Land of Real-time Payments: What to Expect from A2A Schemes in Latin America

    Insights » Americas » Land of Real-time Payments: What to Expect from A2A Schemes in Latin America

    Brazil’s Pix will gain new features while Costa Rica’s Sinpe Movil braces to A2A regional cross-border transactions.

    Real-time Payments in Latin America

    Valentina Meneses

    Sr. Analyst

    Contact the author

    As the main global lenders and investment banks revise their forecast for Latin America’s growth in 2024 upwards, with inflation waning1 and the likelihood of a hard landing for the global economy receding2, we see a steadier road for another trend in the region continuing to evolve: the further development and rapid adoption of real-time payments. As Brazil’s Pix is expected to gain a new game-changing feature later this year, making it compete directly with established payment trails, other account-to-account schemes in the region are poised to reach greater adoption and experiment with new arrangements, including cross-border transactions.

    Brazil’s instant system Pix is one of the leading schemes in the world, with a record-breaking volume of BRL 16.9 trillion (USD$ 3.4 trillion) transacted last year, 54% more than in 2022, according to statistics from the Central Bank, and accounting for 29% of the country’s e-commerce volume in 2023, according to PCMI data. Considering all online purchases in the region, Pix accounted for 16% of them last year.

    A game-changer functionality is expected to roll out in late October, allowing Pix to compete to some extent with the credit card industry, a primary payment method for recurring purchases. It is the so-called “Automatic Pix,” which will enable the auto-bill function of the system, allowing users to authorize the payment of utility bills and recurring services by direct debit from their bank accounts.

    With “Automatic Pix,” the Central Bank expects business transactions to soar, which would lead to a massive increase in the volume of payments processed through the system, as operations for and between companies tend to be much larger tickets — their financial volume already account for half of the total and the number of transactions (P2B, B2P, and B2B) has been growing steadily. If they represented 30% of the total operations within Pix a year ago — compared to 64% of P2P transactions — they now account for 40%.

    Other RTPs in Latin America and Costa Rica’s Particular Case

    Pix first became popular among Brazilian consumers due to its free peer-to-peer transactions. As we have already discussed in other articles in PCMI’s blog Insights, Mexico’s Dinero Movil or simply DiMo, a system launched in 2023 that enables users to make instant bank transfers through the country’s real-time gross settlement system SPEI by using only a recipient’s phone number, aims for the same purpose, focusing first on gaining traction as an option for P2P and P2B low-value payments.

    At an earlier stage, we find Colombia’s Banco de La República newly issued interoperability rules for banks and digital wallets to follow the same standard in QR codes and instant transfers. Argentina’s Transferencias 3.0 did the same a couple of years ago, which helped digital wallets reach 23% of e-commerce transactions in 2023, according to PCMI estimates, being the second most used payment method for online purchases after credit cards.

    Costa Rica’s Sinpe Movil started on the same path even earlier but with a tweak — as the most developed economy in Central America, the country has been working3 to expand its electronic payments system Sinpe, the “father” of its mobile A2A scheme Sinpe Móvil, to its neighbors.

    Although Sinpe has existed since the late 1990s, it was in 2015 that the country’s Central Bank launched Sinpe Móvil, by allowing users with an account in one of the participant institutions to make P2P and P2B payments using their cell phone numbers as aliases. The move boosted Sinpe’s reach.

    In 2023, Costa Ricans posted4 a new record in money transferred through Sinpe Móvil: CRC 8.6 trillion (USD$ 16.5 billion), up 25% from the previous year. The system has 3.6 million active users vis-à-vis Costa Rica’s population of slightly more than 5.2 million people. Transactions through Sinpe Móvil currently account for 30% of operations running through Sinpe’s trail.

    Sinpe Movil evolution in Costa Rica

    In 2020, Banco Internacional de Costa Rica (BICSA), domiciled in Panama, was the first “regional participant” to enter5 Sinpe’s network through its parent companies: Bank of Costa Rica and the National Bank of Costa Rica. With it, customers of these institutions were allowed to make cross-border transactions through Sinpe — that was also possible because four years earlier the Central Bank had implemented the international account standard IBAN in Sinpe.

    In 2021, the Central Bank introduced PIN, a regional instant payment scheme to connect banks outside of Costa Rica with local institutions using Sinpe as settlement infrastructure.

    In January 2023, the Central Bank updated6 the rules for the institutions wanting to participate in PIN and Sinpe. Arrangements like this of BICSA are expected to multiply, attracting institutions from Honduras, El Salvador and Guatemala, for example. Expanding Sinpe Móvil regionally would be natural after that. With a larger penetration of cross-border e-commerce, a regional RPT scheme would also make more sense for Central American countries than for other Latin American nations. This marks a trend bubbling up in Latin America and the world: the internationalization of domestic RTP schemes. 

    The Land of RTPs (at least in the West)

    Real-time payment schemes are in full development in Latin America, sometimes driven by regulators, sometimes stimulated by the fintech revolution that has been one of the driving forces for financial inclusion in the region for more than a decade.

    Although at different stages, all these initiatives have growth prospects in 2024 and make Latin America the land of A2A schemes — the United States and Canada are nowhere near this level of development and adoption of RTPs.

    Next Steps

    With real-time payments developing at a rapid pace in Latin America, it is increasingly difficult to keep up with their impact and transformations. Don’t worry, PCMI gets you covered. Get in touch for a more in-depth look at what’s to come and what opportunities RTPs offer payment providers in Latin America as more connections and features are built on top of all these solutions.


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    Sources

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    Valentina Meneses
    valentina@paymentscmi.com

    Valentina Meneses supports PCMI practice by conducting desk research, interviews and analysis focused on different markets, consumption variables; as well as social, political, and economic contexts.

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