How Payments Are Changing in Chile
The COVID-19 pandemic changed the shopping and payment habits of people around the world, but in Chile, the change has been especially rapid and significant.
Pre-pandemic, cash was the preferred payment method in Chile, but Chileans’ preferences changed quickly during the early days of the pandemic when there was less certainty about whether COVID-19 could be transmitted on surfaces.
Financial institutions operating in Latin America (LATAM) must ensure they’re prepared for the current (and continued) reality of payments in Chile. “Banks no longer have decades to decide their strategy and innovate accordingly; in the best of cases they will be years old,” according to says Nicolás Deino, executive director for the Financial Industry of Accenture Chile.
Cash Is No Longer King
Chileans have historically preferred cash payments. In 2019, 51% of point of sale (POS) payments were made using cash, while debit cards accounted for only 25% and credit cards 22%. The COVID-19 pandemic correlated with a sharp drop in cash payments, and in 2020 they accounted for only 31% of POS payments.
By 2021, cash use was down, accounting for only 27% of POS payments, while debit cards rose to account for 34% of transactions and credit cards increased to 24%. Mobile wallet payments have grown to account for 6% of POS payments, and even Buy Now, Pay Later (BNPL) payments have entered the game, accounting for around 4% of POS transactions.
Clearly, cash is no longer king in Chile. And while some groups do still prefer to use cash at higher rates, the majority of the population is moving away from cash and believes they’ll continue to do so in the future. As with most other regions around the globe, the spike in digital payments seen at the beginning of the pandemic was not a passing fad, but the beginning of transformation in payments.
Kick-Started by Safety, Propelled by Convenience
While this shift in consumer preferences may have been kickstarted by safety concerns, Chileans quickly realized the benefits of paying with cards and digital wallets. Patricio Sandoval, Country Manager Mastercard Chile & Paraguay, says, “Consumers seek flexibility, convenience. Nine out of ten Chileans expect to be able to buy what they want, when they want and how they want.”
The technologies being adopted in Chile now include digital wallets, prepaid cards, QR codes, and other contactless technology. As with other regions around the world, Chileans want convenience more than anything else. Sixty-three percent of respondents to a Mastercard and Kantar survey said that they want to be able to pay in real time regardless of the financial service provider, and 47% of them said they’d like to be able to use the same payment system through messaging apps and on social media.
Banks must prepare for the future reality of digital payments in Chile. “Chileans have a transversal interest in technology and are willing to try new, more convenient payment methods,” says Sandoval. “The pandemic increased the use of digital payments by 64% due to social distancing and this is a trend that is here to stay.”
The Key to the Future of Digital Payments in Chile: Financial Inclusion
While Chileans’ payment preferences are unquestionably changing, there are still consumers and businesses in Chile who don’t have the access to technology needed to take full advantage of new, simpler, more convenient payment methods.
To ensure that everyone — not just the technologically savvy or financially well-off — in Chile can adopt new payment technologies, a group of issuers, card brands, payment processors, non-profits, and other groups in the banking and financial industries have come together to build ChilePay, an initiative designed to make digital payments accessible to everyone.
ChilePay says there are still more than a million businesses in the country that rely on cash and face-to-face sales. These businesses may struggle to digitize their payments, and ChilePay’s mission is to bring those businesses along in the transformation of payments in Chile.
By ensuring their customers are informed about the changes in the payment preferences of Chile’s consumers and providing them with the tools they need to modernize their payment practices, banks can continue to support their clients and keep up with the changing trends in Chile and around the world.