Interconnecting Asia Pacific and Latin America

ABOUT AMI

www.americasmi.com

Americas Market Intelligence (AMI) is the premier market intelligence firm for Latin America, providing powerful market and competitive intelligence-driven insights for companies to succeed in the region. With a specialization in the payments industry, its expertise includes eCommerce, neobanks and digital wallets, fintech, POS and acceptance technology, financial inclusion, crossborder payments, B2B payments, open banking, and real-time payments. Its customized research reports deliver data-based clarity and granular strategic direction based on expert sourcing.

AMI’s payments practice is focused on helping financial institutions, merchants, and others navigate the unique payments landscape in Latin America and compete in a rapidly digitizing environment. AMI consultants are recognized thought leaders in verticals such as eCommerce, payments innovation, contactless technology, real-time payments, and consumer and payment industry trends.

FOREWORD FROM NUVEI

www.nuvei.com

At Nuvei, we have long believed in the power and potential of connections.

At our core, we help our clients to connect with theirs by enabling them to accept payments or to pay globally. We are today the leader in terms of global payment coverage, with more than 570 different payment methods and local acquiring in nearly 50 markets. We have also developed our own proprietary solution that enables merchants and clients to connect with us and offer the local payment method, the local currency, and the local language in each given moment, device, or location.

With this in mind, we partnered with AMI to develop this report and provide timely insights on the connections between the Asia

Pacific and Latin American markets. Many of our clients are interested in eCommerce payment trends and growth drivers. Putting a spotlight on such important rapidly evolving markets ultimately helps businesses make better decisions.

This study marks the first in a series of reports we will produce, exploring opportunities for growth across different regions.

As tomorrow’s payment platform, we look forward to sharing our insights and working with our merchants to take advantage of the emerging opportunities.

YUVAL ZIV Nuvei President

LEGAL NOTICE

Wherever possible, AMI has verified the accuracy of information provided by third parties, but does not under any circumstances accept responsibility for inaccuracies should they remain unverified.

It is expected that the Client will use the information provided in this report in conjunction with other information and with sound management practices. AMI therefore will not assume responsibility for commercial loss due to business decisions made based on the use or non-use of the information provided.

AMI reserves the right to adjust the historical and projected data presented in subsequent and other publications as new and additional information becomes available.

INTRODUCTION:

Why Latin America and Asia? Connections and synergies

Asia’s connections with Latin America: Trade, technology, and cultural similarities

Despite being on exactly opposite sides of the globe, Latin America and Asia have deep commercial ties that help sustain the world economy. Trade between the two regions has grown significantly, at 9% annually, since 1995,1 driven by China’s growth in manufacturing and Latin America’s production of natural resources. Among the products imported by Latin America from China are electronics and machinery, chemicals and plastics, and textiles and footwear, while the main exports include minerals, agriculture and meat, seafood, processed food, and beverages.2 Total trade between the two regions is more than $500 billion annually.3

1. AIIB, 2019. Latin America and Asia trade: a future beyond commodities for manufactures

2. AIIB, 2019. Latin America and Asia trade: a future beyond commodities for manufactures.

3. Worldbank, 2019. World Integrated Trade Solution.

China has been Brazil’s most important trading partner since 2009, and between 1990 and 2021, trade between the countries grew 19% annually in imports (China to Brazil) and 18.5% in exports (Brazil to China).4 In 2021, total trade between these markets was more than $140 billion. The Mexico-China trade relationship also performs well, having grown 20% in the same time period,5 but it is much less symmetric; Mexico imports 11 times more from China than it exports.

The Chinese in particular have been buying assets in Latin America in recent years, ranging from energy to telecommunications. In 2021, China’s State Grid Corp acquired two Chilean energy companies and in 2020, China’s State

4. UN Comtrade, 2022.

5. UN Comtrade, 2022.

Imports from Asia Pacific, 2021

Exports to Asia Pacific, 2021

“The motivation for APAC merchants to reach LATAM is the size of the market and population. When looking to expand globally, LATAM can be the ideal geography.”

JUAN FRANCO

Nuvei Senior Vice-President and Founding Board Member of the Singapore-Mexico Chamber of Commerce

Power Investment Corp purchased Mexico’s renewable energy company, Zuma Energía. Huawei has operated as a telecommunications provider in 20 Latin American countries since 1999, and Xiaomi opened its first retail store in Mexico City in 2018 and in São Paulo in 2019. It also operates retail stores in several other cities in the region, such as Buenos Aires, Santiago, and Bogotá. Technology giant Tencent established its first data center in the region (São Paulo) in 2021. In total, investments from Chinese companies in Brazil grew by 208% from 2020 to 2021, reaching $5.9 billion. Brazil attracted 4.8% of Chinese investments globally in 2021, and in the Americas is only surpassed by the United States, which attracted 14.3%.6

Trade with Asia has helped Latin America gain access to low-cost technology, including smartphones and computers from brands like Huawei, Xiaomi, and ZTE. Digital brands, including AliExpress and DiDi, have also fared well, even becoming leaders in their respective industries. TikTok has exceeded 100 million users in Latin America, surpassing both Twitter and Snapchat.

According to the World Economic Forum, China will double its trade with Latin America by 2035 to $700 billion, accounting for 25% of trade in Latin America. In fact, over 600 investment projects in Latin America from Asian companies have been announced since 2020; these are slated to begin in 2022, and amount to a total investment of $75 billion. The two primary target countries are Brazil, with 26% of total investment, and Mexico, with 23%.

6. CEBC.org.br, 2022. Estudo Inédito—Investimentos chineses no Brasil.

FIGURE 1. COMMERCE WITH ASIA PACIFIC, USD BILLION

Many Asian companies, particularly Chinese, have been aggressive in their global expansion, and Latin America is not the only region where they’ve seen global success. However, Latin America is particularly wellsuited for Asian companies looking for new growth markets for several structural and cultural reasons:

Experience navigating digital transformation.

The Asia Pacific (APAC) region is vast, with more than two billion inhabitants and over 40 countries. While APAC is home to affluent markets like Japan, Singapore, and Hong Kong, most of APAC is considered a developing market. This means that internet, smartphone, and other technology adoption has taken place gradually over time, as well as unevenly and unpredictably. Asian companies have experience navigating the market inefficiencies that are commonly endemic to developing markets which are similar to Latin America, and are thus able to cleverly innovate to solve them.

Huawei

Bridgestone

DiDi

Xiaomi Telecom

Colombia

Argentina

Posco Mining 179 Mexico

Tsingshan Mining 370 Argentina

Samsung Technology 500 Mexico

Softbank Technology 3,000 Mexico

Enegix Energy Energy 5,400 Brazil

High levels of fragmentation.

In a region with over 40 jurisdictions, the need to localize is critical:

Indonesia alone has more than 20 locally used payment methods. Asian eCommerce companies have perfected the localization of content, marketing, products, and payment methods, and have clearly understood the need to follow a similar pattern in Latin America. The variety of local payment methods in Latin America ranges from central bank initiatives like Pix in Brazil and SPEI in Mexico to cash vouchers, including boleto bancário and OXXO Pay, and a multitude of digital wallets. With over 30 markets, Latin America also has varying regulations, tax laws, banking frameworks, and cultural patterns that APAC merchants must learn to navigate.

High smartphone adoption, mobilefirst.

Even in developing markets, Asian consumers can be considered early adopters of technology when it is within their means. With 70%+ smartphone adoption, Asian consumer brands are now mobile-first.

As such, the region has the most innovative eCommerce market and is the global leader in gaming. Similar attributes are found in Latin America, where many consumers skipped desktop computers and migrated directly to smartphones. Responsive, agile websites and apps that work on low-memory phones and with shaky connectivity have been key factors to success in both markets.

Population segments can be mobile-first and sometimes mobile-only, since a mobile phone is more affordable than a desktop for low-income consumers. Additionally, a mobile device may be simpler to use for segments with low literacy levels, allowing users to contact friends, family, and even clients through voice messages and to access information on social media through videos and images.

Tolerance for uncertainty.

Working in developing markets necessarily comes with a level of uncertainty, specifically related to regulation and economic volatility.

Fintech is a relatively young industry in Latin America and the regulatory environment has not fully caught up in all markets. As such, payment processors, fintechs, and merchants sometimes operate in a regulatory gray zone, which exposes them to some risk. Partnering with a local payments partner close to regulators, banks, and other local stakeholders can help international merchants successfully navigate such uncertainty.

Economic shocks can also occur in the region.

Since many Latin American markets are dependent on commodity exports, economic growth and the local currency are linked to the price of certain commodities, causing volatility. However, Asian brands are accustomed to navigating the challenges of developing markets on a much larger scale (Latin America’s population is 660K, in comparison). As such, they are well-equipped to weather the ups and downs of a region subject to external shocks and regulatory changes.

Table 1. Examples of investment announcements in LATAM by Asia Pacific countries, starting in 20227

7.

websites, AMI analysis.

Background and methodology

Search for new growth markets.

Like all global companies, Asian multinationals are on the hunt for new international growth markets. As Brazil and Mexico are both OECD (Organization for Economic Co-operation and Development) countries with large populations and rapid digital growth, they are natural destinations for those seeking new opportunities. These opportunities, combined with the structural and cultural similarities described on pages 4-5, make Latin America an ideal playground for Asian (and all global) companies seeking new growth opportunities.

Nowhere is this truer than in the Latin American eCommerce market, which has had growth in double digits since 2010 and continues to surge forward. The pandemic sped up the adoption of digital purchases and pushed consumers to first try new ways of paying. According to a study developed by AMI of 17 markets in the region, the total eCommerce market in Latin America will grow by 35% in 2022, reaching a volume of $395 billion, and will maintain 25% YoY growth through 2025. Driving this growth is the rise of bank transfers, which should grow by 60% in 2022 and are causing credit cards to lose market share of total eCommerce volume for the first time in history. Pix in Brazil is the number-one driver of this trend, but Mexico, Colombia, Argentina, and other markets are also experiencing this disruption. Payments via digital wallets are also an important segment

of the industry, considering that at least 20% of eCommerce shoppers access digital payments through a wallet or neobank as opposed to a traditional bank account.8

Latin America has also become easier to access for international merchants. In fact, the region can no longer be considered “highly unbanked” since the percentage rate of adults who own a financial account (from a traditional bank, neobank or digital wallet) for the region exceeds 70% and has exceeded 90% in some countries, such as Brazil, Argentina, and Chile.9 Mobile penetration fares even better, shooting to over 80% across the region, and is virtually universal in urban areas.

Availability of payment models that enable easy offshore operations.

A final trend making Latin America appealing to Asian B2C companies is the availability of technology that enables merchants to sell online to consumers locally, without opening a local operation. By using the “merchant of record” model, payment technology companies enable international merchants to accept payments locally as opposed to processing through an offshore acquirer. This allows merchants to have direct relationships with local acquirers, and to accept local payment methods in local currency. They can do this without opening a local entity or

8. AMI analysis.

9. Local central banks, 2022.

Nuvei, a leading global company in the payments industry, partnered with research firm Americas Market Intelligence (AMI) to develop this report, which provides a detailed account of eCommerce and digitization in Brazil and Mexico and tracks their similarities with the APAC region.

The data in this report comes from the AMI Latin America ECommerce Library, a detailed eCommerce database developed annually by AMI since 2015 and which covers 17 markets in the region. AMI develops this dataset via interviews with over 40 industry stakeholders across Latin America, accompanied by deep desk research and original AMI analysis. AMI complemented its ECommerce Library data with exclusive interviews with leading APAC eCommerce merchants and additional research on the APAC-Latin America digital corridor.

“LATAM has a very similar payments infrastructure to APAC. Enabling a payments corridor means that a merchant from APAC or LATAM, regardless of where they are located, can reach a market outside of their region.”

PRAFUL MORAR

Global Expansion Officer, Digital Payments, at Nuvei

having any local infrastructure whatsoever. This model has empowered not only large brands to succeed in Latin America but also small and medium-sized merchants across all eCommerce verticals.

In sum, Latin America is a prize market for international merchants looking for expansion opportunities, and Brazil and Mexico in particular are attractive for their size, dynamism, and cultural patterns that mirror those of Asian markets. This report will set out to provide readers with a deep dive into these two markets and guide them when considering market entry. It is the first in a series of reports covering multiple global eCommerce corridors.

Definitions

The following definitions and specifications are used throughout this report:

Table 2. Definitions

General terms

APAC Asia Pacific

Digital payment

Digital wallet (wallet)

Any payment made using digital technology, including eCommerce, P2P apps, QR codes, and NFC technology.

A digital financial services platform that allows payment through a mobile device. This includes fintech wallets that store a balance and other payment credentials, and bank-owned wallets used for P2P payments and contactless or QR code payments.

Fintech Financial technology; any technology that is used to support and enable banking and financial services.

eCommerce In this report, eCommerce refers to the online purchases of goods and services, encompassing all product categories, payment methods, and both local and cross-border purchases.

Payment methods

Bank transfers

Buy Now Pay Later (BNPL)

Debit cards

Digital wallet (wallets)

Cash vouchers

Bank transfers made for eCommerce through a direct bank integration with the merchant, as well as bank transfers through a dedicated real-time payment platform, such as Pix in Brazil. Launched in 2020, Pix is the Brazilian Central Bank’s real-time payment system.

A payment button that allows customers to buy and pay for the purchases in installments using a debit card, bank account, or any payment method other than a credit card. This is an emerging payment method in Latin America and includes providers such as Addi, Slightpay, Zip, and VirtusPay. These differ from traditional credit card installments, which are offered by the issuing bank and are available only to credit card holders.

A debit card from an international or local card network. Prepaid cards issued by digital wallets and fintech companies that draw off a digital account are included in this category.

A digital wallet is a payment method that stores a funding source on file. This could be a credit card, debit card, bank account, or stored balance, and this funding source is drawn on to send payments. ECommerce volume falls into the digital wallet category if the wallet brand is selected at checkout, even if a different funding source (such as a credit card) is ultimately selected to fund the transaction.

Payment platforms that enable eCommerce purchases in cash. Shoppers select the payment method at checkout and receive a barcode or code to provide to an affiliated retail location to make the payment in cash. Such platforms include OXXO and Paynet (Mexico) and boleto bancário (Brazil).

Credit cards A credit card from an international or local card network.

Credit card installments A service provided to card holders that allows them to pay for purchases made with the credit card over a fixed period, dividing the amount of the purchase into smaller equal payments.

Other Other payment methods included in the eCommerce analysis include one-time-use gift cards, direct carrier billing, meal voucher cards, and cash on delivery, among others.

Cross-border and domestic

Cross-border ECommerce purchases from a merchant located outside the buyer’s home country. Such a transaction is considered cross-border even if the transaction is processed locally.

Domestic ECommerce purchases from a merchant located within the buyer’s home country.

Banking and technology penetration

Adult population Population aged 15 years or older.

Financial account penetration Percent of the adult population that owns a bank account and/or other financial accounts.

Internet penetration Percent of the adult population that has consistent access to broadband internet or Wi-Fi.

Smartphone penetration Percent of the adult population that owns a smartphone.

Wallet penetration Percent of the adult population that has an account with a digital wallet.

ECommerce purchases facilitated by marketplaces or social media but in which the final payment does not take place over digital channels or is not captured by an eCommerce payment provider, known as remote commerce, are not reflected in the eCommerce market sizes mentioned in this report. ECommerce purchases from international visitors to Latin American countries or using credit or debit cards issued from a non-local bank are also excluded.

Other specifications

l All monetary values are expressed in US dollars unless otherwise specified.

l Please note that numbers in charts may not add due to rounding.

l The eCommerce data contained in this report is sourced from the AMI Latin America ECommerce Library, a database constantly under review and in process. As such, data contained in this report may differ slightly from other reports published before or after this present document.

BRAZIL: A GLOBAL LEADER IN PAYMENTS AND SHOPPING TRANSFORMATION

ECommerce is projected to increase at an annual rate of 20% between 2022 and 202610

10. AMI, 2022. E-commerce Data Library

Brazilians: Sophisticated, advanced, digital

Asian eCommerce merchants, known as some of the most advanced and innovative in the world, find many similarities between customers in China, Hong Kong, Japan, Singapore, and Brazil in terms of tech-savviness and digitization. But it has not always been this way; Brazil, as a developing market, has done a lot of catching up in the last three decades. Since the implementation of the Real Plan in 1994—designed to stabilize the economy in the midst of 4,000%+ inflation—until today, Brazil has undergone major economic and societal evolution, impacting the population’s relationship with money and its use in all types of commerce. Regulators have worked diligently to digitize money and payments, spread credit and debit card acceptance networks, and to promote eCommerce as an important tool for modernizing the economy.

10. AMI, 2022. ECommerce Data Library

More recently the government has incentivized digital banking, making financial products more affordable and accessible, and also created an interoperable transfer system (Pix) that has revolutionized the way people make payments. Pix has experienced aggressive adoption, with almost 2.2 billion transactions in August 2022,11 demonstrating just how far Brazilians have come in their payment journey and how digitally savvy they have become.

Today, thanks to these efforts as well as the work of banks, merchants, and fintechs, Brazil is a digital powerhouse, with 96% of adults having a relationship with a financial institution or fintech12 and rapidly declining cash penetration. Its eCommerce market will reach $211 billion in 2022, representing over 40% of the total volume in Latin America.

For these reasons, Brazil is one of the top 10 global markets for merchants who are pursuing international expansion, especially those from Asia, including AliExpress, Shopee, and Shein, all of which have become

well-known retail brands among Brazilian consumers in the past five years.

As of July 2022, 75% of Brazilians shop online, a whopping 128 million consumers. Of these, 58% are women, and the average age is between 36 and 50 years old13—a population that has money and experience and is ready to spend. In 2022 eCommerce represents 20% of retail sales, a number that rivals the United States. Brazilians are sophisticated digital shoppers and have come to expect innovative and seamless shopping and payment experiences. This has attracted world-class global merchants, in particular Asian companies experienced in serving a highly digitized, fast-paced consumer base. Between 2022 and 2026, annual eCommerce spend per capita is expected to increase at a CAGR of 19%.14

11. BACEN, 2022. Estatísticas do Pix.

12. BACEN, 2021. Relatório de la Cidadania Financeira 2021.

FIGURE 3. BRAZIL’S ANNUAL ECOMMERCE SPEND PER CAPITA, USD

13. Neotrust, 2022. People who bought online during 2021.

14. AMI, 2022. ECommerce Data Library.

FIGURE 2. ANNUAL ECOMMERCE MARKET SIZE AND PROJECTED GROWTH THROUGH 2026 IN BRAZIL, USD BILLION

Penetration of Asian companies in Brazilian eCommerce

Brazil has attracted world-class eCommerce brands from all over the world, but Asian companies in particular have flocked to Brazil, and are projected to continue this trend.

AMI estimates that 51% of all cross-border eCommerce in Brazil can be attributed to Asian merchants.

Asian merchants are arriving to Latin America in greater numbers each year15. Leading players include Shein, AliExpress (which have already established local operations in Brazil), Zalora, Shopee, Garena and Rakuten, among others. Shopee alone reported 270% year-overyear growth in the second quarter of 2022, according to its investors relations report.16 Newly arrived e-commerce merchants coming from APAC have the potential to double in volume each year through 2026 in LatAm.

While cross-border eCommerce in Brazil suffered in 2020, hit hard by the devaluation of the Real and interruptions in supply chains, it is quickly recuperating, growing 29% per year for the next four years, compared to domestic eCommerce growing at 19%. And the number of merchants coming from APAC is growing faster than either of these segments, at 55% per year through 2025.17

15. Interviews and AMI analysis, 2022.

16. FGV, 2022. 31st FGVcia Annual Survey.

17. GSMA, 2022. The mobile economy—Asia Pacific.

“Increasingly, merchants are looking to expand outside their home region and Latin America is at the top of their list, because they see the success so many companies have had since expanding to this region.”

This success has been made possible in part by the use of local payment partners as the merchants of record to handle payments and financial remittances. Beyond simply not needing a local entity, this model has several other advantages: It offers local acquiring, it enables acceptance to local-only credit card networks and boosts authorization rates, it reduces costs by eliminating fees and taxes on international transactions, and it makes consumers feel more comfortable shopping by providing a local look and feel.

Mobile-first

As in Asia, the smartphone has been a protagonist in Brazil’s digital revolution. It has played a key role in making financial solutions more accessible to the population, and today one can appreciate how important it is for merchants to be present across all digital platforms, including desktop, mobile, social media, and others. Brazil has more than one smartphone per inhabitant—234 million smartphones for just over 231 million individuals—and more than 447 million users on smart electronic devices (including tablets, notebooks, etc.). This amounts to 87% smartphone penetration across the population. In today’s economy, when making a transaction, Brazilians reach for their mobile device first. Meanwhile, by the end of 2021, the number of smartphone users in Asia Pacific exceeded 1.5 billion, an estimated 73% of the population.18

There were over 10 billion mobile app downloads in Brazil in 2021,19 or more than 19,600 apps downloaded per minute, which represents a growth of +30% compared to “pre-pandemic” 2019 data. This places Brazil in fourth place globally in number of downloads— making it a paradise for global brands delivering experiences and services through

18. data.ai, 2022. State of Mobile—Brazil.

19. data.ai, 2022. State of Mobile—Brazil.

the mobile channel. In the same year, China had 98 billion downloads, ranking first worldwide. Mexico, Japan, South Korea, and Colombia had 4.8 billion, 2.5 billion, 2 billion, and 1.8 billion downloads, respectively.20 Brazilian consumer spending in app stores grew even more aggressively, registering a +63% change in the same period and surpassing $1.1 billion, with categories like entertainment, gaming, and finance driving this growth.

Brazilian users spent an average of 5.4 hours daily on mobile devices in 2021, ranking first globally and 13% higher than the average of the top 10 markets for mobile use. Meanwhile, South Korea averaged 5 hours, India 4.7 hours, Japan 4.6 hours, Singapore 4.5 hours, United States 4.2 hours, and China 3.2 hours.

The most downloaded gaming apps in Brazil were Free Fire, Roblox, Coin Master, Craftsman, and 8 Ball Pool. This is evidence that consumers are increasingly migrating their gaming and entertainment consumption to mobile, as the mobile industry in Brazil simultaneously experiences enhancements in mobile storage, connectivity, device speed, and screen quality.

The increase in subscription payments has helped these platforms grow. Increasingly, Brazilians are more comfortable putting a card on file to pay for recurring subscriptions, a

20. data.ai, 2022. State of Mobile—Brazil.

behavior that increased significantly during the pandemic. The Brazilian eCommerce Association reports that subscription payments have grown 18% annually since 2018, with particular strength in video streaming, SaaS, and gaming, as well as food and beverage clubs, health and wellness services, and educational platforms. Better technology offered by payment platforms including subscription personalization (choosing your billing date) and easy cancellation have helped Brazilians to put their trust in this payment option.

Shopping apps also had an excellent performance in 2021; they experienced a 45% growth (compared to the previous year) in the total number of hours spent by Brazilians on apps, totaling 2.5 billion hours. Among the most downloaded apps in this category were Shein, Shopee, and AliExpress, once again demonstrating the success of Asian merchants in catering to Brazilian shopping preferences.

Mobile browser is also an important channel for retail sales. Digital wallets like Apple Pay and Google Pay have made online checkout within a mobile browser easier than ever, and payment methods like Pix cater to a young population (who may not have a credit card) and are most likely to be shopping on a mobile channel.

RAFAEL LAVEZZO

Nuvei LatAm Commercial Vice President

FIGURE 4. MOBILE DOWNLOADS AND AVERAGE DAILY HOURS SPENT ON MOBILE DEVICES

MOBILE APP DOWNLOADS (BILLIONS)

Brazilians are used to a strong and fast UX thanks to the rollout of Pix

The enthusiastic adoption of mobile was accompanied and supported by the launch of Pix in late 2020. The arrival of Pix, the Central Bank’s interoperable, real-time, mobile payment platform, was a transformative event in how Brazilian society relates to payments. The meteoric rise of its user base—achieving adoption of 124 million Brazilians (nearly three-quarters of the country’s adult population)—demonstrates the market readiness for a mobile-based instant payment method and forced banks and merchants to adapt to a much faster pace of commerce.

Pix will continue to increase its share of purchases as the Central Bank rolls out new features, such as Pix Garantido—installment payments with Pix—and allows cross-border Pix payments. As such, AMI predicts that bank transfers will reach 34% of eCommerce volume by 2025.

The vast adoption of Pix is making it even easier for Asian merchants to do business in Brazil. With over 70% of the population using Pix, compared to 37%24 penetration of credit cards, Pix acceptance now enables Asian merchants to access a larger portion of eCommerce shoppers. It is also less expensive for merchants to accept than cards, making it appealing to small sellers.

As Juan Franco, Nuvei Senior Vice-President and Founding Board Member of the SingaporeMexico Chamber of Commerce, indicates: “We have seen Pix revolutionize merchants’ business in Brazil, skyrocketing to represent 30% or 40% of merchants’ total revenue. It is also attracting new merchants to Brazil, particularly merchants from Asia who are looking for a seamless, easy, and low-risk way to accept payments.”

24. Central Bank of Brazil, 2021.

Note: Volumes21 were converted into dollars from reais using the average annual exchange rate according to ABECS.

Pre-Pix, bank transfers had only 2% penetration of online shopping, thanks to high fees, slow transfer times, and poor user experience. Pix completely transformed this scenario. In 2022, Pix is expected to represent 23% of total eCommerce, constituting 40% to 50% of sales for some merchants. For Asian businesses accustomed to using AliPay, WeChat Pay, and other mobilebased solutions for online payment, this shift has been quite painless.

According to a survey conducted by Gmattos Consulting and published by ECommerce Brasil,22 Pix is already accepted by 78% of eCommerce merchants, surpassing debit card and digital wallet acceptance. Currently, its acceptance percentage is the same as the traditional boleto bancário, a cash voucher payment method used for bills, B2B payments, and purchases. The chart in figure 7 shows how Pix acceptance among eCommerce merchants has grown since 2021, today reaching nearly 80%.23

21. BACEN, 2022.

22. Ecommerce Brasil, 2022. Pix reaches second place in the ranking of payment methods accepted in eCommerce.

23. Ecommerce Brasil, 2022. Pix reaches second place in the ranking of payment methods accepted in eCommerce.

Vast adoption of Pix Surpassing the credit card penetration

FIGURE 6. PIX TRANSACTION VOLUME, USD

FIGURE 7. MERCHANT ACCEPTANCE OF PAYMENT METHODS ONLINE

FIGURE 8. ADOPTION OF PIX VS. CREDIT CARDS, % OF THE ADULT BRAZILIAN POPULATION

FIGURE 5. BRAZILIAN MOBILE ADOPTION AND CONNECTIVITY

Vertical breakdown

Online retail is becoming a mobile experience shaped by influencers

Brazil has a diverse eCommerce landscape, led by retail, which represents 44% of eCommerce. In this “mobile-first” market, merchants in Brazil are reinventing the online retail experience by incorporating new technologies and channels. Following trends set in Asia, live shopping and “shoppertainment” are the latest developments, in which influencers interact with consumers via live videos and over social media. Leading Brazilian brands B2W, Americanas, Natura, and Renner have followed in the footsteps of Asian innovators in this respect, specifically AliExpress and Shopee, as well as live shopping platforms Be Live and Mood.

TikTok, of course, is the leading platform enabling the influencer economy. It boasts 52 million Brazilian users and 100 million users across Latin America.25 Considering that live shopping represented 13% of eCommerce sales in China in 2021,26 Brazil is following the footsteps of its Asian counterparts.

Large and growing appetite for gaming and digital experiences

Latin America had some of the fastest growth in revenues in the gaming industry in 2021, with Brazil, Argentina, and Mexico in the lead. Out of the 146 million gaming payers in Latin America, Brazil and Mexico together represent 68% of the entire region.27 Brazilians spend more than $1.6 billion annually on gaming, with mobile growing the fastest.28 Mobile participation is expected to triple in Brazil with the rollout of 5G to smartphones,29 already available in state capitals and scheduled to be available in all Brazilian cities by July 2029.30

The gaming industry represents an opportunity for financial inclusion because it attracts younger and lower-income consumers. Today in Brazilian gaming, the credit card is still the main form of payment thanks to the convenience of automatic recurring payments, but the acceptance and usage of Pix is growing dramatically, especially by crossborder merchants keen to capture Brazilian demand. It is also important to note that in Brazil, 19% of paying gamers would be willing to consider payments using cryptocurrencies for gaming-related purchases.31 And, according to an AMI survey of 300 Brazilian crypto users in August 2022, 42% reported having received compensation in crypto from a gaming or gambling platform.32 The gaming industry is proving to be a gateway into a digital lifestyle for millions of Brazilians, including in regard to payments, digital currencies, and metaverse experimentation.

42%

19% of Brazilian crypto users reported having received compensation in crypto from a gaming or gambling platform

of paying gamers would be willing to consider payments using cryptocurrencies for gaming-related purchases

25. Insider Intelligence, 2022. “TikTok now has more than 100 million users in Latin America.”

26. McKinsey Digital and AMI analysis, 2021.

FIGURE 9. BRAZIL ECOMMERCE BY VERTICAL

FIGURE 10. BRAZILIAN CRYPTO USERS AND GAMERS

Payment method breakdown and projections

Cards and Pix intermingle

Credit cards have historically dominated eCommerce purchases in Brazil (55% of volume in 2022), but the launch of Pix significantly changed the competitive landscape. Today, credit cards are used for higher-ticket retail items, travel, recurring purchases, and short-term education courses. Importantly, over 50% of online credit card payments take place via interest-free installment payments, demonstrating the importance of flexible financing options at the point of sale.

Going forward, credit cards will remain the leading payment method, but they are losing share to Pix and are projected to fall to 47% of volume in 2025. Pix is most popular for lower-ticket purchases, especially in retail and digital goods, and could increase its relevance for high-ticket goods with the onset of Pix Garantido. Debit cards have low adoption in eCommerce, representing just 1% of spend, and are not likely to grow due to Pix.

The future of boleto bancário

Boleto declined to 9% of volume this year, down from 15% in 2019 (pre-pandemic). However, boleto remains the top payment method used by Brazil’s unbanked population and can represent up to 50% payment share for some merchants. Industry observers believe that Pix will take share away from boleto in the long term, especially among young eCommerce users who prefer mobile-based payments. Boleto will remain the preferred payment method for older Brazilians out of habit and due to a preference for cash, and will represent 7% of the market by 2025.

BNPL and point-of-sale lending in Brazil

Offering credit at the point of sale through credit card installment plans is common in Brazil, as in the rest of Latin America, but in recent years fintech companies, merchants, and marketplaces are offering credit via new solutions. New Buy Now Pay Later (BNPL) players are issuing credit to non-credit card holders and improving the customer experience. However, this is a risky endeavor considering the average default rates in Brazil are between 10% and 20%, a very different reality from Asia and the United States, and the BNPL model is too new to guarantee its viability.33

Additional point-of-sale financing comes from the Central Bank, which announced Pix Garantido, a transfer system in which the full value of the purchase is guaranteed by the customer’s bank and paid via Pix; the customer pays the installments he or she owes to the bank, with interest. This payment method is expected to further revolutionize the use of installment payments in the Brazilian market and compete with both credit card installments and BNPL fintechs. Although highly anticipated by the market, the latest official pronouncement from the Central Bank (17th plenary meeting on September 22, 2022)34 mentioned that the “Pix Garantido/ Crédito” product is still in the initial design phase, with no expected launch date.

Cryptocurrency

As early adopters, Brazilians are leaders in cryptocurrency adoption. A survey conducted by AMI in April 2022 signals that among smartphone holders, 35% had purchased cryptocurrency. This represents remarkable growth over September 2021, when just 19% had bought crypto. In addition, 44% say they are interested in purchasing crypto,

33. AMI interviews.

34. BACEN, 2022.

FIGURE 11. ECOMMERCE VOLUME BY PAYMENT METHOD IN 2022 AND 2026, USD BILLION

Source: AMI, 2022 ECommerce Data Library.

foreshadowing future growth. Among leading crypto exchanges are international players, mainly Binance, as well as local exchanges like Mercado Bitcoin.

Yet, crypto usage is still in its early stages, with usage highly concentrated in investment. In another AMI survey of 300 crypto users conducted in August 2022, 81% said they bought crypto for investment purposes, while 10% said they used it to make a purchase. As such, cryptocurrency is far from being considered a mainstream payment method, even for online purchases. What’s more, among those making purchases with crypto, the leading use case is with a crypto debit card, which does not require merchants to accept crypto. There is still much to be done in terms of clarifying the regulatory regime and consumer education before merchants must consider accepting crypto as a payment method.

However, high crypto adoption in Brazil presents myriad other opportunities to enable international connectivity. As Javier Guerrero, Mexico Country Manager at Nuvei, says, “Latin America has an opportunity to strengthen B2B through relationships with Asia.” Payouts via crypto can help strengthen gig-economy companies that want to pay contributors on their platforms in Latin America, Latin America-based marketplaces onboarding Asian sellers, and other use cases that require agile and flexible B2B money movement.

Additional considerations: Regulations, taxes, and logistics

The Brazilian Central Bank is famed globally for its ability to push innovation and modernize the Brazilian payments system. This does not stop with Pix. In March 2020, the Central Bank of Brazil published the country’s first rules for Open Banking. In 2021, the Open Data and Transactional Data phase began and in 2022 the third phase came into force, launching the payment initiation feature. Payment initiation will further remove the friction of digital payments and move spend from physical to digital, driving Pix usage and financial inclusion overall.

Regulatory change is also happening in sports betting. The market was legalized at the end of 2018 (Law 13.756/2018) and its regulation and specific rules should be put in place by the end of 2022. In this window, hundreds of gambling platforms have entered Brazil, mostly from Europe, but they operate within a legal gray area. By the end of 2022, the expectation is that a solid regulation will be put into place and provide the foundation for even more growth of this market, which already totals nearly $5 billion.

Brazilian logistics have evolved significantly in recent years with the modernization of Correios (the national postal service) and the investments of several Asian companies to speed up the delivery times of physical products to the Brazilian market. Not long ago, it was common for a product purchased on a Chinese marketplace to take one to two months to arrive in Brazil, but currently this period is around one to two weeks.

Of course, there are still big challenges to solve. Brazil is known for having a complex tax policy and regulations on specific topics that, many times, can cause confusion for companies, consumers, and even for the inspection agencies themselves. Crossborder eCommerce can be held back by a controlled F/X regime, the high cost of funds repatriation, and additional tax on cross-border transactions, but local payment processing through a trusted partner can help international merchants avoid these challenges.

All in all, the expected regulatory improvements, digital evolution, and continued influx of Asian merchants into this dynamic market will guarantee growth rates north of 20% annually, promising a bright future for merchants of all kinds selling to Brazilians. And with payment partners that enable local payment processing and assistance navigating the local landscape, Asian merchants located halfway around the world will find selling to Brazil can be as simple as selling to consumers in their local market.

MEXICO: 30%+ GROWTH IN THE WORLD’S LARGEST SPANISH-SPEAKING MARKET

ECommerce is projected to sustain an annual growth rate of 32% between 2022 and 202635

Mexico: Surging toward digital, thanks to alternative payment methods

Mexico, as the second-largest market in Latin America and home to 130 million people, is another hugely attractive market for Asian merchants expanding globally. For many, Mexico may even be a first option over Brazil, as it has a less competitive local market and a simpler regulatory regime, and will grow faster in coming years. Mexico is also quite unique in terms of the local payment method mix, which is well-suited for APAC merchants. Mexico is famous for the high penetration of cash in eCommerce as well as debit cards and digital wallets. As Praful Morar from Nuvei states, “Latin America, especially Mexico, boasts a unique ecosystem of alternative and local-based payment methods, a reality Asian merchants are familiar with.”

Penetration of banking services reaches 58%36 of Mexicans, much lower than other large markets in the region. This may seem like a limiting factor for eCommerce, but it actually has not had this effect. Cash payments in eCommerce, representing 10% of total volume, have empowered the unbanked to shop online, and today, nearly 70% of Mexicans are eCommerce shoppers.

For many, Mexico is an enigma: a large middle-income country far behind its peers in certain digital indicators.

And yet, eCommerce in Mexico is booming, growing at 32% annually through 2026. This growth is underpinned by a digitizing consumer base, high smartphone penetration and organic growth as Mexicans embrace eCommerce as part of their daily routine. In 2021, Mexicans increased their frequency of purchase; the percent of eCommerce shoppers buying monthly increased 14 percentage points in 2021.37 In 2022, Mexicans are spending an estimated $335 per

capita on eCommerce, and this amount will reach $1,222 in four years’ time. At the market level, this equates to a total market size of $53 billion in 2022, three times the size of the next largest market in the region, which is Colombia. In fact, Mexico’s eCommerce market is projected to reach a volume of $160 billion in 2026.

“Latin America has an opportunity to strengthen B2B through relationships with Asia.”

JAVIER GUERRERO

Mexico Country Manager at Nuvei

35. AMI, 2022. ECommerce Data Library.

36. AMI analysis based on public sources, considering the penetration of traditional banks, fintechs, and digital wallets.

37. AMVO, 2022. Estudio de venta online: El consumidor digital mexicano. 2022.

FIGURE 12. ANNUAL ECOMMERCE SPEND PER CAPITA, USD

FIGURE 13. ANNUAL ECOMMERCE MARKET SIZE AND PROJECTED GROWTH THROUGH 2026

ANNUAL ECOMMERCE SPEND IN MEXICO, USD BILLION

Penetration of Asian companies in Mexican eCommerce

Mexico is a terrific market for cross-border eCommerce, thanks to its open trade regime and proximity to the US. Due to the limited availability domestically, Mexicans have learned to shop abroad and consume digital goods from all over the world. As such, over a quarter of Mexico’s eCommerce is cross-border,38 the highest share among Latin America’s large markets. Cross-border sales are growing at a much faster clip than domestic, at 39% annually vs. 30%.

Within this volume, the US takes the majority share, while Asian merchants represent an estimated 12% and growing.39 With eCommerce in Mexico growing by 32% annually, more companies from APAC are getting serious about Mexico. Leading Asian eCommerce merchants that are interested in Mexico include AliExpress, Shein, Shopee, Garena, Samsung, DiDi, Xiaomi, Banggood, and BIGO, among others.

Mobile-first

Growth of cross-border and domestic eCommerce is due to several factors, first and foremost the adoption of smartphones. Since 2019, nearly 10 million new Mexicans became smartphone users, reaching a total countywide penetration of 74%. Mobile commerce represents 75% of the total market, or $471 per shopper per year, compared to $308 annual desktop eCommerce spend per computer user.40

38. AMI, 2022. ECommerce Data Library.

39. AMI analysis, 2022. Interviews.

40. AMI, 2022. ECommerce Data Library.

The prevalence of low-cost (~$30) Chinese smartphones, accounting for 30% of smartphones in 2022, up from 19% in 2019, has helped smartphones to proliferate. Huawei remains dominant among Chinese smartphone providers, although Xiaomi is set to overtake Huawei in 2023.41 As such, the newly digitized Mexican consumer requires websites and apps which are simple to use and have an intuitive mobile design. Limited phone storage and internet bandwidth are an issue for many, so developing a Mexicanfriendly mobile user experience requires an approach designed to address these challenges.

Within social media, TikTok is taking Mexico by storm. There are 35 million users in the country and overall, some 27% of Mexicans use TikTok, compared to 25% of Brazilians. Live commerce is still in its infancy, generating only 1% of retail volume in 2022, although Samsung successfully launched a campaign in April 2022 that generated $1 million in under one hour of live streaming with an audience of 24,000 viewers.42 Mobile is the first channel to access the Internet for most new eCommerce users, and mobile commerce is projected to grow 37% annually through 2025, compared to just 10% for desktop. Mexicans are savvy mobile users, increasingly willing to make mobile payments and purchases. 41.

Vertical breakdown

FIGURE 14. MEXICAN MOBILE ADOPTION AND CONNECTIVITY

FIGURE 15. ECOMMERCE VOLUME BY VERTICAL IN MEXICO, 2022

Mexican retail giants

Part of the reason eCommerce performs well in Mexico is the high concentration of online retail among market leaders. Retail volume accounts for nearly two-thirds of eCommerce, with about half of this volume concentrated among the top five retailers: Mercado Libre, Amazon, Walmart, Liverpool, and Coppel.43 These merchants continue to invest in the eCommerce channel, signaling its future growth. In the first half of 2022, Walmart’s eCommerce sales in Mexico are growing at twice the rate of in-store sales, and direct home delivery sales (Despensa a tu casa)

43. America retail, 2022.

even grew by almost 180%. In the second quarter of 2022, Liverpool increased its sameday and next-day delivery by 89% Y-o-Y. The volume of goods sold via Mercado Libre’s marketplace between January and June 2022 surpassed $3 billion in Mexico, up 24% Y-o-Y.44 Both Mercado Libre and Amazon have banked on the growth of small businesses for their eCommerce platforms, which generated 50% of Amazon’s Mexico sales in 2021.

As such, online sales are increasingly a priority for retailers and in 2022 represent 11% of total retail sales—and are forecasted to represent 28% by 2026. This aggressive growth is an attractive incentive to international newcomers who can help augment the domestic market and provide variety and price competitiveness to market leaders. The leading APAC merchants in Mexico are online marketplaces, providing a wide variety of goods at lower prices to Mexican consumers. In 2022, 95% of eCommerce shoppers said they bought a product online, compared to 75% who said they purchased a service. The top-performing retail categories in eCommerce include apparel, electronics, books, toys, beauty and wellness products, appliances, and home décor, with electronics and home décor experiencing the greatest increase over 2021.45

Digital goods drive new online shoppers

International merchants selling digital goods and services are thriving. Gaming platform revenue is dominated by companies hailing from Asia and the US, primarily Microsoft’s Xbox, Sony’s PlayStation, and Valve’s Steam, followed by Japan’s Nintendo. Gambling is expected to grow by nearly 40% in 2022, pushed by merchants like Spain’s Codere and the US’s Betway, as well as local platform Caliente. Netflix, Disney+, HBO Max, and Amazon Prime Video account for 93% of video streaming subscriptions, whereas Spotify, YouTube Music, Apple Music, and Amazon Prime Music account for 94% of music subscribers.

Digital goods also serve as the gateway to converting non-eCommerce users. Mexico is home to 12 million streamers (13% of internet users).46 FEMSA reported that digital subscriptions like Netflix and Spotify accounted for 24% of the total payments volume received by OXXO Pay in 202147 and one-fifth of Netflix’s subscribers in the region are in Mexico.

44. Company websites, AMI analysis.

45. AMVO, 2022. Estudio de venta online: El consumidor digital mexicano.

Helping to spur on this growth is the increasing adoption of subscription payments. While Mexican consumers may feel more comfortable with prepaid access to digital platforms, recurring subscriptions are becoming increasingly common with the boom of streaming and gaming. This is especially true when these consumers have built-in technology like tiered pricing, customized subscriptions, card updaters, smart retries, and the ability to pause and resume subscriptions. The more trust and user control merchants can build into their subscription payments, the more success they will have, especially with a population that often prefers cash.

These platforms have succeeded due to cash-based and prepaid payment methods that enable the unbanked to purchase online. Cash payment platforms like OXXO Pay, Paynet, and 7-Eleven, which experienced a reduction during the pandemic, are still hugely popular across all eCommerce verticals, including digital goods. In 2022, Amazon launched Pago en efectivo en tienda, partnering with OXXO, Farmacias del Ahorro, and 7-Eleven to enable cash payments at over 25,000 package pick-up locations throughout the country.48 Prepaid cards offered by streaming platforms and reloadable digital wallets, e.g., Walmart’s Cashi, also provide access to eCommerce by the unbanked, enabling Mexican consumers to purchase streaming directly, as well as pay their utility, internet, and TV bills, and perform mobile top-ups.

46. The Consumer Intelligence Unit, 2022. Competencia y Preferencia por Plataformas SVOD al 4T-2021. Netflix, 2002. 2Q22 investor relations report, AMI analysis.

47. FEMSA, 2021. Annual report.

48. Company websites, AMI analysis.

Payment method breakdown and projections

Cash keeps its crown

Given this, successful eCommerce merchants across Mexico understand that accepting cash payments remains essential. ECommerce transactions paid for using Oxxo in the first half of 2022 enjoyed a Y-o-Y increase of 43% compared to the same period in 2021, with an average ticket of $38.49 Cash use declined during the pandemic, but AMI research reveals that cash for eCommerce rebounded in 2022 and will once again climb in the short term, maintaining 10% share in 2026. With 30 million consumers who still do not shop online, cash will remain the gateway payment method for those who are going through a process of digitization.

Simultaneously, Mexican consumers are beginning to adopt digital wallets. ECommerce wallets and Buy Now Pay Later providers are serving as evangelizers of digital payments. In general, Mexican fintechs and wallets are capturing the attention of younger generations. In just under two years, Rappi has issued 602K credit cards, 78% of which belong to users under the age of 36. In Mexico, the adoption of digital habits will be largely generational and will continue to accelerate as young people are introduced to digital experiences and products at an early age.50

Bank transfers gains some scale

Another payment method in Mexico is bank transfers through SPEI, the Central Bank’s inter-bank payment rails. While bank transfers flowing though official eCommerce gateways totals less than a $1 billion in 2022, it is gaining steam, following a regional trend of bank transfers growing as an online payment method. It is

49. Forbes, July 2022.

50. Banorte, 2022. 2Q22 investor relations report, AMI analysis.

particularly attractive to Mexicans without a credit card or who are worried about using a credit or debit card online for fraud reasons.

Cards remain the principal rail for eCommerce

Despite the importance of alternative payment methods in Mexico, credit and debit cards account for 66% of Mexican eCommerce, signaling that eCommerce is mostly concentrated among an affluent consumer base. Debit cards in particular are important, representing 25% of spend, the highest proportion in the region. In fact, Mexican banks are leaders in the region for debit card enablement for eCommerce: 100% of debit cards issued locally are enabled for online purchasing, and debit cards issued on an international card scheme (Visa or Mastercard) have no restrictions when it comes to cross-border shopping.

Credit cards are the top eCommerce payment method, representing 41% of spend. According to the banking regulator CNBV and the national statistics agency INEGI’s 2021 Nation Survey on Financial Inclusion, 31% of Mexicans over the age of 15 have a credit card. Although department store credit cards have nearly twice the penetration of bankissued cards, consumer protection agency CONDUSEF reports that bank-issued cards generated 99% of 2021 eCommerce card volume.51

Cryptocurrency

Mexico’s proximity to the US results in a remittance corridor of approximately $60 billion annually. In August 2022, Bitso, a Mexico-based cryptocurrency exchange, reported facilitating $1 billion in crypto remittances between those two countries in the first half of 2022. An AMI survey conducted in 2022 reveals that 28% of Mexicans over the age of 18 have purchased

FIGURE 16. ECOMMERCE VOLUME BY PAYMENT METHOD IN 2022 AND 2026, USD BILLION

Source: AMI, 2022. ECommerce Data Library.

51. CNBV and INEGI, 2021. Nation Survey on Financial Inclusion.

cryptocurrency. More than half of these consumers are frequent buyers. To capture these flows, Mexican merchants are testing the acceptance of cryptocurrency. Rappi piloted the acceptance of cryptocurrency in 2022. As part of its omnichannel strategy, Elektra announced that it aims to accept any form of online and offline payment, now including Crédito Elektra and Bitcoin.

However, merchants don’t need to rush to enable crypto payments just yet. In AMI’s survey of 300 Mexican crypto users, 9% said they had made a purchase with crypto, with a purchase via crypto debit card being the leading use case. These cards convert crypto to fiat at the time of purchase, so merchants never touch the cryptoasset. Interestingly, half of crypto purchasers mentioned doing so within a metaverse platform, indicating there may be opportunity to enable payments in emerging platforms like Decentraland and Sandbox for the purchase of virtual goods. These tend to be micropayments (<$5), which require agile, instant, and low-cost payment methods.

Additional considerations: Regulations, taxes, and logistics

The Fintech Law

Mexico’s Fintech Law is slowly making fintech more viable. After a freeze in approvals during 2020 and 2021, the CNBV has authorized 38 entities as of September 2022, including 24 Institutions of Electronic Payment Funds (IFPE) and 14 Collective Financing Institutions (IFC), in accordance with the 2018 Fintech Law.52 The Law’s key function is to increase the accessibility and penetration of digital goods and services among the population by creating a fast-track process for fintechs to offer financial services without necessitating a banking license. The IFPE license permits nonbank institutions to hold funds electronically, legalizing the operations of wallets such Santander’s Superdigital. This is increasing access to digital payments and boosting eCommerce as a result.

52. Latamfintech, 2022.

Trending toward high-speed logistics

Despite a triple-digit surge in demand for deliveries in 2022, Walmart’s average direct delivery time remains three days. Nevertheless, retailers began heavily investing in logistics capabilities to keep up new global standards in 2020. Logistics are improving, making purchasing goods online more accessible to consumers.

Pushed by demand, Elektra is investing in offering free delivery. Liverpool, a leading department store, reports a constant shift toward same-day and next-day deliveries to satisfy demand.

Growing more aggressively, Rappi’s 10-minute delivery service Turbo now represents 10% of volume in cities in which it operates after launching in February 2021. Rappi Turbo leverages a network of over 70 dark stores, and new users increased by 485% Y-o-Y in the first half of 2022.53 This has attracted competitors such as Jokr, which now offers 15-minute delivery in select Mexican cities after announcing the closure of its US operations to focus on Latin America.54

In conclusion

To close, Mexico presents vast opportunities for global merchants, with growth prospects of 30% or more per year. Virtually all Mexicans over the age of 15 will have internet access within the next four years, although nearly a third have yet to shop online, meaning new, young, digitally savvy consumers are rapidly coming to market. Retail remains the principal driver of Mexican eCommerce, bolstered by 16 million new online shoppers since 2020. Despite the rapid adoption of digital technologies in Mexico, accepting cash remains a requirement for merchants seeking to enter the Mexican market. Alternative payment methods, including cash vouchers, bank transfers and digital wallets, engage new online shoppers, facilitating access for the 56 million adults without a financial account. As such, international merchants must accept local payment methods to fully enjoy the prosperous growth of the region’s second-largest economy. This can be done through an experienced payment partner with local expertise.

FIGURE 17. PENETRATION OF SAME-DAY AND NEXT-DAY DELIVERY SHARE OF LIVERPOOL ECOMMERCE

Source: Liverpool, 2022. Investor’s Day report.

53. Pro Network, 2022.

54. Techcrunch, 2022, and company website.

FINAL THOUGHTS

The commercial relationships between the Asian and Latin American markets bring relevant results to the global economy and for decades have been responsible for supplying raw materials to Asia and industrialized products to Latin America. More recently, eCommerce has been a source of commercial ties between the regions, with APAC companies succeeding at selling to the more than 300 million Latin American eCommerce shoppers.

There are many reasons for this, among them the rapid growth of eCommerce, especially in the region’s two largest markets, Brazil and Mexico. With smartphone penetration over 70% and access to digital payment methods increasing, companies both local and global are ramping up their investments in eCommerce and digital experiences in Latin America.

In Brazil, eCommerce opportunities for businesses have generated tremendous results as financial services for the banked

and unbanked become more accessible, Pix revolutionizes the way people interact with money, and digital payments become part of the population’s daily routine. The Brazilian eCommerce market is evolving, with the rise of different approaches (such as “live-shopping” and “shoppertainment”), the increasing presence of international players, and an audience that has migrated to the smartphone as their first choice to perform any kind of transaction. The payments market is also transforming. A prime catalyst of this change is Pix, which has had an incredible acceptance rate and has developed new features (Pix Garantido). Pix’s success has also led to the loss in relevance of traditional cash payment methods (boleto bancário). There are also new payment methods (BNPL) and crypto solutions that do not yet have a specific direction but signal that ongoing transformation is inevitable. Growing at 20% annually, the Brazilian eCommerce share will reach $400 billion by 2026.

Mexico has the fastest projected growth of the large markets in Latin America, increasing at 32% per year, and presents an enormous opportunity for APAC merchants who want to quickly get ahead in an emerging market. Mexico’s growth is based on domestic and cross-border retail, as well as gaming and other digital goods, along with maturing eCommerce consumers who are buying more frequently and shopping for a greater variety of products. Today, Mexicans spend about half of the amount Brazilians spend online per year, and eCommerce penetration among the adult population still has room to grow, so we can expect rapid expansion for several more years. This growth is creating room for new business models, such as subscriptions, as well as new product categories like SaaS, health and wellness, and gaming and gambling. Offering cash payments, digital wallets, and bank accounts, as well as cards, is important in this market because its population is still gaining access to banking and has a strong proclivity for cash.

As cross-border eCommerce remains the fastest-growing segment of the industry in these two countries, global merchants will continue to grow their presence. As opposed to merchants based in the US, who may be used to a more monolithic payments and eCommerce landscape, merchants hailing from Asia are well-prepared to navigate the particular characteristics of Brazil and Mexico,

including their large, diverse populations, their fragmented payment method landscapes, their under-banked consumer groups, and their developing regulations.

For this reason, Asia is the region from which cross-border merchants in Latin America are coming the fastest: They are estimated to increase their eCommerce volume in the region by more than 30% annually through 2026.55 And through partnerships with experienced payment partners, Asian merchants can access the Latin American region with very little additional effort, bypassing the challenges of setting up a local entity, dealing with local regulation and taxes, and directly integrating with acquirers and local payment methods. The goal should be for offshore eCommerce sales to be as easy as they are in the domestic market.

These trends will continue in the medium term, with the following key developments predicted to take place across Latin America by 2026:

l Cross-border eCommerce from Latin American shoppers will reach 17% of total volume, up from 14% in 2022

l Asian merchants will represent 28% of eCommerce cross-border volume from Latin America, up from 16% in 2022

55. AMI analysis, 2022. Interviews.

As opposed to merchants based in the US, who may be used to a more monolithic payments and eCommerce landscape, merchants hailing from Asia are well prepared to navigate the particular characteristics of Brazil and Mexico.

l ECommerce usage will exceed 80% of the Latin American population

l Across Latin America, credit cards will remain the leading payment method, but will lose share to bank transfers

l Cash payment methods will stabilize at around 10% in Mexico and 7% in Brazil

Despite its recent eCommerce revolution, Latin America still requires development to remove some of the present inefficiencies. Challenges remain, including elevated fraud rates, low authorization rates, difficulties related to subscriptions, shopping cart abandonment, fees related to international transactions and foreign exchange, lack of access to credit, etc. The right payments partner with the right tech stack can help merchants overcome these obstacles by offering:

l Merchant of record model: Enables merchants to accept payments locally without being physically present in the country, which removes F/X fees, increases authorization rates, integrates acceptance of multiple local payment

methods, and enables payment with installments according to rules set by local issuers and acquirers

l Smart routing: Routes the transaction to the acquirer most likely to approve the transaction and sends the transaction to a backup in case of a decline

l Anti-fraud and risk management tools: Real-time fraud detection and scoring engines, integrated in the payment solution, that allow a vendor to monitor the activity and stop the transaction before the fraud takes place

l Subscription management technologies: Increases authorization, decreases churn, provides maximum user trust and control

l Mobile responsiveness and mobile checkout: Guarantees positive user experience on any mobile device

Beyond Brazil and Mexico, Latin America offers a myriad of opportunities in fast-growing eCommerce markets, including Colombia, Chile, Peru, Argentina, and Central American

Beyond Brazil and Mexico, Latin America offers a myriad of opportunities in fast-growing eCommerce markets, including Colombia, Chile, Peru, Argentina, and Central American countries.

countries. Approaching Brazil and Mexico— along with these secondary markets—requires flexibility, savviness, and innovation, and most of all, the ability to adapt to the local landscape, which is why Asian companies (which possess all of these characteristics) have been so successful in the region. Going forward, Latin Americans will continue to dedicate more of their monthly spend to online shopping, as in-store retail grows less than 10% annually, compared to eCommerce’s 20%+ projected annual growth. With the correct payment partners, international merchants can set themselves up for success in these markets, where a mobile-first, local payment method approach is the winning ticket.