1. Lindsay Lehr, Americas Market Intelligence, Payments Practice Leader …
Your source for payments education
Merchant strategies for enabling a digital economy in Latin America: Evolving from a cash-dependent region
Lindsay Lehr, Americas Market Intelligence, Payments Practice Leader …

2. The shifting electronic payment landscape in Latin America
Competing technologies vying for cash

3. Financial inclusion is far from the norm
Bank account penetration combined with smartphones is the motor for many financial inclusion initiatives
Credit Card, Bank Account, Internet & Smartphone Penetration
Brazil
Mexico
Colombia
Chile
Peru
Source: World Bank, World Internet Stats, AMI analysis

4. Cash remains deeply engrained
$1.5 trillion in cash spend at brick and mortar retailers annually across Latin America
Penetration of cash in brick and mortar retail
Debit card ownership vs. usage,
% of pop, 15/yrs+, 2017
Source: Local public domain sources, World Bank, AMI analysis

5. Framework for understanding payment methods
Cash has continued to win because its of “user experience”
Advantages
Disadvantages
Perceived
security
User
experience
Cost
Not digital, so not subject to fraud
Subject to theft
Easy to use and understand
Accepted everywhere
Ideal for small ticket purchases
Must have it on hand
Have to make exact change
Not applicable for e-commerce and apps
Free!
ATM fees
Hidden costs of cash
Determinants of consumer behavior
What new payment methods must combat
What new payment methods should leverage

6. QR codes proliferating
Which to enable and why? Merchant objectives should be clear
Expanding electronic payments?
Or providing an additional electronic payment option?
PEI

7. Determinants of consumer behavior
Who will pull ahead?
Without a clear reason to use QR codes, consumers will revert to cash
CoDi SPEI
Cash
RappiPay
MercadoPago )
Perceived
security
User
experience
Cost
How do they perform?
Not digital, so not subject to fraud
New player, potentially untrustworthy
Well-known
Banxico, highly trust-worthy
Amazon boosts reputation
Easy to use and understand
Accepted everywhere
Ideal for small ticket purchases
Excellent UX
Card-on-file
Digital wallet pays interest
Multiple use cases
Not a user-friendly platform
No clear incentive
Determinants of consumer behavior
Free!
Free for consumers

8. Contactless cards off to a sluggish start
But the card brands are committed, giving contactless an advantage other electronic payment methods
Low contactless card potential
Medium contactless card potential
High contactless card potential
As of Q4 2018…
In 2018 in Costa Rica:
80% contactless penetration of card transactions
Average transaction time reduction of 14 seconds
Average cashier productivity improvement of 12%
~26% contactless
Costa Rica
transaction penetration
~22% contactless
Chile
transaction penetration
Source: Contactless payments in Costa Rica, AMI

9. In Costa Rica, contactless growing in debt
Contactless works for everyday, low ticket purchases. Merchant promotion of debit will help adoption
Source: Contactless payments in Costa Rica, AMI

10. Determinants of consumer behavior
Can contactless beat cash?
What is the value of contactless to consumers and merchants?
Perceived
security
User
experience
Cash
Contactless cards
Cost
How do they perform?
Not digital, so not subject to fraud
No authentication leads to fears of theft
Easy to use and understand
Accepted everywhere
Ideal for small ticket purchases
“It’s what I know”
Better experience than chip
Signature/PIN/ID/installments make the transaction more complicated than cash
Determinants of consumer behavior
Free!
Free, except for general costs associated with card ownership

11. QR vs. contactless Winners Winners Maintains interoperability
As a merchant, what do you want to support? And what does your bank want to support?
If contactless wins…
If QR wins...
Winners
Winners
Card networks
Banks
Modern merchants
Card networks
Modern merchants
Traditional merchants
Banks
QR code network
Maintains interoperability
Enables cross-border
Networks and banks remain brand-central
Could expand card acceptance
Could expand financial inclusion
Payments to become more fragmented
Networks and banks lose to a competing brand

12. Digital natives obscuring brands
Where is the most innovative payment experience happening?
Online marketplace and invisible payments threaten not only payment providers but also merchants
Digital natives obscuring brands
As marketplaces grow….
Merchant brands lose relevance
Card-on-file and recurring payments prevail
Blurred lines between the physical and digital
Mobile phone grows as transactional channel
On-demand delivery
Restaurant delivery
Supermarket delivery
Mass success in ride hailing
Digital goods top-ups
Planning LatAm expansion

13. So how can merchants think strategically about payment acceptance?
Leveraging payments as a strategy

14. Payments as a strategy Traditional thinking Innovative thinking
Using payments to drive efficiency, customer experience, growth and revenue
Payments as a growth driver
Increasing efficiency and cost reduction
Boost in productivity and sales
Driver of customer loyalty
Improved cashier experience
Cost/benefit tradeoff
Payments as a competitive advantage & central to company strategy
Innovative thinking
Payments as a cost center
Not central to my business
A necessary evil rather than an opportunity
Accepting cash is free
Traditional thinking

15. Merchants as powerful influencers
Consumer engagement and branding is key to payment method adoption, something that the banks lack
Banks depend on merchants to promote
consumer adoption of payment methods
Top-of-mind brand status
Deeper consumer engagement in person and digitally
Influence over the consumer at the time of purchase
Merchant advantages over banks
Greater ability to diversity product and service offering

16. Account management and savings
Banks to remain the hub
User experience will be outsourced to a diverse number of players, including merchants
P2P Apps
Banks to remain the hub
Merchant payments
Ecommerce payments
Lending
Account management and savings

17. Developing a framework for merchants
Planning your payment acceptance strategy
Revenue
growth
Payment method penetration
Data
Regulation
Digital
Image
Global trends
Perceived
security
User
experience
Cost
Determinants of consumer behavior
Determinants of consumer behavior
Determinants of consumer behavior

18. Contact Us Thank you! Lindsay Lehr
Associate Managing Director, Payments Practice