The pandemic and the development of electronic means of payment dealt a severe blow to the use of cash in Latin America, but also raised financial inclusion to a level above the global average. While those people who only use cash in their daily transactions went from 45 percent before covid to 21 percent after, and those who prefer hard and cold money did so from 28 to 12 percent in the same period (2020-2023), about 8 out of 10 have managed to have at least one financial product, that is, 76 percent of the population .
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The figures are part of the recent study prepared by Mastercard, together with Americas Market Intelligence (AMI), ‘The state of financial inclusion after Covid-19 in Latin America and the Caribbean: new opportunities for the payment ecosystem’, with which it was possible to show that, despite the progress in this matter, 91 million people in the region still need to be banked, while some 200 million are part of a group that is in the initial stage of financial inclusion.
The study also shows that the group of people who are willing to try means of payment other than cash (electronic payments) went from 10 to 35 percent, and the displacer of cash from 9 to 16 percent.
There were more than 3,000 surveys, in seven countries (Brazil, Argentina, Colombia, El Salvador, Guatemala, Mexico, Peru), which included 28 in-depth interviews with players in the payment media ecosystem in all segments.
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Twenty-five percent of those consulted in these countries responded that, before the pandemic, they used cash to cover more than 75 percent of their monthly expenses; but in 2023 that percentage produced 15 percent, which shows the change that people have had in favor of digital payments.
In fact, the study revealed that although the appearance of covid-19 forced millions of people to switch to digital payments, this impulse would not have been possible without the penetration that smartphones have had, which in Latin America exceeds 80 percent. .
«Mobile phones have become the standard means of making payments, particularly money transfers,» warns the report, which mentions that 88 percent of financial product owners have used a mobile to make payments or carry out financial transactions.
Eight out of 10 have used them to send money to another person, seven to receive money from a third party, as well as to make purchases online, while four out of 10 to pay in person in supermarkets or stores.
Marcela Carrasco, Senior Vice President of Market Development, Financial Inclusion for Latin America and the Caribbean at Mastercard, told EL TIEMPO that The increased penetration of digital payments, as well as the fact that more people in the region will have more access to the financial sector, its products and services, is the result of several factors, including covid-19 and its repercussionsthe dispersion of subsidies by governments, the emergence of fintech with a different technological value proposition, large financial institutions developing their wallets and the different players in the ecosystem also contributing their own.
The directive said that Latin America is the region that has made the most progress in financial inclusion in recent years. Citing data from the World Bank, he said that while global banking increased from 68 to 76 percent between 2017 and 2021, the region did so from 55 to 75 percent in the same period.
For their part, digital payments made it from 52 to 64 percent in the world, while in Latin America it went from 46 to 66 percent. «Despite these achievements, there is still a gap to be closed in the region, insisted Carrasco, noting that it is the rural and remote areas that require the most attention on this front.
«When we talk about the people who are not yet financially included, the most vulnerable segments are the people who are in rural areas, there is an opportunity in the female segment, especially those with low incomes and independent people, the unemployed is where they exist greater opportunities to reach them with different financial products and services,» warns the Mastercard board of directors.
and adds that these groups of people should be reached with financial education, because this is one of the strategic pillars, but also with credit products. For her, it is key to find a way to refocus this education, which is not based on the characteristics of the products, but more intuitive, invisible, looking at how to turn it into a value proposition so that people, in the As they use your financial product, they learn and practice at the same time, moving away from traditional models.
The other thing -he says- is to see how they accompany people depending on the stage of their life they are in, their level of knowledge and financial education, access to credit can be facilitated, because financial education is not only the use of financial products, but the accompaniment of people so that they can empower themselves and allow them to achieve their life goals.
access to credit
According to the study, there is a very significant debt in the region in terms of credit. Although 58 percent of Latin Americans have a credit card, only 3 out of 10 have access to other forms of credit, such as loans, insurance, or investment products.
Brazil, Argentina and Guatemala, with 75, 74 and 64 percent surpass Colombia (55 percent) in terms of credit card penetration. However, the country with 30 percent beats the first two (28 and 19 percent, respectively) in terms of advances in other lines of loans other than cards.
«We have to devise more ways so that people not only have a savings account, but also a loan, some type of investment, insurance and savings plans that allow them to think about the future and have a cushion to attend to their emergencies, which it is what we define as health and financial prosperity», comments Carrasco.
The key foci
For Mastercard directives, the study detected five main foci on which entities should focus and direct their efforts to achieve higher levels of financial inclusion in Latin America:
First, prioritize personalization by offering tailor-made solutions for the specific most neglected segments, using open banking and personal finance management tools to add value and relevance.
Second, I focused on credit product development, creating better products that offered easier access to personal loans and credit cards, and enabling innovative credit scoring or creative guarantees.
Providers also need to reorient financial education, moving away from traditional courses and workshops to provide invisible and gamified education according to the financial aptitude of each segment.
For their part, payment providers are promoting convenience and creating incentives, focusing on saving time, adopting an ecosystem approach that solves several problems at once, and simple investment products that offer liquidity, to name just a few.
Finally, continued collaboration between the public and private sectors is essential to improve financial inclusion, and payment providers should prioritize collaborative subsidies, public transportation, and active financial policies that seek to reduce the use of cash.
«I think that the challenge that lies ahead is, one of those people that we have already brought to the financial circuit, to find a way for them to continue to grow in that financial inclusion, how to lead them towards financial prosperity with products beyond what they have today , low-cost, easily accessible, versatile and secure products”, insists the Mastercard board of directors.