What are the most popular payment trends in Mexico?
What are the most popular payment trends in Mexico?
As the second biggest eCommerce market in Latin America, Mexico boasts a payment landscape as diverse as its culture, blending traditional and modern methods. However, despite efforts to minimise cash circulation, a significant proportion of Mexico's almost 130 million people remain underbanked.
Mexico is on the cusp on another financial renaissance. The reliance on cash in Mexico has outlasted many peers in the America, however it’s expected that Mexico will be the next frontier for cashless payments in the region.
With all this in mind, what are the most popular payment methods in Mexico? This article breaks down the most popular choices and offers insights into their future trends.
The digitalisation of payments
Fuelled by digitalisation, Mexico’s payments industry is witnessing several emerging trends that are set to shape the future of the market. Digital payments, including mobile payments and e-wallets, have started to gain significant traction, buoyed by the widespread adoption of smartphones and improved internet connectivity.
These digital payment solutions offer consumers a host of features that make transferring money and purchasing goods more convenient, as they can complete person-to-person transfers, bill payments and in-app purchases easily.
The overall payment market, encompassing digital wallets, is set to grow from $103.37 billion in 2023 to $167.85 billion by 2028, at a CAGR of 10.18%. This growth underscores the growing significance of digital wallets in Mexico’s payment ecosystem.
In addition to digital wallets, there are other alternative payment methods such as Buy Now Pay Later (BNPL) and instant payments gaining momentum. BNPL payment adoption is expected to grow steadily over the forecast period, recording a CAGR of 31.8% during 2023-2028 and from 2022 to 2027 the real-time payment market in Mexico is predicted to grow at a rate of 8.6%, indicating a significant portion of the Mexican population embracing this swift payment method.
Cash on top
Despite the ambitions of a cashless society and availability of cashless payment options in Mexico, cash continues to remain king. With cash dominating transaction volume in 2023, it’s clear there is a strong cultural preference for this traditional mode of transaction.
Surprisingly, almost half of Mexican households still don’t have a bank account, relying exclusively on the cash-based economy for their purchases. This is partly due to a lack of connectivity, lack of trust in banks and fear of fraud or hidden abuse.
Even major online players such as Amazon and Uber recognise the prevalence of cash usage in Mexico, offering consumers the option to pay in cash either directly at banks or through prepaid cards purchased with cash and used for online transactions.
Furthermore, Cash on Deliver (COD) is particularly popular in Mexico as it facilitates a seamless transaction for purchases made online, but the transaction is completed using cash. In this process, customers order online and receive a voucher that they present when they receive the goods, paying in cash at a convenience store, such as OXXO and 7Eleven. This method helps bridge the divide between the digital and cash economies, making online commerce accessible to those who only have access to cash.
While cash still accounts for an estimated 60% of consumer transactions in Mexico, its usage is still steadily declining, as other payment methods begin to gain traction.
"Digital payment solutions offer consumers a host of features that make transferring money and purchasing goods more convenient, as they can complete person-to-person transfers, bill payments and in-app purchases easily.”
Card clash: Do people prefer credit or debit?
Although Mexico is currently a cash-dominated market, there’s a notable surge in the adoption of payment cards. In 2023, the Mexico cards and payments market size reached $157 billion, and is expected to continue growing with a CAGR of more than 13% from 2023 to 2027.
When it comes to shopping online, both credit and debit cards are experiencing a positive trajectory. In the first quarter of 2023, purchase requests via credit cards amounted to 142.163 million pesos, with 92.329 million pesos being authorised, signifying an authorisation rate of 65%. Furthermore, this growth is reflected in the year-on-year transaction volume up to July 2023, showing an average increase of 5.3% across key categories.
These figures attest to the interest in card adoption, even if it may be gradual among consumers. However, not all payment options are equal. Credit cards emerge are the frontrunners, offering users the capability to make purchases and manage balances over time. The popularity of credit cards is underscored by their ability to provide consumers with enhanced financial flexibility. This is a significant move away from cash and could be a vital stepping stone for new digital payments to also grow in popularity.
It’s clear that there is a willingness among consumers to explore alternative, digital payment methods, driven by their convenience and speed. Should this trend persist, Mexico can expect a continued surge in digital payment adoption. The future of payments is bright within Mexico, and with such a diverse payments ecosystem, it’ll be important for merchants and payment providers looking to expand into the region to remain vigilant and adaptable to these evolving trends.
