Though the world is moving more an more to be a cashless society, for many unbanked individuals cash is still king, and there is a long way to go before we see full financial inclusion.
Carlos Colinas is the LATAM Commercial Director for Unlimint. Founded in 2009, Unlimint (formerly Cardpay) provides fast-growing innovative businesses with a convenient and simple business interface that enables payments to flow freely and invisibly. With 10 years experience in the banking and payments industry, having previously worked for household names such as Mastercard and Visa, Carlos is now dedicated to creating opportunities for the unbanked populations of LATAM regions by building Unlimint’s brand awareness – giving merchants and sellers alike the power to buy and sell globally.
Here, Carlos shares his thoughts on e-commerce in Mexico and the rise of cash payments.
Ask any local in Mexico: whether it’s a retail store, an online marketplace, or a nightclub, when it comes to purchases, paying by cash is a necessity. For Silvia Salas, cash plays an outsized role in her daily life. The 37-year-old Mexican bartender has been working at a Cancun resort for three years. Like most resort workers she is happy to receive extra money while at work, which comes in the form of cash tips.
Though she is poorly informed about financial and banking products, having time-saving options is still important to her. That’s why she chooses online shopping with Cash Payment. To help Silvia and her colleagues enjoy the convenience of online shopping, Unlimint has introduced solutions created to help consumers order products online and pay at nearby convenience stores with their favourite method – cash. But Silvia’s certainly not the only one who uses cash when shopping online. Many Mexican workers lack a bank account or the confidence to pay online, so merchants must be creative.
A look at the big picture
Mexico is enjoying an economic uplift, being the fastest growing and one of the largest e-commerce markets in Latin America, second only to Brazil. By 2023 it will rank 8th worldwide in terms of B2C e-commerce, with an annual growth rate of 8.61. Willingness to buy goods and services online, with consumer electronics and travel being the leading segments, has attracted overseas companies to enter this market.
Some might say Silvia and her co-workers drew the short straw by participating in the informal economy. But her position represents a huge proportion of Mexico’s diverse society.
Although Mexico’s economic growth represents a great opportunity for workers, only 37% of adults have bank accounts. People engaged in informal sectors receive their salaries in cash and have little access to banking services. Consequently, they can’t use cashless payments for day-to-day purchases.
Banks typically focus on the interests of the middle and upper classes: those who have access to better education and can easily log on or travel to financial service providers. However, these individuals are in the minority. Lack of financial literacy, plus a rural lifestyle, has resulted in low access to banking institutions for much of the population and presented a challenge for global companies expanding to Mexico.
The mix of an open economy and complicated payment methods puzzle international merchants who want to enter this market. Unlike local companies, most European or North American businesses are not aware of this diverse financial landscape and need prior knowledge and local assistance to navigate it.
The market is still emerging, which poses even more problems for merchants. They must ensure that they have access to the local payment methods and comply with constantly changing e-commerce regulations.
“Having success in Mexico means adapting to specific local conditions, where bank accounts are available to modern people in urban areas, but not so much in rural parts of the country. Especially it works with small purchases as 95% of people keep using cash if they spend up to MXN 500 (around $26)”, says Andrey Novikov, Head of LATAM region at Unlimint.
Online shopping for the unbanked
Mexicans have a great choice of payment methods for online purchases, including credit and debit cards, cash (via voucher), PayPal, e-wallets, phone payment, and more. While most developed countries prefer non-cash methods, people in Mexico tend to use cash payment vouchers when they shop online.
Mexicans who have bank accounts prefer to pay with their credit or debit cards. Many people own debit cards, but a significant number of these cards cannot be used for online transactions. That’s why customers prefer to pay for online purchases at convenience stores or upon delivery.
Another reason cash payment vouchers are a popular way to handle online purchases is because shoppers typically face more problems when using their cards.
According to the Payment Methods Report 2019, 53% of respondents have faced a payment rejection during online shopping. Banks detect their purchase as an unusual transaction or don’t explain why the purchase has been rejected. Considering these issues, foreign merchants should adopt a hybrid model that allows customers to buy online but pay in cash.
Doing business in Mexico can be lucrative, but how can overseas companies approach customers like Silvia? To win her over, they must understand how she pays for purchases. With a local office and expertise, Unlimint is well acquainted with consumers in Silvia’s position, and covers 90% of all cash payment methods in Mexico.
Silvia works late and by the time she finishes her job, the shops are already closed – but there is a 7-Eleven on the way home which is open all hours. She browses MercadoLibre online during her lunch break, picks a pair of jeans, proceeds to checkout, and chooses an option to pay via cash payment. After confirming her full name and email on the payment page, Unlimint redirects her to the voucher page to print it out. On the way home, Silvia will present this voucher and pay with cash at a 7-Eleven.
Her transaction will be completed within 24 hours. When payment is successfully processed, the status of an order will change to ‘paid’ and she will receive her jeans. Apart from 7-Eleven, Silvia can choose among 20 convenience store networks available for the service and covered by Unlimint.
Amazon, MercadoLibre and Walmart were among the first e-commerce pioneers to adapt to markets where a large part of the population remained unbanked. Now, more and more companies are allowing Mexican customers to use cash at 7-Eleven and other retail locations.
Cash in Mexico is a way of living, and to stay competitive, international merchants must add cash payment into their strategies to reach Mexican shoppers.