Boost in Top Payment Firms in Latin America Reaches 150% Over Five Years
Latin America Makes a Mark in the Cross-Border Payments Industry
In the ever-evolving landscape of the cross-border payments industry, Latin America is making a significant impact. This year, five Latin American companies — Mercado Pago, EBANX, dLocal, Monex, and Banorte — have secured spots in the prestigious "Cross-Border Payments 100," an annual publication that highlights the industry's leading players.
This rise in Latin American representation is a testament to the region's growing importance in the sector. Since 2019, the number of Latin American companies in the top 100 has more than doubled, reflecting a burgeoning interest in global trade and a drive to overcome traditional payment challenges.
The growth of small and medium-sized enterprises (SMEs) in cross-border trade is a key factor driving this trend. With SMEs in Latin America expanding their international trade at a rate of approximately 12% per year, double the global average of 6%, the demand for efficient cross-border payment solutions has increased substantially.
Traditional correspondent banking systems, designed for large transfers, have long imposed high costs, slow speeds, and low transparency on SMEs. For instance, fees on small transfers (around $250) average 23.3%, with some corridors experiencing over 30% in fees, creating inefficiencies that hinder SME growth.
To address these inefficiencies, innovative payment platforms such as Mastercard Move are emerging. These solutions utilise pre-funded local currency networks, reduce intermediaries, improve settlement speed, and enhance transparency and tracking features. As a result, transaction failure rates have dropped from traditional levels of 11% to around 2% in the Latin America and Caribbean region.
The expanding cross-border ecommerce market in Latin America is another factor contributing to the region's growth in the payments industry. With the market projected to exceed $100 billion by 2026, the demand for efficient cross-border payments is set to increase further.
Daniel Webber, CEO and founder of the platform that publishes the Cross-Border Payments 100, has expressed a positive outlook for the industry in Latin America. He stated that the region is seeing significant activity in payments and is quickly becoming a key player in the cross-border payments space.
Despite the growth of emerging markets in Latin America, North America continues to dominate the industry. However, with the increasing presence of Latin American companies in the top 100 and the trend of payment companies setting up shop in the region, it is likely that Latin America will continue to assert its importance in the cross-border payments industry.
The recovery of the job market post-pandemic has also contributed to the growth of remittances in Latin America, with immigrants based in the US sending money home to help families tackle the rising cost of living. The proliferation of fintechs in Latin America is another key development observed in the cross-border payments industry, offering digital and mobile banking options to previously unbanked populations.
In conclusion, the 2023 Cross-Border Payments 100 reflects a noteworthy increase in the presence and activity of Latin American companies within the cross-border payments sector. Key developments since 2019 include accelerated SME internationalization, innovation in payment infrastructure tailored to smaller firms’ needs, and rapidly growing ecommerce and trade volumes in the region. As these trends continue, it is expected that Latin America will remain a strong area for remittances and a hot spot for cross-border payment service providers.
- The growth in the number of Latin American companies in the "Cross-Border Payments 100" since 2019 demonstrates the region's increasing role in the finance sector, as more firms capitalize on opportunities in global trade.
- The expansion of fintechs in Latin America, providing digital and mobile banking services, is shaping the future of finance by providing digital solutions to previously unbanked populations, further boosting the region's prominence in cross-border payments.
