FinTechs, open banking, and digital payments are in full expansion stage in Latin America and are advancing towards new frontiers, both technological and business. Jason Simon, an expert who remains at the forefront of online commerce, explains how digital payments are creating changes in eCommerce and are capable of even developing smart cities.
QR codes have become commonplace for retail purchases and contactless payments (via radio frequency) are seen as the next big innovation in the region. But perhaps one of the most interesting movements is that digital payments are beginning to cross the boundaries of eCommerce into territories such as smart cities and public transportation.
“You have to make digital payments part of people’s lives, and so what better than implementing it in public transportation?” said Simon.
The specialist believes that bringing digital payments to public transport has “a major impact” because the system becomes more efficient and impacts a greater number of people on a day-to-day basis.
A global study by Visa published in September last year noted that 88% of public transport passengers expect to have contactless payment options. Visa has projects in Latin America related to public transport in the Colombian city of Cali and the Costa Rican capital, San José.
“These two launches, along with MetrôRio in Brazil, the contactless payment bus pilot program in São Paolo, and bus systems in Guatemala and the Dominican Republic, are part of the contactless payment public transportation projects already in operation in Latin America and the Caribbean,” the company said in a statement. “And we are working on dozens more.”
The implementation in 2021 of Costa Rica’s electronic payment system for public transport, SINPE-TP, was a milestone in this transformation of transport payments. SINPE-TP allows fare payments to be made with electronic means such as debit and credit cards and other instruments associated with bank accounts, including QR codes and contactless payments issued by national or international financial institutions. In this regard, Mastercard facilitated the acquisition of 70 pieces of equipment that will make it possible to receive payments.
Another market that has already made progress with QR codes for public transport payments is Mexico, with implementation in the capital’s Metrobús rapid transit bus system and pilot tests in the subway network.
In Colombia, the city of Barranquilla will start pilot tests in April with the installation of 2,700 dual devices (validator and logic unit) to enable electronic payment in metropolitan transport, according to the local press. “There is a great appetite for smart city issues and modern transportation that accepts open payment transactions,” Simon points out.
Simon added that not only merchants and banks, but also cities and utilities, are looking to innovate on payments issues. “We are seeing very big growth in many verticals,” he noted.
In smart cities, BCP claims to have completed processes in Chile and implementations in Barbados, Colombia, and Ecuador. The Visa report notes that in Latin America and the Caribbean, contactless transaction penetration reached more than 25%, with markets such as Costa Rica and Chile well above 70%.
However, there is still plenty of room for growth. “In Latin America, we still have a great opportunity for contactless payments, but we need hardware upgrades at merchants,” asserts Simon.
PayPal offers in Mexico and Brazil a card acceptance device for SMEs that enables the reception of contactless payments.
“I believe that for the economic reactivation of Latin America, we need to invest in technology that is cost-efficient, that can make payments easy for users and that new products and services can be set up for them,” Simon commented.