Latin American E-Commerce: Rapidly Growing but Challenging Markets

“Latin America is one of the fastest-growing regions for e-commerce, behind Asia-Pacific. We expect online retail sales to grow at a compound annual growth rate (CAGR) of 17% between 2014 and 2019 to reach $85 billion in sales at the end of the forecast period.”

The Latin America E-commerce Report

Latin America presents a unique challenge for online merchants. It’s a rapidly growing region, but much of its online payment infrastructure is relatively new and there are many different providers. Today, roughly 10% of Spreedly’s customer base transacts in Latin America, but the big story is how much growth we’ve seen there in the last 12 months. Here’s a snapshot of our transaction history for the two biggest markets combined, Mexico and Brazil.

latin american e-commerce
E-commerce transactions for Spreedly customers in Mexico & Brazil, May 2016 – April 2017.

For this article, I want to drill down on Mexico and look at some key data points.

Popular Payment Providers in Mexico

Below is an illustration of all transactions on our platform in Mexican Pesos (MXN) (some transactions are local, in-country merchants and some are non-Mexican merchants processing in pesos). Breaking it out by payment providers, OpenPay and Conekta are by far the most popular choices amongst our customers, representing approximately 99% of the transactions. OpenPay is the blue and Conekta the green.

latin american e-commerce mexican pesos
Transactions by payment provider in Mexican Pesos.

The very tiny sliver makes up the all of the remaining providers who transact via Spreedly in Mexican Pesos. Breaking down this small group, approximately 1% of all MXN transactions, here is what we see:

latin american e-commerce mexican pesos
Drilling down into the 1% of non Conekta/OpenPay transactions.

Stripe is leading the group for Mexico once we get outside the big two. Redsys makes sense, it’s a Spanish gateway shared amongst Spanish banks. It’s a little surprising that Payu Latam isn’t more popular, but anecdotally we are starting to see interest pick up there.

Success and Decline rates in Mexico

Credit card fraud rates are high in Mexico. Here is a chart showing consumers who have experienced credit card fraud, by country.

latin american e-commerce credit card fraud

The higher the degree of fraud, the more likely that legitimate/good transactions will be falsely declined: high fraud rates require more strict fraud defaults, which can accidentally catch perfectly good transactions by mistake. This happens in any country and situation, but the higher the fraud, the more likely it is to occur.

Let’s use Spreedly Insights and look at success and decline rates for requests in the Mexican Peso vs different currencies. The following is for Authorization transactions.

First, the Brazilian Real:

latin american e-commerce brazilian real

This chart represents all Authorization transactions over the last 8 weeks by all Spreedly merchants against the Brazilian Real. On average, 68.5% of those transactions succeed.

Now, let’s look at Authorization transactions when it comes to Mexican Pesos:

latin american e-commerce mexican peso

The results are almost completely introverted!

Lastly, for triangulation’s sake, here’s the Columbian Peso:

latin american e-commerce columbian peso

Conclusions

The behavior we’re seeing from Spreedly customer’s entering or working in Latin America can be described as follows:

Growth there is very strong so participants are being rewarded. But that’s tempered by high decline rates/fraud. As a result, merchants are frequently changing providers as they try and find the best possible combination of geographic reach, rates, services and fraud controls. Spreedly’s unique position helps solve for this problem: our centralized tokenization solution gives clients control to ramp up and down new providers in real time, based on ever changing conditions.


Spreedly collects a tremendous amount of payment related data we capture metrics for over 100 payment gateway providers and third party API endpoints worldwide. Our tools allow you to better understand the absolute and relative performance of your payment gateway’s key metrics, such as failed online credit card transactions. Click here for more information.