E-commerce is On the Rise in Latin America

There is huge potential for growth within the E-commerce industry in Latin America. Accuracy, an international finance business, predicts that the industry could see a growth of around 200% in 2014, when compared to 2013, making it a strategic market for businesses in the region offering E-commerce services.

According to Rafael Hospina, Director of the Partner Program at PayU Latam, an online payment service provider, E-commerce is currently growing at a rate of 40% per year. He claims that this growth is, in part, due to new countries such as Colombia, Chile and Peru (currently growing at a rate of 50 to 70%) entering the online commerce market, as well as the consolidation of other countries such as Mexico and Argentina.

Hospina argues that while Brazil has not been able to maintain the high levels of growth that it was seeing a few years ago, it is still leading the field, with participation of 60%. “Despite the fact that growth has slowed down somewhat, on a regional level it is still considered significant, between 30 and 40% per year,” he states.

Hospina claims that both consumers and businesses in general are becoming more confident in making electronic transactions when purchasing products or services. He adds that consumers are realizing that it is a much more convenient way to make transactions, and are not as worried as they used to be when it comes to entering personal information on E-commerce sites.  “Businesses are seeing online transactions as a compliment to physical transactions; incurring fewer costs and requiring a different type of professional training,” he states.

He also believes that digital marketing specialists are now providing a much clearer E-commerce strategy; placing much greater emphasis on the logistics of a reliable, on-time delivery of the products bought online. “Things are looking pretty good for the next five to ten years, with predictions of double digit growth; something that will prove to be important for our countries,” Hospina notes.

Sectors Showing Potential

While E-commerce is still relatively small in Latin America when compared to physical sales, Rafael Hospina believes that this is soon to change; particularly when it comes to certain industries. For example, within the tourism industry, he says all sales will soon be made over the internet, especially when it comes to hotel and airline reservations.  Similarly, the retail industry is putting significant initiatives in place to open up virtual channels and become more “professional” when it comes to online business management.

“There are stores that solely operate online, and they are doing extremely well”, states Hospina.  “Amazon is already starting to look at Latin America in a new light, and will soon commence operations in Mexico.  This will undoubtedly encourage the growth of E-commerce within our countries, helping it to become an important sales channel,” he adds.

Hospina, Director of the Partnership Program, explains that PayU Latam currently offers over 70 alternative payment options, covering the entire Latin-American market.  These include both local and international credit cards, cash deposits and bank transfers.

Hospina also highlights the importance of consumers having easy access to banking services; making personal bank accounts and credit and debit cards widely available. In general, however, this is something that is not being fully capitalized upon in the Latin-American region. “This is why we are focusing on these markets; because we are aware of the fact that the use of E-commerce in Latin America differs from that of North America. It is because of this that we are offering alternatives such as cash payments through convenience stores,” he states.

This is why, according to Hospina, payment providers, E-commerce businesses, users, governments, banks and telecommunication businesses all need to come together and start “pulling in the same direction.”

PayU Latam currently has around 20,000 clients and manages around 15 million transactions a year. According to Hospina this is a considerable amount when considering that most of these transactions are generated within the region itself, as well as from countries outside the region looking to take advantage of the services and products on offer in Latin America.  “This is equivalent to approximately US$2.5 billion a year,” Hospina says.

Attracting More E-commerce

PayU Latam recently launched its Global Partnership Program, which looks to help companies using an E-commerce platform to enter the Latin American market.  It hopes to involve 200 associates in the program, as part of its globalization scheme.

According to Hospina, the online payment platform allows for payments to be processed in the currency specific to each country – Argentina, Brazil, Colombia, Chile, Mexico, Panama and Peru.  “Moreover, we have a good understanding of each market, and are able to determine which transactions are legitimate and should be approved.  And most importantly, we are aware of the common attempts of fraud and are able to take steps to protect against them,” he states.

Hospina explains that the business will use a global alliance program to expand operations and reach clients that, as yet do not operate in Latin America, but are interested in selling and operating in the region.  “We have 14 years of experience operating in this market and we are familiar with both the positive transactions and the fraud attempts. We know the people and we never make the mistake of being overly quick to reject a transaction; something that often happens when someone in the States or Europe tries to process payments in Latin America,” he concludes.