As the year starts, it is time to renew the regional focus on bringing more Latin Americans into the formal financial economy.

The financial inclusion story of Latin America is both a remarkable success and one where progress is as varied as its landscape. Some countries, like Brazil and Chile, have managed to integrate their populations into the financial system, leading to a significant displacement of cash. Brazil, with 94 per cent digital payments penetration in Private Economic Consumption (PCE), will soon become the first economy worldwide to achieve remarkable scale in digital payments. Chile (63 per cent) is at the level of very mature countries like the US (63 per cent) or the UK (62 per cent). Many other countries, however, like Mexico (25 per cent), Peru (25 per cent), and Colombia (17 per cent) still have significant portions of their populations relying on cash.

Paving the way for prosperity

The benefits of payments digitisation to various stakeholders, such as consumers, SMEs, and governments, are well known. Looking ahead, Mastercard sees a great opportunity in engaging both private and public sectors to reduce cash usage and drive inclusion through digital payments via the following initiatives:

1) Providing consumers with access to digital payments through accounts and payment methods such as debit cards or other alternative payment methods is crucial for modern economic participation. A great example comes from the government subsidies provided to consumers across the region during the pandemic. A Mastercard study from 2023 revealed that 15 per cent of respondents accessed their first savings/deposit account product, and 9 per cent accessed their first digital wallet, thanks to government assistance during COVID-19. In the Dominican Republic, Banreservas’ Bono Navideño programme has digitised the distribution of assistance to families that, until 2020, was received in the form of a basket of food. Fintechs have also played an important role in providing access to digital accounts in the last few years. Nubank, for example, announced last year that it reached the milestone of 100 million customers .

2) Access to digital payments alone is not sufficient. To accelerate the transition, we must enable consumers to manage all their daily transactions — whether in-store or online — using the digital solutions. Ensuring that all merchants, large and small, accept digital payments is paramount. We should aim to replicate this Brazil’s best practice. The country has the highest number of merchant locations per 1,000 inhabitants accepting digital payments, while large economies like Mexico and Colombia have a little bit over 20 acceptance merchant locations per 1,000 inhabitants.

3) Consumer-oriented experiences also play an important role in driving usage and adoption. Simple, intuitive digital interfaces, when combined with reliable customer support, can significantly enhance public trust in digital platforms and drive adoption. Latin American fintechs, with their exemplary consumer experience, have become benchmarks in the industry for other global players.

4) In addition to providing an exceptional consumer experience, it is crucial to continually build trust and confidence, particularly for senior consumers. Recent statistics indicate that 83 per cent of Latin Americans consider security features to be the most influential factor when selecting a payment method. The industry’s substantial investments in cybersecurity — where many institutions have already adopted AI for fraud prevention and cybersecurity, moving from rule-based systems to sophisticated anomaly detection and behavioural analysis — along with ongoing investments in consumer education, are essential in shaping consumer behaviour.

Moving forward, a regulatory framework that promotes competition and fosters innovation is essential for the implementation of these best practices. By cultivating an environment that encourages innovation, regulators play a vital role in enhancing consumer choice, building trust, and driving technological, economic, and social progress.