Payment trends

2024
in Latin America:
Technology
shaping the future
The six industry trends
Credits
Payment trends 2024 in Latin America: Technology
shaping the future | The six industry trends

Made and distributed by:

Kushki | www.kushki.com | LinkedIn/Kushki
By Kushki and Payments and Commerce Market Intelligence

Information sources | Content | Drafting

By Kushki and Payments and Commerce Market Intelligence

Design and layout:

Lina Rodríguez Arévalo

01
Contents
04 Introduction: A turning point for Latin America

07 Cross-border e-commerce: Significant growth

ahead

10 Cross-border volume around the region.

12 Diving into payment methods.

16 Instant payments shifting the competitive

landscape

16 The global RTP trend.

20 RTP use cases – How are they impacting Latin American
payments today?
22 The next RTP boom in Latin America.
24 RTP challenges yet to overcome.

02
26 From ban to boom: The evolution of sports
betting in Latin America

28 Betting around the region.

32 The perfect sector for instant payments - or - the perfect
payment method for gambling.

34 Omnichannel and UX: The future of how

consumers will pay in Latin America

34 More sophisticated and complex consumers.

35 Improvements in technology usage.

41 Navigating the digital transformation of fraud

prevention

44 The search for the security sweet spot.

48 Real-time payments and fraud.
50 Generative AI and fraud prevention.

54 The rise of GenAI in transforming the payments

landscape

59 Next steps

03
Introduction
A turning point for Latin America
Latin America has experienced a significant acceleration of digital
payments, such that ecosystem players face an ocean of
opportunity—and challenges—in 2024.

Financial and digital inclusion

is nearly complete, with over
80% of the population

owning smartphones.

E-commerce continues to grow at double-digit rates. Faster,

mobile-based, P2P payments are an entrenched reality in most
markets, displacing cash, speeding up commerce, and creating a
new expectation for consumers and merchants.

While in the post-pandemic years of 2022 and 2023, the industry

was characterized by digital catch-up, 2024 will be marked by
technology-driven change and regulation.

INTRODUCTION 04
Technology will advance payments on several fronts: the expansion
of interoperable and instant payment rails, the dissolution of
hardware into software and cloud-based solutions, the better
leveraging of data to feed fraud and AI models, and the onset of
generative AI. Seamless, personalized, omnichannel, instant, and
secure payments are becoming the standard, across dozens of
verticals and payment experiences.

On the regulation front, we can expect central banks and financial

regulators to take an increasingly active role, following the
leadership of Brazil’s central bank, a global pioneer in Real Time
Payments (RTP), open banking, and CBDC implementation.

Regulators in Mexico, Colombia, Peru, Costa Rica, Argentina, and

elsewhere are already following suit. Regulators are also being
instrumental in legitimizing new commerce opportunities and
formalizing gray market activity, like online betting and gaming.

INTRODUCTION 05
In our globalized economy, national borders are becoming
increasingly inconsequential, and Latin America is rising to the
forefront of the global stage for global merchants and PSPs.
Representing over $500 billion in e-commerce volume alone, the
region presents new revenue opportunities for merchants and
PSPs who employ strategies to scale across multiple jurisdictions.
With clearer regulations, more variety of payment methods, more
tech-forward infrastructure, and a digitized population,
cross-border opportunities become increasingly apparent, as well
as complex and potentially tricky to manage.

In this context, Kushki, in partnership with Payments and

Commerce Market Intelligence (PCMI), set out to identify the top
trends marking the region in 2024, which center around
technology- and regulator-driven change. Looking ahead, we can
expect a more diversified and interoperable payment landscape in
Latin America, capable of adapting to new business models,
payment flows, and service verticals, but also vulnerable to fraud
and the pitfalls of emerging payment systems. This report will give
an account of these trends and provide guidance on how to prepare
for the increasing potential of the Latin American digital economy.

INTRODUCTION 06
Cross-border
e-commerce:
Significant growth
ahead
E-commerce is a central pillar of digital payments and often a driver
of digital payment adoption. This has been especially true since the
pandemic, during which 97 million Latin Americans purchased
online for the first time. And Latin America continues to propel
forward even following the COVID-19 boom, totaling $509 billion in
2023, an increase of 27% over the previous year.

Nearly universal digital access is a primary growth driver: Internet

access in Latin American’s:

Six major markets in the region

and smartphone
has reached penetration now surpasses

93% 1
80% 2

1
Economist Intelligence Unit, 2023.
2
GSMA, 2022. “The mobile economy - Latin America 2022”.

TREND 01 07
Financial inclusion is another: in 2017, only 54% of the region's
population had any kind of financial account3; today, this figure has
surged to 85%4. These factors create the conditions for over 81% of
Latin Americans to participate in e-commerce, spurring the industry
at a 23% compound annual growth rate through 2026.

3
World Bank, 2022. “The global findex database 2021”.
4
Local central banks, World Bank. “Statistical reports from financial supervisory agencies
with 2022 and preliminary 2023 data”.

More accessible cross-border e-commerce is another driver of

sustained growth. In 2023, cross-border e-commerce accounted
for $70 billion, or 14% of the total e-commerce, up from 13% in
2022. Cross-border will continue to gain share, growing at 28%
annually—six percentage points faster than domestic e-commerce.
By 2026, Latin Americans will make $144 billion worth of
international purchases, more than double today’s volume.

Several factors are encouraging this trend. Increased comfort with

online shopping means Latin Americans are more willing to shop on
foreign websites. Greater exposure to international brands through
social media stimulates interest in international products.
Increased demand for digital goods, which are heavily
cross-border in nature, including streaming, gaming, betting online
education, and SaaS, are a primary driver.

TREND 01 08
International merchants are increasingly attracted to Latin
America for its growth potential. Comparing just online retail, Latin
America is growing faster than any other world region—21%
compared to 12% in Asia, 11% in the US, and 15% in Africa5. The
explosion of alternative payment methods, including Pix in Brazil
and PSE in Colombia, also makes Latin America a more attractive
region to international sellers, enabling them to access nearly the
entire online population (as opposed to credit cards, owned by
about a third of online shoppers).
5
Payments and Commerce Market Intelligence, 2023.

Local and alternative payment methods are very important

for this market, but there is also a great demand for card
payments and for this the best strategy to guarantee high
approval rates is to process the transaction locally.

Sherrie Rogers, Head of Global Sales at Kushki

TREND 01 09
Payment service providers (PSPs) specialized in enabling
cross-border commerce to the region are flourishing, enabling
seamless pay-ins and pay-outs, making it easy and cost-effective
for merchants around the world to sell to Latin American
consumers.

Cross-border volume around the region

The cross-border opportunity varies significantly by market.

Cross-border share is the highest (over 50%) in small markets with
underdeveloped domestic e-commerce industries, including
Central America, Bolivia, and Ecuador. Among the region’s large
markets, Mexico, Chile, and Peru boast the highest shares, these
being countries with open trade regimes and favorable tax codes.
Mexico’s proximity to the US also contributes to a cross-border
share of over 20%.

In Brazil and Argentina, a tighter trade regime, fluctuating

exchange rates, and currency controls limit cross-border
penetration. The strength of the domestic market is also a challenge
for international sellers in markets like Brazil, where cross-border
e-commerce represents only 6%. Nevertheless, due to the sheer
size of Brazil, that 6% equates to nearly $16 billion dollars, putting
it on par with Mexico by volume and placing it as a top target for
international merchants.

TREND 01 10
 Argentina could become more favorable in the medium term, as
with the new president voted into office in October 2023, there
exists a possibility of dollarization, which would provide needed
currency stability to facilitate cross-border operations.

Share of e-commerce volume by origin

Cross-Border Domestic
0% 20% 40% 60% 80% 100%

97%
AR
3%

94%
BS
6%

86%
CO
14%

78%
MX
22%

77%
CL
23%

77%
PE
23%

59%
UY
41%

51%
CR
49%

44%
DR
56%

44%
EC 56%

36%
PA
64%

33%
BO 67%

27%
GT 73%

27%
PY
73%

26%
SV
74%

Source: Payments and Commerce Market Intelligence, 2023.

TREND 01 11
 Diving into payment methods
Alternative payments are stimulating both domestic and cross-border
payment growth. Today, alternative payment methods represent
more than 40% of e-commerce volume, with credit cards steadily
losing share year over year in favor of instant payments.

Payment method market share of e-commerce

volume and compound annual growth rate
(2023-2026) in Latin America

% of e-commerce volume in 2023 CAGR, 2023-2026

50%
48%

40% 38%
35%

30%
30%
26%

20%
20%
18%
16%
15% 15%

10%
10% 9% 9%

5%

2% 1%
0%
Credit PIX Debit Cash Digital Bank Other* Buy Now
Card Card vouchers Wallet transfers Pay Later

Source: Payments and Commerce Market Intelligence, 2023.

TREND 01 12
 Looking ahead, bank transfers, debit cards, and Pix, the Central
Bank of Brazil’s instant payment scheme, are growing most rapidly,
with important differences by country. Global merchants looking at
the region must understand these local complexities and enable a
payment method offering that matches local preferences and
growth projections.

Especially notable is the rapid growth of instant payments, or

Real Time Payments (RTP), like Pix, already owning 29% of
Brazil’s volume and 16% of the whole region6. Many PSPs and
merchants prioritize enabling Pix over debit cards in Brazil since it
has nearly fully cannibalized debit card usage in the online
channel.

6
(PCMI) Payments and Commerce Market Intelligence, 2023.

Share of e-commerce expenditure

0% 20% 40% 60% 80% 100%

2023

Alternative payment methods

2026

Credit Debit Bank Transfers Digital Cash Buy Now Others

Card Card (Including PIX) Wallet Vouchers Pay Later

Source: Payments and Commerce Market Intelligence, 2023.

TREND 01 13
Pix and other account-to-account (A2A) payment methods have
been crucial to expanding cross-border e-commerce in Brazil in
verticals such as gaming and betting. These verticals, considered
“high risk” by issuers, experience frequent declines in credit cards.
They are also verticals that require fast, agile, and spontaneous
payments, tricky attributes for card payments. In this way, Pix in
Brazil, PSE in Colombia, and transfers from digital have helped
international merchants overcome the barriers of traditional
payment methods and exponentially increased their addressable
market.

While international merchants must develop an alternative

payment strategy in Latin America, credit and debit cards will
indeed continue to generate more than 50% of volume in the years
to come (albeit with credit cards decreasing in share from 48% to
44% in 2026).

TREND 01 14
Digital goods drive strong demand for card payments,
considering the need for recurring payments: cards take a 69%
share of streaming’s volume in the region, and 65% of gaming’s.
Credit cards are also fundamental due to their ability to offer
installments, which can represent more than 50% of credit card
spending in some markets and verticals.

While Latin American e-commerce becomes increasingly

attractive to international sellers due to its growth, digital
enablement, and regional scaling opportunity, it is also complex,
with an ever-increasing mix of payment methods, spanning over 20
countries. With this trend accelerating, it will become ever
important for merchants and PSPs approaching the region to be
clever about a localized strategy.

TREND 01 15
Instant payments
shifting the competitive
landscape
The global Real Time Payments trend
Just as we saw in e-commerce, much of the payments revolution in
Latin America today is being driven by the onset of RTPs, referring
to A2A transfers that are initiated, cleared, and settled in a few
seconds, at any time of any day. With the increased digitization of
global consumers, the creation of digital banks, and the advance of
financial inclusion, regulators around the world are prioritizing
making RTP systems accessible to consumers.

TREND 02 16
Regulators are driving this trend, who see several advantages in
RTPs: they make it easier for consumers to transfer money and
make purchases, reduce the use of physical cash, promote
financial inclusion, and reduce fees to merchants compared to
cards. They are also cheaper than traditional bank transfers,
reducing the operating costs for system participants and increasing
the efficiency of each country’s national payment systems7.
Globally, by mid-2023 there were already more than 100 different
countries with a centralized RTP system in operation8.

There is no better illustration of this trend than Brazil’s Pix, the Real
Time Payments system launched by the Central Bank in late 2020
which now has more than 799 participating institutions, including
banks, fintechs, credit unions, PSPs, among others9. In less than
three years, Pix became one of the most successful RTP systems in
the world, resulting in the financial inclusion of 72 million people in
the first two years of operation10, usage by 91%11 of the adult
population, cost reduction in payment acceptance, and overall
increased efficiency of the national payment system.

7
PWC, 2023. “Decoding instant payments: the emerging markets story”.
8
PWC, 2023. “Decoding instant payments: the emerging markets story”.
9
Central Bank of Brazil, 2023. “Pix statistics”.
10
Central Bank of Brazil, 2023. “Pix management report 2020-2022”.
11
Central Bank of Brazil, 2023. “Pix statistics”.

TREND 02 17
From mid-November 2020 to the beginning of November 2023, the
system has handled more than $5.7 trillion in payment volume and
almost 67 billion transactions.

"One of the beautiful things about the Pix

story is that it proved that if regulators and
banks work together, they can create
something good that works for everyone."

Anschana Caravaca, VP Specialist Markets at Kushki

While Brazil is the regional first mover, the RTP trend is growing
across Latin America. Fintechs and banks have been instrumental in
RTP adoption outside of Brazil, primarily with the digitization of
person-to-person (P2P) payments, which are widely used for social
commerce and other informal selling.

TREND 02 18
In Panama, the digital wallet Yappy, developed by Banco General, is
the main digital payment service, used by 32%12 of the population13.
In Peru, the country's leading bank, BCP, developed Yape, the
country's leading digital payments service, used by over half of
Peruvians, primarily for P2P transfers but also for purchases at
merchants using QR codes. Nequi, DaviPlata, MACH, ATH Móvil, and
MercadoPago are other examples of instant, A2A payment schemes
that have achieved significant scale in their respective markets.

12 13
Banco General, 2023. “Yappy”. Economist Intelligence Unit, 2023.

RTP systems on the rise in Latin America

Dominicap Rep.
Costa
Rica
Central America
Puerto Rico

Panama Guatemala
Brazil

Ecuador Colombia

Peru

Chile Argentina

Source: World Bank Findex report, Central % adoption of RTP in the population
Bank of Brazil, Central Bank of Costa Rica,
0% 20% 40% 60% 80% 100%
company websites and PCMI analysis.

TREND 02 19
 RTP use cases – How are they impacting
Latin American payments today?
In established RTP systems, P2P transactions represent the
majority during the early stages, but as the use of the system
intensifies, different use cases are developed. In Brazil, when Pix
turned one year old, the share of the volume of P2P payments in
the total volume transacted was 40%, while on its third
anniversary, the share of P2P payments in the total volume
transacted had dropped to 33%, as B2B payments and purchases
at businesses (P2B) had ramped up14.

Pix as a P2B payment method is proving to be a major disruptor.

In the first quarter of 2023, P2B payment volume exceeded the
aggregate transacted by debit cards and prepaid cards for the
first time.
14
Central Bank of Brazil, 2023. “Pix statistics”.

TREND 02 20
Pix's total number of quarterly P2B transactions has grown at a
Compound Quarterly Growth Rate of 41% since its first full quarter
of operation, while the total number of card transactions (credit,
debit, and prepaid) has grown at a CQGR of just 5%15. In the third
quarter of 2023, Pix P2B had reached 46% of total card volume and
34% of the total number of card transactions. These percentages
are expected to continue growing, creating a new payment method
landscape for consumers and merchants, and applying
unprecedented competitive pressure on the card industry16.
15
ABECS, 2023. “Report of the electronic payment methods sector”.
16
Central Bank of Brazil, 2023. “Pix statistics”.

Pix P2B and cards volume by quarter ($billion)

Pix Person-to-Business Credit Cards Debit and Prepaid Cards

140

120

100

80

60

40

20

0
21Q1 21Q2 21Q3 21Q4 22Q1 22Q2 22Q3 22Q4 23Q1 23Q2 23Q3

Source: Central Bank of Brazil, 2023. "Pix statistics".

ABECS, 2023. "Report of the electronic payment methods sector".

TREND 02 21
 The next RTP boom in Latin America

Other central banks and regulators across the region are seeking to
follow in Brazil’s footsteps. Instant bank transfer rails already exist
in several countries, including Mexico and Costa Rica,but they have
not developed the mobile user experience needed to scale RTP
systems at the same level as in Brazil. Doing so requires not only rail
interoperability but also the ability to manage user data and
connect consumers’ bank accounts with their phone numbers or
other alias. Several markets in the region are actively trying to solve
this problem.

Mexico

The SPEI instant payment rail was created in 2004, and over the
years various supplementary systems have been added to optimize
the user experience. In 2019, the central bank launched CoDi to
enable QR code payments over SPEI, which failed to scale for
several reasons, including that financial institutions were prohibited
from charging a fee for the use of CoDi, which de-incentivized them
from promoting CoDi to their customers. This differs from Pix, in
which participants generate income (albeit at very low prices),
which incentivizes the industry-wide promotion of Pix.

TREND 02 22
Having learned from its experience with CoDi, in 2023, Mexico’s
Central Bank launched its newest iteration of RTP, DiMo. In DiMo,
instead of being reliant on a QR code, as in the case of CoDi, or an
18-digit bank account number, with traditional SPEI transfers, DiMo
links users’ bank account numbers to their phone number,
enabling easy, mobile P2P payments. This improvement in the user
experience is a decisive factor for the potential adoption of
interoperable Real Time Payments systems in Mexico.

Brand
Launch 2019 2023

RTP scheme SPEI SPEI

Method QR Code Phone number

Bank adoption Mandatory for banks Voluntary

Business-to-Business
Target segment Person-to-Person
Person-to-Business

Source: Association of Mexican Banks, 2023. “Press conference in August 2023”.

TREND 02 23
 Colombia
Another essential attribute of a successful RTP system is
interoperability, which has been a historic challenge in Latin
America. In Colombia, two digital wallets, Nequi and DaviPlata,
have scaled to over 10 million users, but without interoperability,
their potential as large-scale RTP systems remains limited.
Understanding this, in October 2023, Colombia's Central Bank set
the first interoperability parameters for immediate low-value
payment systems, which will enable digital wallets to communicate
with each other. These parameters lay the foundations for Colombia
to establish an RTP similar to those in Brazil, Mexico, and Costa Rica
by 2025.

RTP challenges yet to overcome

RTP systems are still nascent in Latin America, lacking much of
the sophistication of established card networks. For in-person
purchases, RTP systems need hardware and software upgrades to
function at the same level of operational quality as cards.
Merchants need the technical capacity to link payment and
reconciliation with their ERPs and management software to
facilitate the usability of the payment method on a day-to-day
basis.

TREND 02 24
Some key features, such as recurring payments and credit, are not
available over RTPs. Fraud is also still unknown; there are no
established protocols or industry standards for returns, transaction
reversals, and fraud incidents, potentially leaving consumers
vulnerable. While private actors and central banks are working on
these shortcomings, there are still many unknowns related to
RTPs, and their trajectory is unpredictable.

Even so, the future of payments in Latin America is decidedly

moving towards fast, interoperable payments based on low-cost
mobile devices. Cards and cash will maintain their position, due to
personal preferences, greater acceptance, and deeply entrenched
habits. Nevertheless, the entire ecosystem is actively rebalancing
around the existence of low-cost A2A payments and will continue
to do so through the midterm.

TREND 02 25
From ban to boom:
The evolution of
sports betting in
Latin America
For many decades, Latin America was on the back burner for
investors in the sports betting sector for two main reasons:

1. The European market, 2. The LATAM regulatory

the traditional cradle of the scenario prohibited or
sports betting industry, largely limited the potential
still yielded good results of the sports betting
with greater margins. market.

In 2023, these two reasons so longer stand.

Today, the European market has become more competitive over

the years, with industry players now looking for new growth
markets. Latin America stands out due to its newly achieved digital
maturity, passion for sports, and a new era in regulation of the
sports betting market that has impacted several countries.

TREND 03 26
 Total volume of the online betting market in
the six largest countris in Latin America
(in $billions of dollars)

60

50

40

30

20

10

0
2022 2023 2024 2025 2026

Brazil Colombia Mexico

Peru Argentina Chile

Source: Payments and Commerce Market Intelligence, 2023.

The combination of its digital maturity, passion for sports and

new regulations made the market in Latin America projected at a
compound annual growth rate of more than 18% between 2022
and 202817.

17
Business Wire, 2023. “Latin America gambling market outlook report”.

TREND 03 27
 Betting around the region
The betting market in Latin America was banned in most countries
for many decades, with Costa Rica and Panama being the first to
legalize online gambling. Colombia followed, legalizing the online
gambling market in 2016, resulting in growth from 250,000
registered users in 2017 to over five million by 202318.

Coljuegos - the entity responsible for regulating games of luck and

chance in Colombia - reported that tax revenues from the gambling
industry in 2022 will grow by 18% compared to the previous year,
reaching approximately $200 million of dollars19. The impact of the
taxes collected from the gambling industry in Colombia, which are
mostly earmarked for the health sector20, has led Colombia to
become a model for several countries to follow, such as Chile,
which has taken the first steps toward regulating the sector.

18
Apuestas Legales, 2023. “Impuesto a juegos de azar en Colombia”.
19
MinHacienda, 2023. “Coljuegos registró cifras récord a diciembre de 2022”.
20
Apuestas Legales, 2023. “Impuesto a juegos de azar en Colombia”.

TREND 03 28
Mexico is the largest regulated online betting market in Latino
American in terms of population: all operators in this market must
hold a license and have an entity established in Mexico21. In 2023,
the country was in third place in terms of volume, with an
estimated processing value of $4 billion of dollars, behind only
Brazil and Colombia22.

Brazil is currently the largest sports betting market in the region by

volume, $7 billion in 202323, and registered a 135% growth in the
sector in the country over 202224. In addition to the growing social
legitimacy of online betting, especially sports betting, the evolution
of Pix has been fundamental to the success of the sports betting
market, helping to facilitate the instant payment of bets and also
the payout of prizes.

21
ICLG, 2023. “Gambling laws and regulations - Mexico”.
22
Payments and Commerce Market Intelligence, 2023.
23
Payments and Commerce Market Intelligence, 2023.
24
Estadão, 2023. “Sports betting market grows 135% in Brazil in 1 year”.

Today we have the perfect example of the success of RTP

systems in Brazil with Pix. Everyone loves it, payment is
immediate and extremely easy, and the levels of chargebacks
or problems with transactions are extremely low. This is
surely also one of the factors why the Latin American market is
more strategic for companies in the betting sector right now.

Anschana Caravaca, VP Specialist Markets at Kushki

TREND 03 29
Beyond cultural and industry changes, regulatory changes in Brazil
will be a boon for the industry. A bill regulating sports betting was
approved by the Senate at the beginning of December 2023 and is
expected to be sent for presidential sanction in 2024. The bill
establishes the legal limits for operating in the sports betting
market, as well as the specifications that operators must follow,
taxation of 12% of the net revenue for the operators and 15% of
the prizes for the consumers, in addition to rules on advertising.

The evolution of the regulatory scenario for this market in the

country will make it possible to formalize the sector and will
probably promote consolidation of betting market operators in the
country since the operating license will cost approximately $6
million to operate for up to five years25.
25
Senado, 2023. “Plenário aprova regulamentação das 'bets'”.

TREND 03 30
Other countries, such as Peru and Chile, are also in the process of
updating their online sports betting legislation. Chile has a large
gray market and in September 2023 the country's supreme court
declared that sports betting sites operating in the country
without a local license are illegal. This is one of the first moves
that signals a likely formalization of the industry and despite the
lack of regulation, the sector is one of the leaders in sports
sponsorship deals in the country - more than 90% of soccer teams
have some sponsorship from betting companies26. In Peru the
regulation was rushed through in 202227, rife with several errors
and contradictions, and delaying the regulation process. The
regulation was only approved at the end of 2023 and will come
into effect in February 2024, fostering the investments in this
market28.
26
Infobae, 2023. “Chile declara ilegales los sitios de apuestas deportivas en línea”.
27
Lexology, 2023. “LATAM gambling update”.
28
iGB, 2023. “Peru approves gambling regulations”.

TREND 03 31
 The perfect sector for instant payments - or
- the perfect payment method for gambling

The region's tendency to make its payments increasingly based on

RTP systems is both an opportunity and an expected result for the
gambling industry. Reaal Time Payments systems facilitate the
payment of bets placed during sports matches, meeting a specific
requirement of the sector: instant, spontaneous payments that
scale rapidly at one time, i.e. during a sports match.

This requires betting platforms to have the technical sophistication

to handle immense volume all at once.

TREND 03 32
At the same time, payments through RTP systems facilitate the
process of paying out winnings, delivering the best possible
experience for the user who wants to receive their winnings as soon
as possible.

With the regulation of the betting market underway in most Latin

American countries, global merchants have new opportunities in
the region. The combination of financial and digital inclustion, the
instantaneity and low cost of RTP systems, and the maturing of the
Latin American market with ongoing regulations are the main
attractions for the betting market.

A cross-border approach is still viable, but with impending

regulation, operators may soon be required to operate locally. This
requires betting operators to seek payment partners to help them
effectively scale in the region, with both cross-border and local
processing.

TREND 03 33
Omnichannel and UX:
The future of how
consumers will pay in
Latin America
More sophisticated and complex consumers

Just as the payment method mix has become more complex

in Latin America, so thave sales channels and user experience
complexities. With new payment methods, verticals, and rails
come new channel opportunities. Digital wallets and instant
payments solidify QR codes as a relevant form factor. Pix and
other alias-based payment methods have accelerated social
commerce.

With the mobile channel representing over 60% of e-commerce

sales, merchants must manage mobile apps, mobile browsers,
and messaging apps. Card payments have evolved toward NFC
technology and tokenized card-on-file.

TREND 04 34
Suddenly, operators in Latin America went from a simplified world
of cards and cash, online and in-store, to a hugely complex web of
payment methods, payment rails, and form factors, all of which
require an optimized user experience and interoperability
amongst them.

For us, omnichannel represents how our platform

enables commerce, be it any kind of commerce. Our
job is to ensure that any type of commerce can
receive any form of payment, anywhere, at any time,
in a single system that is easy to use and accessible.

Fernando Lopez, Country Manager at Kushki Mexico

Improvements in technology usage

To start, the rise of contactless technology provides an example of

changes in user experience. In Brazil, September 2023 was the first
time that Brazilians paid more using contactless technology than
with a traditional card for in-person purchases (52% of in-person
transactions were carried out using contactless technology, while
it was only 19% in the same period in 2021)29.

29
ABECS, 2023. “Report of the electronic payment methods sector”.

TREND 04 35
Also it's extremely common for consumers not to carry their cards
at all anymore, using only their smartphone to make payments
with the card registered in wallets such as Google Pay and Apple
Pay. This trend towards more technological transactions, largely
enabled by the use of wallets, is even more consolidated in other
countries. In Chile, in December 2022, almost 90% of in-person
transactions with Visa cards were carried out using contactless
technology30.
30
Visa, 2023. “Visa reaches 50% of contactless transactions penetration and unlocks new
use cases in Latin America and the Caribbean”.

Penetration of contactless technology in payments

Average penetration of 55%

for contactless face-to-face
payments in Latin America
& the Caribbean.

The penetration of
contactless technology has
become widespread in most
markets, enabling the use of
tokenized mobile wallets.

Saturated (90%+)
Mature (70%+)
Maturing (50%+)
Intermediate
Source: Payments and Commerce
Immature
Market Intelligence, 2023.

TREND 04 36
In contrast, countries like Mexico and Argentina have fallen behind
this trend, owing to a slow adoption of the technology by issuers
and acquirers and resistance from consumers. In Argentina, QR
codes are much more prevalent. In Mexico, cash is still the
prevailing in-store payment method.

Such changes in consumer behavior also impact e-commerce

purchases. The growth in e-commerce purchases made via
mobile devices has outpaced desktop purchases by an
ever-increasing margin since 2020. In 2020, mobile accounted
for 55% of all e-commerce purchases in the top 15 Latin American
countries. In 2023 this share jumped to 71% and will reach 76%
in 202631.

31
Payments and Commerce Market Intelligence, 2023.

TREND 04 37
Subtle improvements in user experience are also taking place as
each payment method is optimized for purchases across various
channels. Pix payment initiation has already greatly improved the
experience of using the RTP system in e-commerce.

A combination of RTP and Open Banking concepts allows

e-commerce users to make Pix payments even more seam-lessly
by enabling non-banking institutions, such as merchants,to initiate
Pix transactions on behalf of the customers, who only need to
authorize the transaction, instead of requiring a redirect to the
user’s online banking.

Moreover, the next Pix development that is eagerly awaited by the

market is the "Automatic Pix", announced by the Central Bank of
Brazil in December 2023 and which will be operational beginning in
October 2024. With this new feature, it will be possible to schedule
recurring payments such as monthly expenses, utility bills, rent,
and even transfers between accounts automatically and without
the need for manual intervention with each transaction32.
32
Central Bank of Brazil, 2023. “Central Bank takes another step towards implementing
Automatic Pix”

TREND 04 38
With more sales channels than ever before (physical stores,
websites, marketplaces, social media apps, affiliates, influencer
marketing, etc.), merchants face a complex task in guaranteeing a
seamless transaction flow for consumers. Based on expert
interviews, the integration of omnichannel strategies with a focus
on the user experience is key to success in the next years in the
region, with the following recommendations top of mind:

Sellers and their payment enablers must

understand the needs and preferences
of the specific Latin American consumer
they are targeting. This includes unders-
tanding regional differences, language
Understand
preferences, device usage, and local
your audience
payment methods.

Merchants and enablers must use the

right technology to integrate payment
systems across different channels. This
includes investing in secure and scalable
platforms that handle multiple payment Invest in
methods, currencies, pay-ins, and payouts. technology

TREND 04 39
 With a high rate of mobile-first solutions
in Latin America, optimizing mobile
payments and guaranteeing a good user
experience is more important than ever,
Focus on more so as Gen Z and even younger con-
mobile devices sumers become more active consumers.

Security is a top priority that impacts

user experience, especially in the online
channel. Ensuring robust security
measures while maintaining a
Increase
user-friendly experience is key. security

The digital landscape is constantly

changing. It is necessary to regularly
update and improve user experience and
omnichannel strategies to keep up with
Continuous
industry trends and consumer
improvement
expectations.

TREND 04 40
Navigating the
digital transformation
of fraud prevention
Despite all the good news in the region around digitization and
expanding opportunities, there is one significant black stain:
payment fraud. Fraud is an ongoing and worsening problem in
Latin America, especially in the online channel, as it is around the
world. Estimates reveal that Latin America loses an estimated
20% of total e-commerce revenue to fraud, ranking second
globally, following Southeast Asia33.

33
Mastercard, 2023. “Ecommerce fraud trends and statistics merchants need to know
in 2023”.

Fraud is not homogenous in Latin

America. Fraud rates are different in each
country and have different causes.

Giacomo Orizzonte, Infrastructure Manager at Kushki

TREND 05 41
A prevalent issue in the region is the lack of education among
users regarding the safeguarding of personal data and payment
information. The surge in online activities during the pandemic has
exposed millions of new consumers to risks due to their
unfamiliarity with necessary safety measures. The continued
growth of interconnected online and offline (i.e., omnichannel)
interactions in commerce amplifies the potential attack surface
for fraudsters.

However, new generations are growing up with face ID, finger

scanning, passcodes, and two-factor authentication, among other
security measures, potentially creating better prospects for the
future. Some banks, fintechs, and governments proactively guide
users to understand and implement better security measures. For
example, Nubank, the largest Brazilian neobank, combines
advanced technology and educational content targeted at
customers to reduce the risks of malicious actions34.

34
Nubank, 2023. “Technology combined with information is key to preventing fraud and
financial scams”.

TREND 05 42
Latin America is undergoing digital transformation and slowly
converging on best practices to ensure digital safety. In recent
years, the adoption of digital and mobile transactions has driven
the expansion of digital wallets, which represent 9% of
e-commerce spending in the region. Leading wallets like Google
Pay, Samsung Pay, and Apple Pay employ card tokenization, a
security practice that substitutes the original card number with a
secure token.

This safeguard protects payment information in online and

mobile transactions, preventing the exposure of actual card data.
These wallets have only started operating in most Latin American
countries post-pandemic but are expanding rapidly both on- and
offline - of the nine countries where Apple Pay is available, eight
have been added to the portfolio in the last two years. As users
continue to adopt and use wallets for their online spending,
transactions will be more secure.

TREND 05 43
 The search for the security sweet spot
The prospect of careful consumer spending leading to a decline in
fraud is encouraging for merchants and PSPs in the medium term.
However, fraud, and its opposite problem, an overly sensitive
fraud alert system that results in fewer completed purchases, are
an ongoing challenge for the ecosystem. This tradeoff can be
conceptualized as the ‘fraud trilemma:’ chasing low fraud rates
means that the user experience (‘UX’) becomes laden with friction
and that investments in payment security are needed, increasing
cost.

Frictionless UX

The
Fraud
Trilemma

Low fraud rates Low costs

Source: Payments and Commerce Market Intelligence, 2023.

TREND 05 44
Traditionally, Latin American issuers, merchants, and PSPs have
placed their focus on the ‘low fraud rates’ pillar of the dilemma,
willing to sacrifice good transactions to combat fraud, resulting in
low authorization rates. Data from the region shows disparate
results, which reflect a difference in technological sophistication
as well as in the culture around fraud and digitization: Mexico is at
a discouraging 65%, while Colombia impresses at 88%35. This
delta means that Mexican merchants are probably declining more
than 20 percentage points worth of good transactions, leaving
significant revenue on the table, and discouraging honest
shoppers.
35
Payments and Commerce Market Intelligence, 2023.

Average authorization rate for

card-not-present transactions (2022)
100%
88% 85%

80% 79% 78% 77%

65%

60%

40%

20%

0%
Colombia Chile Peru Argentina Brazil Mexico

Source: Visa and CONDUSEF.

TREND 05 45
With fraud becoming a mounting problem, merchants must invest
in technology to remain competitive, and thanks to pioneering
PSPs, a world-class technology stack is available for LATAM
merchants, with tools including anomaly detection algorithms,
machine learning models, and behavioral analysis, enabling the
identification and prevention of suspicious transactions.

However, there is a cost associated with developing and

implementing such tools. Historically, many merchants across
Latin America have not been willing to invest, prioritizing the
‘cost’ pillar of the Fraud Trilemma. This is the hallmark of a
maturing market: cost minimization, over the maximization of
value, as the prevailing lever driving supplier behavior.

There is no such thing as 'technological lag' in Latin

America. The tech stack is available, and it is the same
stack as in other regions. Kushki has access to the
latest technologies. Latin America's relationship with
fraud is long-standing and that's where we must work.

Giacomo Orizzonte, Infrastructure Manager at Kushki

TREND 05 46
And yet, as the market matures, Latin American merchants,
especially midsized and small merchants, understand the need for
investments in technology, both to lower fraud and improve the
UX. This ensures greater balance across the Trilemma and
derives maximum value from merchants online checkouts.

There are many strategies to help increase authorization rates

and limit other types of fraud. A highly effective one to mitigate
declines involves processing transactions locally, leveraging a
locally sponsored Merchant Identification Number (MID), which
yields substantial improvements in authorization rates (up to
20-30 percentage points in certain cases, with impressive
cross-border conversion rates of 78% and 84%, in Brazil and
Mexico respectively)36.

In addition, merchants should continue to follow good

practices such as implementing 3D Secure, CVC/CVV checks and
geolocation tracking, leveraging fraud detection software to
detect anomalies, and analyzing user behavior to detect fraudulent
activities. Merchants should also turn to their PSP for support in
the fight against fraud.

36
Google Market Finder, 2023. “Guide to Latin America payment preferences”.

TREND 05 47
In the longer term, the battle against fraud will center around
two key trends:

1. The rise of 2. The increased adoption

Generative (GenAI) of RTP systems.

This artificial intelligence craze will help the most

technologically backward players begin to migrate to the
cloud and adopt previous-generation technologies. This
will allow them to become cost-conscious and develop
tools according to their needs and possibilities.

Andres Martinez, Chief Information Officer at Kushki

Real-time payments and fraud

The fast expansion of Real Time Payments systems like Pix

exposes them to new types of fraud. RTPs create new
opportunities for fraud networks, offering them easier routes to
cash out the proceeds of targeted consumer attacks and
distribute funds in an almost untraceable manner.

TREND 05 48
The advent of faster payments has created new avenues for
authorized push payment (APP) scams. In these scams,
fraudsters employ social engineering to get victims to initiate
payments to an account, posing as a legitimate payee. In Brazil,
reported losses to APP scams were close to $247 million,
equivalent to 1% of total Pix e-commerce volumes in 2023,
rising to $636 million by 202737.

While an increasing problem, it must also be taken into context;

as a percentage of total volume, Pix APP fraud is small
compared to card fraud, which averages around 10% of total
card volume globally38.

37
Business Wire, 2023. “ACI Worldwide scamscope report finds APP scam losses expected
to hit $6.8 billion by 2027”.
38
Nilson Report, 2022.

TREND 05 49
This can be interpreted in one of two ways: either RTP systems,
which only allow authenticated transactions in an online banking
environment (internet banking or mobile), are more secure than
card transactions, or there is ample runway for RTP fraud to grow
as its use becomes more mature and pervasive.

Concerning RTP systems, as they consolidate

in online commerce, we will see what forms
fraud takes in each country. Only then will we
understand how to act and with which tools.

Andres Martinez, Chief Information Officer at Kushki

Generative AI and fraud prevention

In 2023, the focus of the technological world turned to GenAI, a
revolutionary branch of Artificial Intelligence (AI) with creative
capabilities, developed through training on unlabeled data. When
it comes to security, GenAI will have a two-fold impact, both
positive and negative. First, GenAI introduces concerns about
potential misuse by fraudsters, such as creating deceptive videos
and spoofing voices. The technology is likely to help criminals
improve how attacks are carried out.

TREND 05 50
 Fraud systems analyze diverse data points and
identify and analyze patterns. GenAI will make this
process more difficult because it allows attackers
to generate new attack patterns that bypass
current manual and ML generated protections.

Andres Martinez, Chief Information Officer at Kushki

On the other hand, globally, GenAI also offers opportunities to

fortify fraud prevention. As per McKinsey, initial assessments
indicate that GenAI could improve fraud detection productivity
by 30% to 50%, streamlining manual tasks and expediting
various processes39. GenAI stands to augment existing AI-based
risk management initiatives by integrating a more extensive and
diverse dataset into fraud prevention measures.

39
McKinsey, 2023. “On the cusp of the next payments era: future opportunities for banks”.

TREND 05 51
Its capacity to analyze unstructured data could refine detection
rules, identify high-priority incidents, and boost efficiency for
human analysts by presenting pertinent information and
checklists, in addition to recommending optimal actions during
investigations.

To provide an example, in October 2023, Featurespace, a

company that develops software to combat fraud and financial
crime, launched TallierLTM40, the world's first generative Large
Transaction Model for fraud detection. Pre-trained across
markets and segments, TallierLTM employs a self-supervised
approach to represent real-world consumer transactions.

By analyzing numerous transactions, the tool uncovers hidden

patterns, providing insights into future consumer transactions
based on time sequencing, including unusual spending patterns
and behavioral dynamics between consumers and merchants.
Featurespace has opened a waiting list for companies looking to
be early adopters.

40
The Paypers, 2023. “Featurespace launches TallierLTM”.

TREND 05 52
In conclusion, in LATAM quest
for payment security, the
'fraud trilemma' encapsulates
the delicate balance of low
fraud rates, user-friendly
experiences, and cost-effec-
tiveness.

Short-term strategies focus

on local processing and
robust security measures,
while the region's enduring
battle against fraud pivots
towards advanced technolo-
gies and customer education.

GenAI, with its dual impact,

promises to revolutionize
fraud detection, presenting
both challenges and
opportunities, marking a
transformative chapter in the
pursuit of secure and
seamless transactions.

TREND 05 53
The rise of GenAI
in transforming the
payments landscape
Globally, GenAI will have an important role to play in all aspects
of payments, not just security. GenAI is poised to assist with
sales and marketing as well as yield cost reductions and
automate tasks across the value chain.

Opportunities in Opportunities
sales and marketing in cost savings

• Hyper-personalized campaigns. • Product/code development.

• Marketing material generation. • Documentation. • Chatbots.
• Payment mix recommendations. • Report and insight generation.
• Sales support. • Meeting assistants.

Source: Payments and Commerce Market Intelligence, 2023.

Latin America faces a series of challenges related to infrastructure,

technology, data engineering, and a shortage of talent that may
momentarily impede the widespread adoption of Gen AI in the
payments and retail sectors.

TREND 06 54
In particular, there is a lack of GenAI models based on Latin
American datasets. There is an overall need to train AI tools to
predict outcomes realistic to Latin American realities.

Globally, Mastercard is tackling the lack of data to generate varied

"synthetic data" for training machine learning tools. A report by
Gartner predicts that by 2024 60% of data for AI will be synthetic
to simulate reality and future scenarios, up from 1% in 202141. To
the extent that this is done specifically for a Latin American
context, these tools will be increasingly relevant and practical in
the region, from preventing fraud to determining the next best
action in marketing efforts.
41
Gartner, 2023. “Gartner identifies top trends shaping the future of data science and
machine learning”.

With GenAI we could take international risk and

fraud models, give them instructions on how fraud
occurs in a country and statistics to go along with
it, and GenAI prepares scenarios for us to test
these models. This would be 'synthetic data'.

Giacomo Orizzonte, Infrastructure Manager at Kushki

Marketing and sales teams at retail and financial services companies

stand to harness the capabilities of GenAI in multiple avenues.

TREND 06 55
The amalgamation of diverse strands of structured and
unstructured customer data through GenAI yields insights into a
customer’s inclination for new products and upgrades. A prime
example in the region is Nubank which is deploying a GenAI
solution that will focus on presenting personalized possibilities
related to credit granting within the Nubank ecosystem and
portfolio to users42.

42
Nubank, 2023. “Nubank begins testing with Generative Artificial Intelligence to enhance
customers experience with credit”.

Outside of LatAm, use cases are diverse. Mastercard launched

Shopping Muse, a GenAI tool that translates colloquial language
into tailored product recommendations. Klarna, the Swedish
BNPL player, uses ChatGPT to curate product recommendations
for consumers who ask the platform for advice on shopping. The
Commonwealth Bank of Australia is examining how it can use
GenAI to create "digital consumers" to test new products.

TREND 06 56
Additionally, the technology proves valuable in the realm of
multimedia content generation, particularly in prospect
profiling. These tools leverage both public and internal
information to identify and prioritize customers and targets for
outreach, enhancing the effectiveness of marketing endeavors.
GenAI chatbots have already been deployed to support human
customer service agents, with the potential to advise customers
on basic queries directly. Again, to be applicable to Latin
America, more focus on Latin American consumer behavior is
needed.

GenAI has a very quick, short-term application

which is content generation and personalization
of offers. Something that is not mentioned too
much is that AI models should be trained with
data generated by consumers in Latin America.

Andres Martinez, Chief Information Officer at Kushki

GenAI also contributes to the efficiency of routine tasks in

payment workflows, spanning regulatory checks for cross-border
payments, analysis of trade-finance contract terms, and the
alignment of invoices with purchase orders.

TREND 06 57
Its utility extends to more complex workflows, such as optimizing
the efficiency of merchant onboarding through automated
analysis of application documents. Where necessary, GenAI can
signal merchants for human review. Envisioned widespread
integration of those applications also extends into the realm of
retail payments, where banks and PSPs can harness this
technology for post-sale customer care within card and digital
wallet businesses. According to a BCG report, integrating GenAI
into product development within the payments sector has the
potential to elevate productivity across various stages by over
20%43.

43
BCG, 2023. “Investor scrutiny provokes a moment of truth”.

GenAI is still in its early days, especially in Latin America, with

most companies in the region still in the experimental phase.
Greater corporate know-how, data engineering, and models using
local data are required to help GenAI become applicable to local
companies and scale over time. However, the most innovative
players have already found active use cases and are leveraging
the technology to their advantage. In the midterm, the smart
application of GenAI will be a critical competitive advantage that
will help accelerate the region even further.

TREND 06 58
Next Steps
To recap, the commerce and payment landscape in Latin
America looks set for even more innovation and diversification.
Real-time payment systems are enjoying success and
governments across the region are pursuing this technology for
their populations. Consumers are becoming increasingly
accustomed to technological solutions such as contactless
payments and security authentication, and it is expected that
the new technological revolution driven by Generative AI will
have a major impact on the evolution of new solutions.
Regulators are becoming more bullish about enabling fair,
low-cost cost, and efficient payment systems and better
advocates of new digital industries such as online betting.

NEXT STEPS 59
The rise of e-commerce, digital goods, online betting, and gaming,
in fact, creates new prospects for a digitized Latin America, in
which no hardware is required, payments are instant and
seamless, money flows in multiple directions, and consumers
have multiple secure, and personalized payment options. Arriving
at this idyllic scenario is still rife with challenges, from fraud,
inexperienced consumers and merchants, still outdated
acceptance infrastructure, and limited data availability. But with
technology advancing and regulators getting on board, the
future is bright.

For international merchants eyeing the opportunities in this

dynamic landscape, a strategic imperative emerges: collaboration
with local partners. The region's intricacies and historical
fluctuations highlight the importance of partnering with local
experts who understand the market's complexities. In closing,
Latin America's digital payments landscape is a representation of
the fusion of tradition and innovation, offering a glimpse into the
future of global commerce.

Embracing these trends and forging partnerships with local

experts will pave the way for success in this region of boundless
opportunities. For the next years, the synergy between global and
local perspectives will be the key to unlocking the full potential of
Latin America's ever-evolving payments landscape.

NEXT STEPS 60
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