Breaking Down the Barriers To E-Commerce in Latin America and the Caribbean

MIAMI, FL | December 3, 2019

During its annual Innovation Forum for Latin America and the Caribbean (LAC), Mastercard announced the results of a new study that outlines the needs and expectations from online shoppers in the region, and what needs to be done for them to buy more frequently. To conduct this study, Mastercard worked with leading researcher Kantar to survey consumers from Argentina, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Mexico, Peru and Puerto Rico.

E-commerce has been on a remarkably rapid upward trajectory in the region. According to E-Marketer, E-sales in LAC are expected to grow 21.3% this year to $71.34 billion. Key factors driving this growth include the increasing economic power of Millennials, who represent nearly 30% of LAC’s population, along with near universal proliferation of smartphones enabling instantaneous purchases.

One of the insights from the study shows that Brazil is the country where consumers make online purchases most often, followed by Mexico and Colombia, with more than one purchase every fifteen days. The fourth and fifth place are taken by Argentina and Costa Rica, with a purchase every two weeks. In Chile and Peru, they buy less frequently, about a purchase every month.

Analyzing the low end of the spectrum can help bring understanding as to how much latent demand in e-commerce exists in the region. For instance, in every surveyed country, 30% to 40% of consumers made very few purchases online. These categories included “once every couple of months,” “once every six months,” and “less often than once a year.”

“Addressing the factors that would motivate consumers to shop online more frequently could help further increase e-commerce adoption in the region,” said Jorge Arbesu, VP of Cybersecurity for LAC. “This can help the retail and payments industry take advantage of the billions of dollars in untapped demand in e-commerce that is present in LAC,” added the executive.


What Would Make Latin Americans Shop More Online?

Even though the majority of consumers stated that they trust the security of ecommerce, the study showed that there’s opportunity to better inform consumers about the safety associated with online purchases.  When discussing concerns related to ecommerce, one of the most important concerns of shoppers in Mexico, Colombia, Peru, Costa Rica and Dominican Republic was the fear of card data being compromised during or after the purchase.

“Educating these consumers about new technologies like artificial intelligence and passive biometric authentication may allow e-commerce to spread into more households, turning those rare shoppers into frequent ones, once they know they can trust the system”, said Arbesu. “Still, it’s important to note that these numbers represent fewer than half of the participants of each country surveyed, meaning that most online shoppers have faith in the e-commerce system,” pointed out the executive.

Moreover, the fact that consumers cannot physically touch the product was cited as a barrier by those in Mexico, Colombia, Peru, Chile, and Argentina. Brazilians who were interviewed for the research underscored the high costs of product shipping as another barrier curtailing their purchases, which is also shared by those living in Argentina and Mexico. Shipping delays were a prominent issue experienced by those living in the Dominican Republic and in Chile, where there is an added barrier about the product arriving to the right address, according to many of those interviewed.


Biometrics

Another insight resulting from the study is that most consumers have a strong desire to grow beyond passwords and see biometrics as the next phase in their authentication. These biometric authentication measures might include fingerprints, facial recognition and other forms of emerging identification. Consumers who wanted this feature ran from Puerto Rico’s 63% to a high of 83% in Costa Rica. Significantly, more than 80% of consumers in most surveyed countries wanted biometric authentication, confirming how important this newly developing technology is for consumers.

Mastercard Addresses Ecommerce Safety with Digital Security Roadmap

The good news is that the latest technologies and industry standards for digital security are already present and available in the region. Earlier this year, Mastercard launched its Digital Security Roadmap -- a set of initiatives, guidelines and tools created to accelerate the adoption of cutting-edge technologies needed for important players such as, financial institutions and retailers, to safely and simply keep up with the e-commerce space.

The Digital Security Roadmap is centered on authentication and tokenization technologies.

• With the use of “tokenization" and solutions like Mastercard Enablement Services (MDES) and MDES for Merchants (M4M), Mastercard is reducing the probabilities of fraud. MDES helps issuer banks and merchants keep their online customers’ payment data safe by replacing it for an alternate number (“token”), a set of 16 digits that emulates the real card number and can be use only once. In the case of a breach, fraudsters would only have access to the token instead of the consumer's payment information, reducing the probability of fraud.

• Authentication technologies allow retailers and banks to ensure that online shoppers are who they say they are. Authentication solutions like Mastercard’s NuDetect use machine learning to analyze “passive biometrics” -- how a person types, holds their phone, moves their mouse or where they are use their phone -- to anticipate and prevent fraudulent online payments.  The process to verify the user occurs without introducing any friction or interruption in the transaction.

Artificial intelligence technology is also being used to fight fraud, as in the case of Mastercard’s Decision Intelligence. The solution uses AI technology combined with machine learning to increase the accuracy of transaction approvals of genuine transactions, delivering a better consumer shopping experience.

“One of the goals of Mastercard’s Digital Security Roadmap is precisely to understand the consumer’s expectations and leverage the most advanced technologies to build a trusted, simple and secure e-commerce experience in the region without much effort from the cardholder’s side,” said Arbesu. “Doing so will close the gap and capture reluctant consumers, accelerating the expansion of e-commerce in LAC,” he concluded.

A White Paper with details of the research is available here.