South America Digital Wallet - Forecasts from 2023 to 2028

The South America digital wallet market recorded total transactions of US$44.954 billion in 2021 and is expected to grow at a CAGR of 49.34% to US$744.878 billion by 2028.

The South American region is estimated to have a large share during the projected period. The adoption of mobile payment applications, like Mercado Pay, PayPal, Rappi, and PicPay, among others, by shops and services worldwide is progressing quickly. This trend is anticipated to persist during the projection period due to rising internet usage and the rapid expansion of online retailing.

Further, due to the rise in smartphone usage and internet penetration in recent years, mobile payment has been gaining popularity throughout the Latin American region following the pandemic. Compared to other payment methods, mobile payment is more practical, secure, and user-friendly. This is one of the primary drivers of South American digital wallet market growth, along with the expanding trend of mobile-based payment solutions.

Growth in digital transaction

Digital transactions have become prevalent as a result of the growing digitization. According to the World Bank, internet consumption has surged in countries all around the world. For example, internet consumption reached 76% of the Latin American and Caribbean entire population in 2021, rising from 49% in 2014. Countries such as Brazil and Argentina recorded more than 80% internet consumption in 2021. As a result, increased internet penetration, in addition to the rising acceptance of numerous digital payments via wallets by various e-commerce enterprises, has fueled industry growth.

Digital wallets allow users to make payments, save funds, track payments, pay bills, and perform a variety of other things using smartphones or computers/laptops. Various economies throughout the world are evolving towards a digital economy, which is leading to the mass use of digital wallets. Consequently, the COVID-19 pandemic has also played a major role in boosting internet usage. People spent their time at home during the lockdown as work and education were shifted online. Due to social distancing, payment through mobile was considered a better option as payment through wallets was secure and hassle-free.

Evolution in E-commerce

Payment systems have adapted swiftly to how consumers pay for products and services ever since the start of the COVID-19 outbreak. There was a dramatic change in how purchases were made physically, online, and through other means. The following figure represents the trend and forecast of e-commerce sales in the United States from 2019. Moreover, the global e-commerce industry is still expanding at an exponential rate. According to KSI's estimates, this industry will surpass $14.5 trillion in 2028 and will witness a CAGR of more than 11% from 2020 to 2028. Consequently, customers increasingly demanding the most from both worlds, and internet shopping is merging itself into a conventional store-based business.

Favorable government initiatives and investments

Growing preference for convenient payment options has resulted in many digital wallet product launches. For instance, Western Union stated in September 2022 that it had acquired Te Enviei, a digital wallet with a presence in Brazil that will quicken the launch of Western Union's Brazilian financial ecosystem solutions. The company aims to give clients the ability to transmit money domestically and internationally, store money, and make payments via the ease of their phones by launching its digital wallet in Brazil.

Various collaborations are taking place among financial institutions to regulate digital wallets in the region. Accordingly, the Central Bank of Argentina published a new set of regulations in September 2022 that include protections equivalent to those provided by banks for digital wallet users. The collection of guidelines is intended to increase the level of security that users of well-known digital wallets in the nation get. Customers of digital wallet firms will now need to be handled like bank users. The firms will also need to modify their agreements of service and conditions to comply with the central bank's regulations regarding financial contracts.

Increasing use of digital wallets for money transfer

Users can send and receive money online using digital wallets, which are often used for money transfers. There are many different digital wallet services accessible, each with its own set of features and capabilities. Some of the popular digital wallet platforms are PicPay, Mercado Pago, and Paypal, among others. In all these apps people can link their credit/debit cards and transfer money to their digital wallet and use them further. Companies are launching new and innovative products, to expand their market share. For instance, to enhance the use of digital wallets in Brazil, payment system provider EBANX collaborated with PayPal in 2020. Through the cooperation, EBANX is expected to be able to reach a client base of more than 50 million people, advancing its broader goal of facilitating commerce between Latin America and the rest of the world.

Growth in strategic mergers and collaborations

Strategic mergers and collaborations are happening in the digital wallet industry, such partnerships will further grow the South American digital wallet market in the projected period. For instance, to expand the customer base in Argentina, American financial firm Fiserv acquired the Argentine wallet Yacare. One of the earliest digital wallets in the local environment, Yacare was established in 2016. Due to Fiserv's acquisition, Mercado Pago now faces an immense competitor in the domestic market. The market capitalization of the US fintech leader is similar to that of Mercado Libre. Therefore, it might threaten the firm's dominant position in the Argentine digital wallet market. As per the World Bank Statistics, the personal remittances, across the region were 2021 and 2022 were US$131.69 billion and US$146.39 billion. The increasing personal transfer from one person to another is increasing in Latin America. This is anticipated to surge in the coming years. Hence, in the coming years, the use of digital wallets for money transfers is anticipated to grow in the projected period.

It is projected that the digital wallet market in Argentina will grow steadily

The growth of the digital wallet sector in the country is being made possible due to the expanding online service usage and increasing internet penetration brought on a surge in number of smartphone users. The positive actions taken by Argentina's government to support online payment services will also present a chance for the country's digital wallet business to expand. For instance, the government of Argentina has established national guidelines for QR transactions to improve mobile payments. The Central Bank of Argentina also established several rules to regulate digital wallets, requiring them to link payment methods with bank accounts by 2022. The government has taken this initiative to encourage users to use virtual wallets conveniently, which will help standardize how digital wallets operate in Argentina. About 34% of consumers in Argentina choose to use digital wallets and QR codes for payment transactions, according to FinServ, a company that provides services for financial transaction facilitation. As a result, the increase in the use of digital wallets and the concurrent implementation of government rules will help to facilitate the efficient operation of digital wallet applications.

Expansion of e-commerce in Argentina

The digital wallet market development has been influenced by the expansion of e-commerce. To increase their selection of digital payment methods, businesses are also attempting to implement their point-of-sale systems which have increased the revenue of major service providers for the digital wallet in Argentina, for instance, as per the 2021 report by MercadoLibre, Inc, their revenue increased from 19.9% in 2019 to 21.7% in 2021.

Further, as more new digital payment systems are introduced across the nation, more people are using digital wallets. For instance, in December 2021, a new retail platform called Fill Smart will debut in Argentina for customers of petrol stations. The business is creating a smartphone app with an e-wallet for controlling forecourt transactions in partnership with the law firm PAGBAM Abogados. Through the service, users can buy fuel and transmit a specific amount to their acquaintances. Other capabilities that will be available include the capacity to make ATM withdrawals and make purchases at convenience stores. Additionally, in May 2020, Ohana, an Argentine financial technology company, unveiled a new digital wallet product to allow users to pay GST daily.

Market Key Developments

• In August 2023, clients of Davivienda, one of the most renowned banks in Colombia, partnered with Google's Digital Wallet to complete safe, contactless transactions. Through this partnership, millions of bank cards belonging to bank consumers will be able to be safely stored in Google's Digital Wallet. Users may add boarding tickets from up to 30 affiliated international airlines using the app, which is powered by Google Pay.

Segmentation:

By Device

• PC/Laptops
• Smartphones

By Application

• Money Transfer
• Recharge
• Movie Booking
• Food ordering
• Others

By Country

• Brazil
• Argentina
• Colombia
• Peru
• Others