Will Latin America Successfully Facilitate International Money Transfers?
In the vibrant landscape of Latin America, digital transformation is reshaping the payments sector. Domestic payment ecosystems, such as Brazil's PIX, Mexico's SPEI, and Chile's Transbank, have proven successful, yet remain siloed, requiring businesses to navigate local regulations and acquire licenses country by country.
However, instead of waiting for regulatory harmonisation, payment providers are taking the initiative. They are building regional networks that connect national systems through APIs, partnerships, and correspondent relationships. This approach aims to streamline cross-border transactions, addressing the rising demand for eCommerce and remittances.
The potential benefits of a unified payments infrastructure are substantial. It could unlock faster, cheaper, and more efficient money flows across borders. Central banks in Latin America are exploring cross-border linkages, indicating a potential step towards this goal.
Yet, the road to integration is complex. Practical and regulatory hurdles, such as different legal frameworks, licensing models, and regulatory expectations in each market, pose significant challenges. Unlike the European Union, Latin America lacks a supranational authority to drive harmonisation in its payments infrastructure.
Tristán Torres Velat, Chief Commercial Officer at PayRetailers, emphasizes the importance of deep local expertise in executing seamless cross-border payments. He highlights that until there's greater alignment across the region, a regional payments union remains more aspirational than actionable.
FinTechs and payment providers are focusing on localisation first, then integration. They are securing licenses, adapting to local rules, and building payment flows that work in each market. Companies like TransferWise (Wise), Ripple, and Yellow Card are working on creating regional networks that connect national payment systems to enhance integration into regional payment unions.
The region's population of over 650 million people and a fast-digitising consumer base present an opportunity for cross-border trade, eCommerce, and remittances. The demand for easier cross-border money flows, particularly in the context of the pandemic, is a significant factor driving changes in the region's payments landscape.
Multilateral initiatives such as the Latin American Payments Council are underway, suggesting that momentum is building towards digital transformation in the region's payments landscape. The approach to Latin America's cross-border payments is one of patient groundwork, where providers win by digging into local hurdles rather than bypassing them.
The Latin American Payments Council initiative underscores the need for interoperability at the technical and commercial level, while working within the constraints of fragmented regulation. As the region continues to digitise, the future of cross-border payments in Latin America remains shaped by providers who master local market complexities.
