Blog
If you missed the last one about Nequi and its impact on Colombia's e-commerce market, check it out here.
Summary
- PSE is a rapidly expanding real-time payment method in Colombia, processing US$10 million in monthly payments (US$120 million annually) for individuals and more than 21,000 businesses. It rivals credit cards in popularity for online purchases, with only a slight 7% difference in favor of credit cards, demonstrating its substantial impact and adoption in the digital commerce landscape.
- PSE is a crucial driver in the expansion of e-commerce in Colombia, which is the third largest in Latin America. In 2023, with an e-commerce volume of US$42.3 billion and projected growth to US$87 billion by 2026, PSE handles 32% of all transactions, equivalent to US$13.53 billion. This platform supports the scalability of the digital economy and financial inclusion, offering secure and efficient payment solutions that serve a broad demographic and enhance consumer confidence, thus accelerating the adoption and growth of online shopping in Colombia.
- Companies have adopted PSE for its numerous benefits that streamline and secure commercial transactions throughout Colombia. Offering 24/7 availability, PSE enables payments outside of traditional banking hours, enhancing operational flexibility. Transactions are confirmed in real time, facilitating faster processing of orders and services. Known for its ease of use, PSE does not require separate registration; users simply select it as a payment method and authenticate through their bank's standard login, making it widely accessible as it is supported by almost all major banks in Colombia. The platform ensures robust security by leveraging the security protocols of participating banks and the ACH Colombia network, which protects user data and enhances the reliability of transactions. In addition, PSE transaction completion eliminates the risk of chargebacks, providing a significant advantage over credit card payments.
- The future of PSE is marked by the introduction of Transfiya, a new initiative launched by ACH Colombia in 2021, which signifies an evolution of the traditional PSE system towards person-to-person (P2P) payments. Beyond PSE's focus on secure online payments between consumers and businesses, Transfiya enables instant money transfers using just a cell phone number, significantly simplifying and improving the accessibility of everyday transactions. This change not only streamlines the transfer process, but also promotes greater financial inclusion by eliminating the need for detailed banking information. Transfiya has rapidly gained traction, now processing 8 million transactions per month, equivalent to US$1.2 million.
What is PSE?
PSE (which stands for Pagos Seguros en Línea) facilitates seamless transactions for Colombian consumers, allowing them to send and receive payments and make online purchases directly from their trusted banking environments. This system integrates extensive bank transfer systems with immediate payment confirmation, offering a fast and convenient solution for e-commerce. Developed by ACH Colombia, which manages automated transactions between financial institutions, PSE is backed by 20 national banks, making it a preferred choice among local consumers for its reliability and ease of use.
How to make a PSE payment?
Upon selecting PSE as their payment method at checkout, shoppers are prompted to choose their bank from a list of ACH partner institutions. They are then redirected from the merchant's website to their own online banking environment. After logging in, customers review the pre-populated payment details and authorize the transaction. After payment processing, customers are returned to the merchant's website, which simultaneously receives a notification confirming the payment. This seamless process ensures a smooth and secure transaction from start to finish.
How PSE is transforming e-commerce in Colombia
PSE is playing a crucial role in the expansion and transformation of the e-commerce landscape in Colombia, a country that is rapidly scaling Latin America's digital commerce. By 2023, Colombia is positioned as the third largest e-commerce market in Latin America, behind only Brazil and Mexico. With e-commerce volume reaching US$42.3 billion and a projected compound annual growth rate (CAGR) of 27% through 2026, the market is expected to soar to US$87 billion. This substantial growth underscores the increasing importance of robust and reliable online payment systems, with PSE at the forefront of this transformation.
PSE has become integral to Colombia's e-commerce sector, handling 32% of all online transactions, which equates to approximately US$13.53 billion. This significant share highlights PSE's effectiveness in providing a secure and efficient online payment gateway that aligns with the needs of consumers and businesses. By enabling direct bank transfers without the need for credit cards, PSE caters to a broader demographic, including those less inclined to use credit for online purchases. This approach not only simplifies the purchasing process, but also enhances trust and security among users, crucial factors driving the adoption of online shopping.
PSE's impact on Colombia's e-commerce market is further evidenced by its support for scaling the digital economy and fostering financial inclusion. As more consumers and businesses move to the digital realm, PSE's infrastructure offers a scalable solution that supports higher transaction volumes without compromising security. This capability is vital to sustaining growth in the e-commerce sector and encouraging more businesses to embrace digital transformations.
Why did companies adopt PSE?
- 24/7 availability: The system operates 24 hours a day, allowing companies to make payments outside normal banking hours, thus improving operational flexibility.
- Real-time confirmation: Transactions through PSE are generally confirmed in real time, which is beneficial to both consumers and merchants. This immediate verification of transactions helps process orders and services more quickly.
- Ease of use: PSE is known for its convenience. Users do not need to register separately for PSE; they simply choose it as a payment option on the merchant's website and then authenticate using their bank's standard login credentials.
- Widespread accessibility: Because PSE is supported by almost all major banks in Colombia, it provides a universally accessible platform for businesses to conduct transactions within the country.
Security: The system emphasizes security to protect financial transactions, leveraging the security mechanisms of participating banks to ensure that users' financial information is not shared with third parties. In addition, information transfers are executed through the ACH Colombia transfer network, used by the most reputable banks in Colombia, which enhances the reliability and security of each transaction.
No risk of chargebacks: PSE transactions are final, meaning that once money is transferred, it cannot be automatically reversed. This feature is particularly advantageous for businesses, as it eliminates the risk of chargebacks, common in credit card transactions.
What's next for PSE?
New initiative: Transfiya, launched by ACH Colombia in 2021, marks an evolution of the established PSE system by focusing on person-to-person (P2P) payments. Unlike PSE, which facilitates secure online payments between consumers and businesses, Transfiya allows people to transfer money instantly using just a cell phone number. This simplifies the process, improving accessibility and convenience for everyday transactions. While PSE requires navigating a bank's online platform for transactions, Transfiya streamlines transfers, promoting greater financial inclusion without the need for detailed banking information. The system currently processes 8 million transactions per month, equivalent to US$1.2 million.
Verdict
PSE is deeply embedded in Colombia's financial landscape, serving as a fundamental pillar of the country's digital payments infrastructure. Its widespread adoption is evidenced by its handling of 32% of all e-commerce transactions, highlighting its crucial role in a market where e-commerce is expected to grow substantially. Seamlessly integrating with almost all of Colombia's major banks and favored for its user-friendly features, such as 24/7 availability, real-time transaction confirmation and robust security measures, PSE has become a preferred choice for both businesses and consumers. The introduction of Transfiya, a peer-to-peer payment system, marks a progressive evolution of PSE, further enhancing financial inclusion and meeting the dynamic needs of modern consumers, thus consolidating its status as a crucial enabler of digital commerce in Colombia.
As I explore the rapid evolution of PSE and its profound impact on Colombia's payments landscape, I invite you to join the conversation about this well-adopted payment method. How do you see PSE 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 PSE and spread the word about this payment system! Share this newsletter and join the dialogue today.
If you have questions or wish to continue the discussion, feel free to contact me directly at tony@rebill.com.