Author: Arianna Aryel Ramos, Marketing Analyst, EBANX
However, just like entering any foreign market for the first time, LATAM entry can be tricky. Customers favour different channels, and access to internet and payment methods differ widely from country to country.
Two factors are utterly essential for a successful Latin American market entrance:
Localised Payment Methods and Marketing
On average, a global merchant can expect a credit card approval rate of 20-40% in Brazil. The main cause of this low approval rate is not fraud, but rather the fact that the majority of their Brazilian customers don’t realise the merchant can’t process their local credit cards. Only 19% of the payments market in Brazil is made up of internationally accepted credit cards. With local credit card processing such as Elo and Hipercard, and local Visa and MasterCard that can only process BRL, merchants can easily double this low approval rate.
In Mexico, although credit cards assume 31% of the payments market share, there are five times more debit cards than credit cards. Without a local processor, international merchants are unable to accept debit cards and remain limited to accept payments from only a sixth of cardholders.
Although credit cards are still the preferred payment method in Latin America, cash payments still make up the larger sum of payments market share; Boleto cash payments assume 29% in Brazil and OXXO cash payments assume 36% in Mexico. Reasons for this being cash transactions are trusted more online and credit card interest rates are commonly excessive and unreasonable.
By only accepting traditional payment methods like credit card, merchants can expect to enter at most 20% of the entire Latin American market. In other words, they access barely a fifth of the region and realistically limit their reach to even less. Processing local payments as well as credit card payments is necessary to have full access to the Latin American market, and by doing so merchants can expect higher approval and conversion rates across all payment types.
Localised marketing is equally essential to a successful Latin American market entry. Consumers need to be aware that your goods and services are available to them; specifically, that your goods can reach their destination and are accessible to them. There are multiple ways to communicate this to your new customer base.
First, Latin American buyers choose merchants based on the payment methods they offer, so advertising on your site and social media that you accept local payments will let new customers known you are economically accessible to them.
Second, depending on the product you are selling your business could have a higher average ticket than buyers are accustomed. However, that doesn’t mean your product is unviable. Communicate that new consumers can have the advantages of buying high quality products from abroad with the advantages of buying locally by offering payments in monthly instalments. Read a case study of a merchant that increased their revenue by 114% when started using instalments as a payment method.
Third, changes to your site for a friendlier user experience will ease accessibility such as translating your website and checkout page, or displaying prices in the customer’s currency. These user experience considerations can significantly drive conversion rates and traffic to your site.
Lastly, conduct specific consumer research on the countries you plan to enter first. Data you’ll want to look out for is which social media channels consumers use most and how they communicate on these channels. For example, Brazilians are the second largest Facebook using population in the world and 100 million of them use Whatsapp on a daily basis, or Twitter is the second most used social media platform in Mexico.