What are the key challenges faced by the LATAM payments industry and how can we address them?

May 17, 2023 |
By - Jose Perez
3 minutes read
3 minutes read
By - Jose Perez

Technology and innovation have provided an incredible impetus to digital transformation in Latin America’s payment industry. With a total addressable market of over 600 million consumers that generates close to $6 Trillion of the GDP, Latin America has opened doors for exciting opportunities in the payment industry. This is where TerraPay is exhibiting its innovative problem-solving prowess. TerraPay is registered and regulated across 27 global markets and is spearheading operations in terms of mobile wallets, money transfer operators, merchants, and financial institutions, and creating a global payments ecosystem that supports a range of diverse payment types and instruments.

Like with every region, Latin America comes with its own unique challenges. While there is immense potential for growth, it is worth mentioning that the lack of access, regulatory harmonization, and unaffordable and inaccessible payment solutions continue to pose challenges to an open, inclusive, and interoperable payment ecosystem in the region.


Here are some of the key challenges that the region’s payments industry faces:

LATAM is still at a nascent stage of development: LATAM is a region that is still developing its financial infrastructure, and some of its countries are struggling to connect their local networks to improve their interoperability. To overcome this challenge, strategic partnerships are required to achieve 90-100% coverage in each LATAM country. Local networks are not yet fully developed, like Colombia ACH restricting the service to weekdays and processing payments within 1 to 3 days.

Increased dependence on cash: One of the main challenges in LATAM is the region’s dependence on cash. This is due to concerns about fraud, which hinders trust in financial institutions and electronic transfers. Emerging and new fintech companies developing mobile wallets are key to replacing legacy systems and building a cashless economy by offering people a simpler and cheaper solution. Working closely with these wallet providers can help accelerate the shift from cash to digital in LATAM countries.

The hindrance from central banks: In many countries of the Latin America region, the banking sector holds the reins of payment infrastructure, or the central bank has developed it based on a bank-centered model. This has led to a situation where non-bank payment providers are often excluded from accessing the payment infrastructure due to stringent eligibility criteria, such as licensing requirements and high capital thresholds. As a result, interoperability between different payment products is limited, and the growth of new providers and innovation is constrained.

Lack of technical capabilities: For most players in the market, strong infrastructure, and technical capabilities, or rather the lack of them, is another bump on the road. While some players have started developing their own APIs, most of them still need this technical push from capable fintech partners to automate their processes and enhance their payment capabilities.


Addressing the elephant in the room

To address these issues, companies must focus on the solutions they offer and how they add value. It is imperative to identify their USPs and focus on sharpening these based on the shifting dynamics of the industry. The burgeoning e-commerce in Latin America is an opportunity for the payment players to cater to its vast potential.

As a new player in the region, TerraPay is trying to compete with giants using bare hands. In some cases, there are key players such as banks that have pre-established relationships with aggregators or money transmitters, diminishing any opportunity to reach them directly and increasing operative prices. At the same time, rules and regulations for each country may vary, making it easier to comply with & operate in the whole region. If companies want to succeed in LATAM, they must adapt their processes and policies and aim to acquire different licenses to fulfill their business purposes.

For the digital payment ecosystem to thrive in the region, it is important to encourage interoperability, promote a level playing field in digital payment services and adopt global industry standards.


The solution is right here with TerraPay

As LATAM’s financial infrastructure is still developing, the right strategic partnerships will be critical in strengthening its payments industry. At TerraPay, we help businesses and financial institutions break these barriers surrounding cross-border payments, arming them with the right solutions, and improving connectivity in the region. We are currently in the process of acquiring our license in key LATAM markets like Mexico, Guatemala, Brazil, and Colombia to make seamless, secure, real-time payments possible across the entire region.

TerraPay is using its presence and development in Asia, Europe, and Africa to bring its technical prowess, far-reaching global network, and agile payments infrastructure to power borderless payments across LATAM.