The ‘quantum leap’ for LATAM payments

Payments

The ‘quantum leap’ for LATAM payments

December 02, 2022

The international banking system has often been criticized for being opaque and convoluted. In Latin America, digitalization provides an opportunity to create, a faster, cheaper and more transparent payments network.

Financial Institutions in Latin America are taking advantage of new consumer behaviours to develop and implement forward-thinking payment methods… a progress that was almost unthinkable just a few years ago. J.P. Morgan’s Alejandro Pereyra calls it a ‘quantum leap’ for LATAM players.

Here’s how it happened.

1. People

The impact of the pandemic was felt differently, depending on where you were in the world. In Latin America, which endured one of the most stringent lockdowns, movement was severely restricted and banks were closed. The need to access money resulted in a surge in tech adoption and digitalization with rapid adoption for both consumer and corporate use.

Coupled with challenges specific to the region – regulation, geopolitical uncertainty, multicultural complexities – the impact of this event was unprecedented… and the change is still being felt. Enabled by broadband and smartphone penetration, fintechs have brought a new momentum to the ecosystem. And crucially, as consumers tap into faster and frictionless payments in their everyday lives, the same experience is demanded of financial institutions.

2. Real time payments and new marketplaces

The rise of marketplaces and ecommerce is especially notable in Latin America, as connected ecosystems become more prevalent. The huge benefit for business is the ability for well-established ecommerce to link to these ecosystems with access to a variety of different clearing systems. The driver for this: real time payments. Across the region, but especially in Mexico and Brazil, the push for real time payments (RTP) is on. It brings the same settlement times, the same speeds, the same 24/7 availability as in the consumer world.

J.P. Morgan’s Latin American Regional Managing Director, Alejandro Pereyra, expects RTP-based solutions to grow exponentially over the next three years. “We have seen the shift in payments first hand. Our clients want security, scalability and resilience, and to have access to the best in class solutions that a global bank like ours can bring. We have a huge emphasis on technology investment in region, and supported by our heritage of more than 100 years in LATAM, we are well positioned to support the large corporates, multinationals and fintechs. It’s a very exciting market right now”.

3. Cross border payments: looking outwards

Visibility and transparency are equally crucial for cross border payments. Alejandro adds, “With Swift gpi, you can track a cross border payment in 90% of cases, and settle in 30 minutes. Because of this technology, what we can offer our clients is changing. The transparency of cost is also really important, especially in foreign exchange. The FedEx model is a great example of that”.

J.P. Morgan has almost 20% market share of LATAM’s Swift market for Financial Institutions; one in five US dollars goes to J.P. Morgan, and they are the number two provider of euro clearing in Germany. In fact, the bank has 12% of all euro payments that come out of LATAM; in Brazil it’s close to 30%.

This coverage is one of the key benefits to using one bank with a strong presence across the region, Alejandro believes. “To deal with just one provider in many of these countries makes banking a lot easier for business. Our clients appreciate the commonality of reporting, of solutions, of technology – whether they are in Belgium or Brazil.”