The number of cash-only consumers in Latin America has decreased from 45% to 21%, according to a recently released study from Mastercard. Pre-pandemic, a quarter of respondents said they relied on cash for more than 75% of their monthly expenses, and that figure has dropped to 15% this year. This shift showcases the increasing acceptance and usage of digital payment methods.
A Digital Shift, but Still a Ways to Go
The Mastercard study highlights the ongoing efforts and progress in achieving financial inclusion in Latin America. While significant strides have been made in reducing the number of cash-only consumers, the need for continued focus and innovation to address remaining gaps and ensure comprehensive access to financial services is still prevalent.
Latin America’s relatively slower adoption of digital payments can be attributed to several factors, including infrastructure challenges such as limited access to reliable internet connectivity and smartphone penetration in certain regions. Informal businesses also often operate outside the traditional financial system, making it challenging to incorporate digital payment solutions. These businesses may lack the necessary infrastructure or incentives to adopt new payment technologies. But, as the Mastercard study notes, this is changing.
Indeed, a large share of small businesses surveyed (92%), said they’re accepting at least one form of digital payment. Currently, P2P payments or bank transfers are the leading payment methods accepted in the region.
The relationship between digital payments and economic growth can be seen as a mutually reinforcing dynamic. Digital payments can act as both a driver and a symptom of economic growth.
On one hand, the adoption of digital payment systems can facilitate economic activity by enhancing efficiency, transparency, and security in transactions. It can reduce the reliance on cash, streamline business operations, and enable faster and more convenient transactions, thereby contributing to economic growth.
On the other hand, economic growth can also drive the adoption of digital payments. As economies grow, there is an increased need for efficient and convenient payment methods to support expanding commercial activities. This demand, coupled with technological advancements and changing consumer behavior, creates an environment conducive to the adoption of digital payment solutions.
