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If you missed the last one on Yape and its impact on Peru's e-commerce market, check it out here.
Summary
- PagoEfectivo is one of the most popular payment methods in Peru, accounting for 19% of the market's online transactions (i.e., $4.75 billion in total payment volume). It allows customers to pay bills and make online purchases in physical stores with cash. PagoEfectivo has a low risk of fraud or unrecognized payments because the customer must make the payment in person.
- Peru remains a cash-based economy. Of the $40.5 billion transacted in face-to-face retail and e-commerce payments in 2023, $19 billion (47%) was in cash, while another $16.75 billion (41%) was with cards, and only $4.75 billion (12%) was in the form of digital payments. Therefore, to remain competitive, international merchants must include cash payments in their strategies to reach Peruvian shoppers.
- PagoEfectivo is transforming e-commerce in Peru by providing a crucial payment solution for the unbanked and underbanked populations, leveraging the rapid growth of e-commerce in Peru (projected CAGR of 35% from 2023 to 2026) and serving a market where only 54% have bank accounts and 60% shop online. Its secure and accessible cash payment method meets the needs of Peruvian online shoppers, who spend an average of US$741 per year and primarily use mobile devices for transactions. This strategy not only enhances the e-commerce experience, but also supports the sector's expansion from US$25 billion in 2023 to a forecast US$63 billion by 2026.
- Businesses have adopted PagoEfectivo to access Peru's substantial underbanked market, benefit from the security and simplicity of cash transactions, and take advantage of an extensive network of payment points, along with real-time payment confirmation, which increases consumer confidence and transaction reliability.
Building on its success in Peru, PagoEfectivo has expanded into Argentina, leveraging similar economic profiles and consumer behaviors to enhance market penetration and foster financial inclusion across Latin America, consolidating its position as a key player in the region's digital payments landscape.
What is PagoEfectivo?
PagoEfectivo is a voucher-based payment method that provides an alternative to credit and debit cards for online transactions. Launched in 2009, it was a subsidiary of Grupo El Comercio, Peru's largest media conglomerate, until 2021 when it was acquired by Paysafe for US$108 million. It is widely used in Latin America, particularly in Peru, allowing consumers to make secure payments using cash. The platform generates a unique payment code (CIP - Código de Pago) for each transaction, which can be paid at various physical locations such as banks, convenience stores and authorized payment points. This method is especially beneficial for the unbanked, who make up 46% of the Peruvian population.
How to make a payment with PagoEfectivo?
To make a payment with PagoEfectivo, select this payment method at checkout, generate a unique payment code (CIP) and choose a payment location from its network of banks, convenience stores and authorized points. Visit the chosen location with your payment code (printed or on your mobile device), and present it to the cashier or enter it at a self-service kiosk to pay the amount in cash. Once payment is made, you will receive a confirmation receipt and the merchant will be notified in real time to process your order. This method offers a secure and convenient way to pay for online purchases without the need for a bank account or credit card.
How PagoEfectivo is transforming e-commerce in Peru
- PagoEfectivo is playing a transformative role in Peru's fast-growing e-commerce market. As the fastest growing e-commerce market in Latin America, Peru's online retail sector is forecast to have a robust 35% CAGR from 2023 to 2026, with market volume expected to grow from US$25 billion in 2023 to US$63 billion by 2026. Despite these impressive numbers, there remains significant room for growth, particularly as only 54% of the adult population has a bank or fintech account, and only 60% of adults currently make purchases online. With online shopping representing only 8% of total retail sales, the potential for expansion is substantial, and CashPay is at the forefront of facilitating this growth by providing a crucial payment solution for the unbanked and underbanked populations.
- Profiling the typical Peruvian online shopper reveals key insights that highlight the importance of PagoEfectivo's role. On average, Peruvian e-commerce consumers spend US$741 annually, with an average transaction ticket of US$60. The market is characterized by sporadic shoppers, with 64% of online consumers making up to four digital transactions per month. The main demographic group driving online purchases is in the 25-34 age range, representing 43% of online shoppers. PagoEfectivo caters to these consumers by offering a secure and accessible payment method that does not require a bank account or credit card, thus facilitating their participation in e-commerce activities.
- The impact of PagoEfectivo is further highlighted by preferred payment methods and device usage trends in Peru. In 2023, debit cards accounted for 45% of e-commerce payments, followed by cash vouchers such as PagoEfectivo with 19% (US$4.75 billion). This significant share demonstrates the crucial role cash payment solutions play in the market. Furthermore, with 64% of e-commerce transactions conducted via mobile devices, CashPay's user-friendly platform is well suited to meet the needs of this mobile-centric consumer base. By providing a reliable and convenient payment option, PagoEfectivo not only enhances the e-commerce experience for Peruvian consumers, but also supports the continued growth and evolution of the market.
Why did companies adopt CashPay?
- Cash-dominated economy: They access a significant segment of the market that does not use traditional banking services in Peru, is underbanked and has limited or no access to credit cards.
- Transaction security: Payments made through PagoEfectivo have a low risk of fraud or non-recognition because the customer must make the payment in cash, in person, at one of the authorized payment locations.
Agility, simplicity and availability: Payments are quick and easy, requiring only the generation of a unique payment code (CIP). With a wide network of payment points including banks and convenience stores, consumers can make payments conveniently.
Real-time confirmation: PagoEfectivo guarantees immediate verification of funds, ensuring fast completion of the transaction for all parties involved.
What's next for CashPay?
Expansion into new markets: Building on its established success in Peru, PagoEfectivo expanded its services to Argentina. By tapping into this market, which shares similar economic profiles and consumer behaviors, PagoEfectivo capitalized on its recognized brand identity to facilitate market penetration and foster financial inclusion throughout Latin America. This strategic move could significantly enhance PagoEfectivo's influence in the region's digital payments landscape.
Verdict
PagoEfectivo has firmly established itself as a pillar of the payments landscape in Peru, gaining significant traction among a diverse demographic of users. Although it faces competition from emerging digital payment solutions and traditional banking methods, its unique position as a bridge between cash and digital commerce ensures its relevance. Given that Peru remains a cash-based economy, PagoEfectivo is well positioned to sustain and enhance its influential role in Latin America's evolving financial ecosystem, especially with its recent expansion into Argentina and its continued focus on financial inclusion.
As I explore the rapid evolution of PagoEfectivo and its profound impact on the payments landscape in Peru, I invite you to join the conversation about this well-adopted payment method. How do you see PagoEfectivo shaping the future of e-commerce and beyond? Share your thoughts and experiences with me on social media - let's explore the opportunities and challenges presented by PagoEfectivo and spread the word about this payment system! Share this newsletter and join the dialogue today.
If you have questions or would like to continue the discussion, please feel free to contact me directly at tony@rebill.com.