LATAM Leap: Winning the eCommerce Game
LATAM is one of the fastest-growing eCommerce markets in Latin America, offering significant opportunities for merchants who can navigate its unique challenges. From increasing authorization rates to managing payments fraud, success in LATAM requires a tailored approach to payment processing that includes understanding local preferences and compliance regulations. In this blog, we’ll explore the critical factors influencing LATAM’s eCommerce growth and how businesses can optimize their payment strategies.
eCommerce Challenges in LATAM
The eCommerce market in LATAM has exploded in recent years due to increasing internet penetration, mobile commerce, and digital wallets. However, merchants must overcome several specific hurdles to fully capitalize on this booming market, such as:
- Low authorization rates: Many transactions are rejected due to insufficient support for local payment methods and differences in card networks.
- Payments fraud: LATAM has one of the highest rates of card-not-present (CNP) fraud globally, requiring advanced fraud prevention strategies.
- Compliance complexities: Local data protection laws, such as the Lei Geral de Proteção de Dados (LGPD), present compliance challenges for businesses.
- Preference for local payment methods: Many consumers use domestic credit cards, Boleto Bancário, and the increasingly popular Pix system for transactions.
Navigating these challenges is essential for businesses looking to tap into LATAM’s growing eCommerce sector.
Increased Authorization Rates
One of the most effective ways to drive success in the LATAM market is by increasing authorization rates on card transactions. Working with multiple payment gateways and local acquirers is key to achieving better approval rates. LATAM has a fragmented payment ecosystem, with over 80 payment gateways operating within the country, each offering different levels of performance.
Authorization rates can vary significantly depending on the payment gateway used. For example, authorization rates in LATAM can be as low as 16.3% with some gateways, while others can offer rates as high as 84.4%. This vast difference in performance highlights the importance of selecting the right payment partners. A merchant processing $1 million in transactions through a gateway with a 16.3% authorization rate could lose over $800,000 in potential sales. In contrast, by using a gateway with an 84.4% authorization rate, that same merchant could secure most of those sales, resulting in dramatically higher revenue.
Partnering with local acquirers also ensures that businesses can benefit from more flexible fraud rules, optimized routing, and lower interchange fees. By integrating payments orchestration platforms, businesses can improve approval rates by dynamically switching between acquirers based on real-time transaction data and performance. Routing transactions through the most effective gateways and acquirers is critical for maximizing success in LATAM’s complex payment landscape.
Data from Statista shows that eCommerce sales in LATAM reached nearly USD 23 billion in 2021, a trend expected to continue growing. Improving transaction approval rates can capture a significant share of this booming market.
Accepting Local Payment Methods
LATAM consumers have a strong preference for local payment methods, and merchants who fail to offer them risk missing out on sales. Boleto Bancário, for instance, is a popular payment method, especially among the unbanked population. Meanwhile, domestic credit cards—often with installment payment options—dominate the market.
A newer and rapidly growing payment method in Brazil is Pix, an instant payment system introduced by the Central Bank of Brazil. Pix allows consumers to make real-time transfers 24/7 and has seen widespread adoption across the country, making it essential for eCommerce businesses to support this method. Pix transactions are faster than traditional credit card payments, and its seamless integration across platforms increases accessibility and conversion rates.
Merchants need to integrate these methods into their payment flows to ensure they are meeting consumer demand. Payments orchestration platforms simplify this process by supporting a variety of local payment methods in addition to global ones. This flexibility increases the likelihood of converting potential buyers into paying customers, especially as more Latin Americans shop online.
Local payment options also increase accessibility, reaching customers who may not have access to international credit cards or prefer paying in local currency, thus driving more sales and customer loyalty.
Decreasing Payment Fraud and Handling Compliance
With LATAM’s high rates of CNP fraud, businesses must strike a balance between fraud prevention and transaction approval rates. Implementing fraud detection technologies, such as machine learning algorithms, can help reduce false declines—where legitimate transactions are mistakenly flagged as fraud. These false declines can hurt revenue and erode customer trust.
Another important aspect of ensuring successful operations in LATAM is compliance. In addition to Brazil’s LGPD (Lei Geral de Proteção de Dados), businesses must comply with PCI DSS (Payment Card Industry Data Security Standard) requirements. PCI compliance is crucial for protecting cardholder data and ensuring that businesses meet global security standards. Non-compliance can result in costly fines, reputational damage, and increased vulnerability to fraud.
Payments orchestration platforms that integrate robust security features, including tokenization and encryption, help businesses meet both PCI and LGPD requirements, ensuring data protection while reducing exposure to sensitive payment information.
Partnering with local acquirers and utilizing tokenization strategies can further enhance security by reducing the risk of fraud and ensuring compliance with both local and global standards.
Take Advantage of LATAM’s eCommerce Opportunities
LATAM offers tremendous opportunities for eCommerce businesses, but succeeding in this market requires addressing specific challenges, from authorization rates to fraud prevention. By leveraging payments orchestration, merchants can offer local payment methods, such as Pix and Boleto Bancário, improve transaction approval rates, and comply with local regulations.
As LATAM’s eCommerce market continues to grow, staying ahead of these trends will help businesses unlock new revenue streams and ensure long-term success.
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