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LATIN AMERICA'S merchant acquiring market is undergoing a period of liberalisation which is creating opportunities for new players and, for the first time, opening up the possibility of a regional market as distinct from a collection of individual markets.
Two merchant acquiring models have predominated in this region, which is less mature than those of North America or Europe: the first of these, acquiring exclusivity, had been the marked characteristic across many markets, though there has been a gradual liberalisation of acquiring markets which has accelerated in recent years; the second model is one in which the main issuing banks collectively control the acquiring space.
Latin America's acquirers have experienced strong growth during the past several years, both in terms of volumes and the average number of transactions per adult. The region is dominated by Brazil, which, in absolute terms, is by far the leader, although other markets, such as Chile and Mexico, have also progressed. Financial inclusion is a goal of authorities across the region, which has led regulators to liberalise acquiring markets and to introduce caps on maximum merchant service charges.
This extensive research report looks in detail across the card acquiring landscape in Latin America providing a clear understanding of the key trends and drivers of change in this market, backed up with detailed market data.
The merchant acquiring Latin America report is essential reading for cards and payments professionals seeking to understand and profit from developments in the region's merchant services market. Contact us for an online demo or to find out more.
This report examines ten markets: Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Puerto Rico and Uruguay. The region has enjoyed strong growth in volumes over the past few years, as it has in the average number of transactions per adult, per annum. Increasing volumes have compensated for reductions in the maximum MSCs. It is likely that this trend will persist.
Continued growth in card uptake and usage, spurred by contactless and e-commerce, will compensate for lower acquiring margins as regulators cap MSCs. Liberalisation will inject some much-needed competition into markets dominated by a handful of players. However, this will encourage merchant onboarding, increasing volumes. Latin America saw sustained growth in volumes in the six years up to and including 2019.
For the region as a whole, credit card purchase volume grew at a Compound Annual Growth Rate (CAGR) of 12.1%, while the equivalent debit figure was 17.2%. Total card spend grew at a CAGR of 14.1%.
As of December 2019, Argentina has over one million point-of-sale terminals, having rapidly expanded its payment card acceptance network over the past three years. Issuing processing in Argentina's payment cards market is predominantly undertaken in-house. There are four main card processors in the country, of which Prisma and Fiserv are the largest, together accounting for the majority of the market. The other two are Tarjeta Naranja and Cabal.
Cielo and Rede continue to dominate the Brazilian merchant-acquiring market with a combined 71% market share of total acquired billed volume. The main non-bank processors in Brazil are Fidelity (previously Certegy), Orbitall, CSU CardSystem and EDS. Itau Unibanco, Banco do Brasil, Caixa and Santander do their card processing in-house. Local IT and consulting firm Stefanini owns Orbitall, while 58% of CSU CardSystem is owned by various investment funds.
In November 2017, after several years of regulatory discussions, the acquiring framework in Chile evolved into an open-loop, four-party scheme, allowing for new entrants in the acquiring business. Nexus was created by Transbank to provide credit card processing services ... Nexus is wholly owned by the seven largest card issuers and processes all credit cards under the Visa, Mastercard and American Express brands.
The Colombian acquiring market compares favourably with some other countries in the region, such as Venezuela and Argentina, in that all ATM and POS networks are fully interconnected. This means cardholders can use all terminals independently of their card brand or issuer. All of the banks in Colombia share the acquiring network infrastructure but buy different processing services from Redeban and CredibanCo, including card embossing and online fraud monitoring.
There are four key acquirers operating in the Ecuadorian credit cards market: Diners Club, Banco del Pacifico, Banco de Guayaquil and Banco Pichincha. VFR estimates that they jointly hold an 80% market share of total transactions. Datafast, which is jointly owned by Banco Pichincha, Banco de Guayaquil and Banco del Pacifico, dominates the POS processing market in Ecuador. Other POS processing operators include Medianet and Data Express.
Traditionally, merchant acquiring has been carried out by the banks directly. However, banks have developed merchant acquiring alliances to gain economies of scale and to increase coverage. E-Global (Servicios Electronicos Globales) is the largest processor and is owned by BBVA and Citibanamex ... Prosa (Promocion y Operacion), a large card processor and e-payments switch service provider, is the main competitor.
Merchant POS payment card transaction acquiring has been highly successful in the country's capital city of Asuncion. Despite strong growth, Paraguay's point-of-sale network requires further rapid expansion. All payment card issuers in Paraguay perform most of their card processing through Bancard, Bepsa, Cabal, Panal and Procard. These companies provide a complete range of services for credit, debit and prepaid cards, and have enabled every financial institution in the country to issue payment cards at a reasonable cost.
In what marks a significant new departure for the Peruvian payments ecosystem, the above-mentioned regulatory pressure, in addition to market pressure (as the various stakeholders wished to increase volumes), led to the exclusivity arrangements coming to an end in January 2020. The majority of Peruvians who purchase online are based in the Lima metro area, with around 60 to 65% of transactions during 2019. This shows that, despite significant progress having been made in recent years ... services are still lacking in the rest of the country..
Banks in Puerto Rico engage directly in merchant acquiring and have built up coverage to embrace over 23,000 affiliated merchants. Banco Popular dominates the market, followed by FirstBank. Most acquiring processing in Puerto Rico is provided by Evertec. Other processing companies present in the market include Accepta and Dynamics Payments.
While acquiring exclusivity currently prevails in Uruguay, with VisaNet and Fiserv predominating, this market is soon set for liberalisation of the acquiring space. Most issuers perform their card processing functions with Sistarbanc, a local company established in 1981 that is owned by BROU and Bandes Uruguay. Sistarbanc provides card processing for Visa- and Mastercard- branded cards.
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