70% of which are considered “unbanked”. According to World Bank global financial inclusion data, they don’t have an account with a financial institution. It’s a similar story in Chile (74%) and Argentina (52%), which means Latin America offers more potential to expand digital payments than any other region in the world.

But Cash is also difficult to access in countries with few branches and ATMs outside of major cities, meaning people often have to travel considerable distances to get hold of physical currency. By contrast, mobile phone coverage is constantly expanding. The cost of smartphones continues to come down, meaning more people than ever in Latin America now have access to digital payment apps than ever before.

In its Mobile Economy of Latin America 2020 report, GSMA Intelligence estimated that 360m across the continent (57% of its population) were connected to the mobile Internet by the end of 2020. That still leaves nearly 300m people who are still to be reached, though new customers are forecast to add another 40m by 2025 as 5G networks from the region’s mobile operators come into play.

Regional fragmentation an obstacle to mCommerce merchants

Merchant acceptance of multiple forms of payments, including eWallets, QR codes and carrier billing, will also play a big part in dictating the pace of digital transaction adoption and activity in the future. However, Latin America remains highly fragmented, with government agencies and financial regulators in individual countries still evolving legislation to govern digital payments within their borders. That makes it significantly harder for merchants entering any one market to implement a single, standardised approach to growing their eCommerce and mCommerce business in the region.

Working with a payment aggregator with knowledge and experience of navigating local financial and telecommunications regulation in different Latin American countries can help here, as can partnering a specialist to negotiate deals with a local digital wallet, banks and other providers on the merchant’s behalf. Appointing another company to handle fraud protection safeguards and billing/refund processes that many merchants find complex and time-consuming to facilitate also leaves merchants free to concentrate on building and marketing their product and service portfolios.

Nubank’s IPO amply demonstrates investors’ confidence in the Latin American digital banking and payments sector – the region’s expanding mobile network coverage, smartphone penetration, and eCommerce activity appear to offer similar levels of certainty for merchants and consumers alike.


[i] 10 Biggest Digital Banks in 2021, TopMobileBanks, 16th July 2021

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