Article: Digital payments in Latin America are expected to exceed in-store payments in the next 3 years
Originally published in Valor Economico
by Talita Moreira
Digital payments now account for 28% of the purchasing volume Latin America and are expected to exceed in-store transactions in the region in the next three years, according to a Mastercard study with E-Marketer data.
According to the survey, electronic sales grow 2.8 times more than physical sales and are expected to turn over US$ 71.34 billion this year in Latin American countries. It is the world's fastest growing region in terms of electronic payments. Brazil is the country where e-commerce is most present: 15% of online shoppers make at least one transaction every three days, and 21% use e-commerce once a week. Electronics, clothing and entertainment are the top items.
Smartphones are already the main device used by Brazilians for making purchases, accounting for 53% of the total. Desktops and laptops are used by 45%, and tablets by the remaining 2%.
The study was conducted with 900 consumers aged 18-50 in nine Latin American countries, and it also points to the main barriers to online payment expansion. Distrust of the process is one of the main ones, even in markets where online purchases are already widespread, such as in Brazil.
“Today, there is more security in payments made in the physical world and we are rushing to match it [with digital]”, says Mastercard President in Brazil João Paro Neto.
One of the company’s bets is in tokenization, a process that assigns a false number as a mask that hides the true number of a card used for making a purchase. The solution has been used mostly in transactions where customers save their credentials on a recurring website such as Netflix. This type of operation represents 64% of digital payments in Latin America. However, the idea is that it is gradually extended to any modality. All transactions are expected to be tokenized within four years, according to Mastercard Vice President for Cybersecurity and Intelligence in Latin America Jorge Arbesu.
Mastercard is also starting to adopt biometrics for authenticating transactions. The way consumers hold the phone, the speed with which they enter their password and the strength with which they type are factors that will be taken into account to ensure that the person making the purchase is really the cardholder. The system is being implemented in the United States.
Another strategy of the card brand is to work with retailers to prevent and reverse fraud. This year Mastercard acquired Ethoca, a company that offers real-time solutions for curbing troublesome operations.
When a consumer does not recognize a transaction, the technology enables the shopkeeper to know immediately and can thereby cancel the transaction or prevent the purchased product from being shipped. This information is sent to all retailers connected to the network to prevent them from also being victims of the scam.
“Previously, it took time for a retailer to receive the information that a transaction was not recognized. Only then the refund would begin. The problem is, the criminal would leave with the products”, says Mastercard Executive Vice President of Security Johan Gerber.
The technology will also enable customers to ask for more details of a purchase when they do not recognize the description on the invoice (often made under the company’s official name rather than its trade name).
According to Ethoca Executive Vice President of Sales Jason Howard, the company has 7,000 retailers connected to its systems. In addition to Mastercard, the company operates with Visa and other card brands. “We are moving from a knowledge-based anti-fraud model to an intelligence-based model to analyze patterns and project trends”, says Arbesu.
*The reporter traveled at Mastercard’s invitation
