How to Localise Your Payments Strategy for Latin America

The Impact of Local Card Processing

Shifting from cross-border processing to domestic processing can increase approval rates by up to three times. Local acquirers allow transactions to be processed as domestic rather than international, significantly reducing issuer-related declines. Approval rates for local cards used in online purchases can jump from just 20–45% with traditional offshore methods to 80% or more when using local acquiring solutions. This opens a lot of revenue potential for businesses operating in LATAM where a large portion of cards are limited to domestic use. 

The advantages of local acquiring go beyond improved approval rates. By tapping into local market knowledge, local acquirers can better navigate consumer behaviour, communicate more effectively with issuers, and avoid common pitfalls like currency mismatches or cross-border flags that trigger declines. Local processors also provide access to popular regional payment methods, enhance fraud prevention, and keep businesses compliant with local regulations. 

Emerging Payment Trends and Local Innovations

PIX in Brazil and OXXO in Mexico are leading the way in emerging payment trends in LATAM. 

1. PIX (Brazil)

Launched by Brazil’s Central Bank in November 2020, PIX is the country’s instant payment system that has radically transformed its financial ecosystem, offering:

• 24/7 real-time transfers between individuals, businesses, and government entities.
• Mass adoption with over 140 million Brazilians registered by 2023.
• Widely accepted by 76.4% of the population, with even higher adoption among younger demographics: 87% of 16–19-year-olds and 91% of 25–44-year-olds.
• Used across all income levels,  67.8% of those earning up to two minimum wages, 79.9% earning two to five, 80.0% earning five to ten, and 91.7% of those earning over ten minimum wages.
• Consumer preference is driven by speed and simplicity.
• Lower costs for merchants by eliminating expensive card processing fees.
• Increased approval rates by bypassing traditional payment hurdles, resulting in faster approvals and fewer payment failures.

2. Boleto Bancário (Brazil) and OXXO (Mexico)

Boleto Bancário and OXXO are voucher-based cash payment systems. They allow consumers to generate a payment slip and complete transactions at convenience stores or banks, catering to the unbanked and those who prefer cash transactions. 

Boleto Bancário (Brazil)

• Credit cards and Boleto Bancário account for the majority of online transactions in Brazil.
• Better functionality, as customers receive a prefilled payment slip that can be paid at various locations, including bank branches, ATMs, and convenience stores.
• It benefits merchants by providing access to more consumers, including those without credit cards or bank accounts.

OXXO (Mexico)

• Wide reach, having over 20,000 stores across Mexico 
• Caters to Mexico’s unbanked population, estimated at 63% of adults.
• It improves ecommerce integration, allowing cash payments for online purchases.

Although these methods may delay fund settlement, Boleto Bancário and OXXO provide a reliable payment option for customers without credit cards. By supporting financial inclusion, they expand the potential customer base to include unbanked individuals. These cash-based systems also help reduce chargebacks and online fraud, offering a safer alternative for merchants. 

Regulatory Considerations for Localisation

Expanding into Brazil and Mexico requires compliance with local financial regulations. Here are key considerations:

• Brazil’s financial authorities impose strict guidelines on payment processing and remittances. Foreign merchants must partner with a local acquirer or establish a legal entity to process domestic payments.
• Mexico enforces VAT collection and requires foreign businesses to comply with local tax laws. Failure to meet these regulations can lead to penalties or service disruptions.

Impact on Instalment Payments

Instalment plans, known as “parcelados” in Brazil and “meses sin intereses” in Mexico, are widely used for large purchases. While they can increase sales and improve affordability, some industries must assess whether their subscription model supports them.

Challenges with instalment payments include:

• Delayed remittance. Funds are disbursed incrementally over months, straining cash flow for businesses reliant on immediate liquidity.
• Regulatory compliance. Many LATAM Installments may require additional licensing. Brazil requires PCI DSS certification and adherence to the Central Bank’s credit service provider guidelines. Mexico mandates authorisation from CNBV (National Banking and Securities Commission) for interest-free plans.

Instalment payments may not be suitable if a business model relies on monthly subscriptions. However, they can enhance conversion rates for annual or high-ticket subscriptions.

Pricing Localisation: Should You Adjust Prices?

As merchants expand into new markets, they must decide whether to localise their pricing to match regional expectations and purchasing power. While some companies maintain global pricing to maintain simplicity and avoid managing multiple currencies, local pricing can be beneficial due to:

Currency Exchange Fluctuations

Localising prices helps mitigate the impact of currency fluctuations on both your business and your customers.

Purchasing Power Differences

Adapting prices to local purchasing power can expand your customer reach. Aligning pricing with local affordability increases competitiveness in markets where North American price points may be a barrier and attracts new customers in more price-sensitive regions.

Consumer Expectations

Meeting local pricing expectations improves customer satisfaction and trust, and displaying prices in local currency creates confidence and can increase sales by up to 12%.

Strategies to Win Localisation

Brazil and Mexico are two examples of emerging LATAM markets full of innovation and revenue opportunities for global businesses. To win in these markets, merchants should adopt a phased localisation approach:

1. Prioritise local card processing. Work with a local acquirer when entering new markets.
2. Integrate PIX and other bank transfer methods. Increase conversion rates with alternative payment options.
3. Offer cash-based methods like Boleto and OXXO. Cater to consumers without bank accounts or credit cards.
4. Stay compliant with local regulations. Partner with experts to navigate LATAM’s regulations.
5. Evaluate pricing strategies. Decide whether to maintain global pricing or localise based on market expectations.