Latin America is reshaping money

Ask AI · How do Latin America’s exchange-rate fluctuations drive payment innovation?

Author｜Yang Zix

Editor｜Li Xiaotian

Among all the magical narratives in Latin America, the hidden payment networks are especially dangerous and fascinating.

This is a region where exchange rates are not stable. Money sometimes is like steam—under extreme circumstances, a currency can depreciate by 50% in a single day. In recent years, Latin American countries have faced multiple rounds of currency devaluation. For example, in Q1 2020, the Mexican peso and the Brazilian real depreciated by 32% and 32%, respectively, while the Argentine peso depreciated by 9%. Since then, exchange-rate volatility has intensified further. In December 2023, the Argentine peso once depreciated by more than 50% within a single day.

And now, cryptocurrencies can help money in hand shrink less easily. That is why USDT or Bitcoin has become one of the ways to hedge. According to a report released by blockchain data company Chainalysis: Argentina’s cryptocurrency adoption rate is approaching 20%, with 8.6 million people using crypto “to fight” inflation. In addition, between July 2024 and June 2025, Brazil transferred $318.8 billion worth of crypto assets, accounting for one-third of Latin America (LATAM)’s crypto economy. Some smaller markets, such as Peru, Chile, and Bolivia, have also played key roles in the rise of cryptocurrency markets across Latin America.

Even though it’s a region with missing financial credibility, Latin America is in an upward growth phase—an emerging middle class, booming consumption—but traditional financial supply is scarce and outstrips demand. The need to use new technology to handle transactions between different denominations and the settlement between transactions is becoming increasingly urgent.

As BAI investor Zhao Penglan, who has long tracked the Latin American market, said: the most important infrastructure of the global financial system is SWIFT, “Move money at Bank speed.” With the support of blockchain and stablecoins, it can now achieve “Move money at Internet speed.”

A payment revolution is happening across the ocean.

According to Worldpay’s “Global Payments Report 2024,” credit cards are still the largest payment method for online transactions in Latin America, accounting for a little over 40%; but around 2019, that share was close to 55%. The room for share decline is being quickly filled by two categories of payment methods: one is digital wallets, and the other is real-time payment systems.

At present, digital wallets account for around 10% of online transactions in Latin America, while the share of real-time payment systems has exceeded 20%. In some markets it is even higher. A typical case is Brazil’s Pix.

Based on data from Banco Central do Brasil, Pix users have exceeded 150 million. In 2024, Pix transaction volume surpassed debit cards and credit cards, becoming the core method of electronic payments in Brazil.

Besides that, cash has long existed as a payment method in Latin America—especially among low-income and rural groups—but the overall trend is declining. This is because, in terms of the employment environment in Latin America, informal employment is deeply rooted; without major regulation or economic change, it is difficult to alter.

From the changes above, it is clear that payment methods are shifting from a single option toward more diversified possibilities. Diego Oliveira, Brazil country manager of cross-border payments company PayerMax, told Xiahngguang She that over the past five years, mobile devices and app-based wallets have driven financial inclusion. PayerMax is one of the earliest fintech companies to plan for key global outbound markets, covering 150+ markets and supporting 600+ payment methods.

One is the widespread use of smartphones. According to GSMA’s “Mobile Economy Latin America” report, smartphone penetration in Latin America has exceeded 70%, with some countries approaching 80%.

World Bank Global Findex data shows that in Latin America, a significant share of the population remains “unbanked” or “underbanked.” This means that in many remote areas and among low-income groups, there may not be enough physical bank branches, but mobile financial services can reach users directly. For example, in small towns in northern Peru, it might take a two-hour drive to reach a bank branch, but with just a smartphone, people can download a wallet app. For local residents, the first ticket into the financial system is no longer a bank card—it’s a phone wallet.

The second is that for millions of people not covered by the banking system, wallets and digital banks such as Mercado Pago, Nubank, and PicPay have become the entry point for these users to enter the formal financial system. For example, platforms such as Mercado Pago, Nubank, and PicPay can provide people who are not covered by traditional banks with account services, payments, transfers, and even credit services.

More importantly, changes in payment methods have an impact on the traditional business environment. Diego Oliveira told Xiahngguang She that if merchants in the local area can provide localized payment options—including wallets, cash vouchers, and real-time transfers—they often can significantly increase conversion rates and reduce abandoned-cart rates. Because in regions where credit card penetration is low, the key to whether a transaction succeeds is whether payment can go through.

In Mexico, convenience store payment channels such as OXXO, with more than 20,000 outlets, have become the offline entry point for online shopping. A Mexican merchant also expressed the same view: for similar product pages, if they support only credit cards, the abandoned-cart rate can be as high as double digits. But once cash payments at convenience stores and local wallets are added, the conversion rate improves significantly. When payment methods expand from a single credit card to wallets, cash vouchers, and real-time transfers, the transaction threshold is lowered, and merchants naturally achieve higher conversion rates and lower abandoned-cart rates.

In the strategic map of outbound (cross-border) enterprises, Latin America is often treated as a whole. But at the level of payment systems, different Latin American countries operate in completely different ways. Payment structures, regulatory models, and user behaviors all differ. The gap in penetration of inclusive finance within Latin America is also very obvious: Among Mexicans aged 15 and above, fewer than half have accounts; while across the entire Latin American region, the figure is 73%.

Brazil is the most digitized market in Latin America. Pix, a real-time payment system driven by the Central Bank of Brazil, has covered more than 150 million users, accounting for 42% of electronic payment transactions nationwide, exceeding credit cards’ 41%.

Pix’s success cannot be separated from the unified standards led by the central bank and mandatory interoperability: all banks and digital wallets must connect to Pix to enable 24/7, real-time settlement. As a result, a large group of people who previously relied on cash or had insufficient credit card limits achieved truly instant online payments for the first time.

Throughout 2024, Pix processed about 64 billion transactions, up 53% year over year, and substantially increased merchant conversion rates and transaction success rates in e-commerce and retail scenarios.

Therefore, Pix not only changed the payment technology process, but also rapidly reshaped consumer and merchant behavior. People who previously relied on cash or credit cards are directly brought into the digital payments ecosystem. E-commerce transaction approval failure rates decline, transaction costs fall, and conversion rates rise clearly.

Meanwhile, Mexico is a market with deeply rooted cash culture. Although digital payments have kept growing in recent years, in Mexico, cash remains deeply embedded in daily social circulation. According to data from the Bank of Mexico, cash accounts for more than half of residents’ retail payment transactions, and its share is higher in small-ticket purchases and offline scenarios.

A highly representative phenomenon is that Mexican consumers are accustomed to ordering online and paying with cash offline. Taking OXXO, Mexico’s largest convenience store chain, as an example: its national footprint of more than 20,000 stores has become an important offline touchpoint for e-commerce and financial systems. After consumers place orders online, barcodes are generated, and then they go to stores to complete payment with cash.

At the institutional level, Mexico is also pushing real-time payments—just with less-than-ideal results. In 2019, the central bank launched the QR code instant payment system CoDi, attempting to replicate Brazil’s path. However, as of 2024, the active usage rate of CoDi is still far below expectations, in sharp contrast to Brazil’s Pix. The underlying reasons are that the banking industry’s entrenched interest structures are complex, and the market is highly fragmented, leading to limited policy push strength and a lack of mandatory interoperability mechanisms, making it difficult to form network effects.

In addition, Mexico’s digitalization level is relatively split between cities and rural areas. In first-tier cities such as Mexico City and Monterrey, the growth of digital wallets and card payments is rapid, and in some e-commerce platforms, the share of digital payments has already exceeded 60%. But in towns and small merchant ecosystems, cash still dominates absolutely. Many street vendors and family-run operators have not yet been incorporated into the formal financial system, and the speed of building payment infrastructure cannot keep up with the growth in consumption demand.

Digitalization in Mexico is indeed increasing, but in the short term it will not form a structural substitution for cash; even now it remains a cash-dominant market.

Mexico’s payment structure, first, is influenced by macro risk management issues.

For many years, Argentina’s annual inflation rate has remained high, with some years even exceeding triple digits. In such an environment, cash itself becomes a “depreciating asset.” Consumers are more inclined to move funds quickly into digital wallets or bank accounts for immediate use in payments or for converting assets, rather than holding banknotes for the long term. Digital wallets represented by Mercado Pago have an active user base of more than 30 million, accounting for more than half of the country’s population; in a high-inflation environment, digital wallets become even more embedded in daily life.

In addition, Argentina’s financial system is highly fragmented. For a long time, Argentina’s banking system has been repeatedly affected by frequent adjustments to macro policies, including foreign exchange controls, restrictions on capital flows, and multiple exchange rates. The gap between the official exchange rate and the market exchange rate creates significant uncertainty for cross-border settlement and merchant collections. Payment channels and clearing mechanisms therefore also show phased volatility.

For businesses, the core difficulties they face in Argentina are affected by macro variables such as uncertainty in exchange rates, the success rate of settlement, and the time until funds are received. Specifically, when exchange rates fluctuate sharply in the short term, e-commerce pricing and the amount of collections can quickly fall out of sync. When capital controls tighten, the cycle for cross-border funds to return is lengthened, and cash-flow pressure is amplified accordingly.

The popularity of digital wallets is also an adaptive product shaped by the long-term effects of high inflation and exchange-rate risk.

Colombia, unlike Brazil which has completed a systemic leap, and unlike Mexico which is deeply dominated by cash culture, is in a transition stage of steady modernization and gradual restructuring.

From the population structure perspective, Colombia has a relatively younger population, with continuously rising internet and smartphone penetration. Younger consumer groups are more receptive to digital wallets and online payments, and there is still substantial room for growth in e-commerce penetration. The evolution of payment structure relies more on the demographic dividend and consumption upgrading, rather than on macro risk or institutional compulsion.

In addition, Colombia also has differences in bank account coverage between urban and rural areas. Some small and medium-sized merchants have not yet fully connected to electronic payment networks. Improving payment acceptance depends on infrastructure deployment and merchant education, not on a one-time institutional breakthrough.

Currently, Colombia is upgrading its real-time payment system and strengthening the infrastructure for electronic transfers. But overall, the pace of advancement is clearly slower than Brazil’s path of centralized reform, and regulatory efforts also lean more toward gradual promotion.

Its local bank transfer system, PSE (Pagos Seguros en Línea), directly deducts from bank accounts, costs less than credit cards, and provides instant confirmation of funds received. At the same time, it avoids credit card limit constraints and chargeback/rejection risks. In recent years, PSE has become one of the important payment methods in e-commerce scenarios.

PSE is more like an intermediate solution that is “less cash, less credit card.” For consumers, it lowers the barrier to using credit cards. For merchants, it reduces fees and losses from rejected payments. In a market where credit card penetration has not yet fully covered everyone and cash still has a foundation, PSE fills the structural gap between the two.

Placing Brazil, Mexico, Argentina, and Colombia side by side shows that in Latin America, there is fundamentally no single unified payment model. Payment methods are not simply a matter of technological interfaces; they are the outcome of financial infrastructure, the pace of regulation, population structure, and macroeconomic variables acting together.

If we extend the time dimension, the direction of how Latin America’s payment landscape evolves may become clearer. In our conversation with Diego Oliveira, we also gained insight into the following trends:

First, instant payments are being replicated across the region. Pix, launched with the leadership of the Central Bank of Brazil, has become a regional template. Its high coverage and high-frequency transaction performance are pushing neighboring countries to re-examine their own paths for building domestic clearing systems. Colombia is upgrading its real-time clearing track; Mexico is optimizing transfer efficiency on the basis of existing systems; and in the region, multiple central banks are promoting the building of “national-level real-time tracks.” It can be expected that in the future, real-time clearing capability will become a “standard feature” of payment infrastructure, rather than a differentiated competitive point.

Second, digital wallets will continue to encroach on card payments. In Argentina, wallets represented by Mercado Pago have long surpassed a single payment function and have become entry points for credit, installment payments, and even cross-border transactions. In Brazil and Colombia, wallets also take on account management and consumer finance functions. Card networks will not disappear, but their role is changing—shifting from being a front-end traffic entry point to gradually moving into the back-end clearing tool layer. What truly controls user relationships and data assets is the wallet ecosystem, not the traditional card network.

Third, cross-border payments are becoming regionalized. As intra-South America trade and capital flows increase, cross-border clearing paths show a trend toward “decentralization.” Businesses are starting to consider more frequently the settlement and clearing interconnection in local currencies within the region, rather than relying entirely on U.S. dollar channels. Discussions about regional payment interconnection are heating up, and as a result, cross-border payment efficiency and cost structures may be reshaped.

Fourth, regulation is moving forward. Open finance, data compliance, anti-fraud mechanisms, and digital identity authentication continue to be strengthened. Regulators no longer “catch up” after innovation; instead, they embed compliance architecture into infrastructure design from the start. Payment innovation must be built on a clear data and risk-control framework, otherwise it will be difficult to scale.

When we put the crypto assets’ hedging logic, Brazil’s institutional leap, Mexico’s cash inertia, Argentina’s macro risk management, and Colombia’s steady modernization on the same map, the real contours of Latin America gradually become visible. In Latin America, payments are not only a technical matter—they are a social structure. Only by seeing that hidden network can we find a path to certain growth in this dangerous yet fascinating market.