To get you started download our guide to cross-border payments
2020 may have been a tough year for Latin America, but the ecommerce market represents a huge opportunity in 2021. The regional online market is predicted to reach $187 billion by the end of the year. This is particularly exciting for international businesses looking to expand into Latin America. Latin American consumers are keen to buy from international ecommerce businesses – in fact, cross-border digital purchasing is growing at a rate of 42% a year.
So far, so good. But as many international businesses have learned to their cost, selling online in Latin America can be tricky if you don’t do your homework. While the potential market is huge (over 270 million online shoppers), accepting online payments isn’t straightforward. If you’re based outside Latin America, you’ve entered the complex arena of cross-border payment processing. The good news is that, if you work with a cross-border payment provider, you’ll be in a great position to make the most of Latin America’s booming e-commerce industry in 2021.
What makes cross-border payments tricky in Latin America?
Latin American consumers use a wide range of payment options, and many are specific to each country in the region. So, even if you find a payment solution that works perfectly for your Brazilian customers, it still might not suit your market in Mexico.
Furthermore, most credit cards are not eligible for international purchases, and many of your customers will not have any credit card at all. A significant portion of potential customers will prefer to use local cash-based methods like Boletos or Oxxo. For larger purchases, online shoppers in Latin America will expect to be able to pay in installments, which will usually require a partnership with a local bank.
So, what are your options?
For many companies outside Latin America, the obvious answer is to use a payment processing system in their own country. So, if you’re in the US, you might handle orders from Latin America via your usual US-based payment system.
Unfortunately, this isn’t likely to work very well. For starters, you can expect very high rates of payment refusals – our research suggests that your payment acceptance rate for purchases from Latin America could be as low as 30%. In other words, your customers in Mexico will go nuts trying to place their order and probably end up giving up altogether.
So, you might move on to Plan B – using a payment provider in Latin America. Your customers can use their local payment methods, your payment acceptance rate goes up, and everyone’s happy. Right?
Well, no. The catch here is that if you want to work with a Latin American payment processor, you’ll need a local entity in Latin America. In other words, you’re going to need a physical address for your business, a tax ID, a bank account and a local rep in the region. All of which adds up to a lot of expense and hassle.
That’s where we come in.
OK, so here’s the good news. At PrimeiroPay, we specialize in cross-border payments for international businesses. You can think of us as an extension of your business in Latin America – but at a fraction of the cost of setting up a local entity. We help you accept payments locally in Latin America, then transfer the funds anywhere in the world. You provide your customers with the best possible payment experience, keep costs low, and avoid paying unnecessary taxes and fees.
But don’t take our word for it.
Cross-border payments can be a complex challenge for international businesses – but those companies that figure it out quickly will be in a fantastic place to make serious profits in Latin America in 2021.
The best place to start is by getting a clear understanding of how international payment systems work. That way, you can figure out the best approach for your unique business model and target market. After all, you’re the expert on your particular clients and what kind of customer experience they expect.
To help get you started, we’ve created a quick, easy to read guide to cross-border payments for international businesses that want to expand or grow in the Latin American region this year. We’ve broken down the unique characteristics of the Latin American online shopper, put together an overview of the most popular local payment methods, and created a comprehensive picture of how cross-border payments work. If you’d like to build a profitable ecommerce business in Latin America over the next 12 months, it’s definitely worth taking a look.
Click here to download it now!