Argentina leads Latin America in the growing use of digital wallets

Argentina leads in Latin America the use of digital wallets for payments in the e-commerce and traditional points of sale, with a growing adoption of this financial product in which both the high inflation that the South American country is suffering from, such as the flourishing of powerful companies in the sector.

According to the Global Payments Report 2024 prepared by the firm Worldpay, the 31% of payments on e-commerce platforms in Argentina are made with digital wallets, the highest rate in Latin America, which will rise to 44% by 2027.

Meanwhile, at the points of sale in Argentina, where the 27% of payments are still made in cash, the 18% of purchases are made with digital wallets, placing the country also in a regional leadership position in this segment, along with Brazil.

“Today, practically everyone in Argentina has a wallet account and interacts with it at least once a day. It has become part of everyday life in Argentina, leading in many cases in adoption and transactionality at a regional level,” highlights in an interview with EFE the executive director of the Argentine Fintech Chamber, Mariano Biocca.

According to the most recent data from the Central Bank of Argentina, as of last April there were 16.7 million payment accounts, with a balance of 493.5 billion Argentine pesos (US$ 522 million at the current official exchange rate) and 1.9 trillion Argentine pesos (US$ 2,012 million) invested in mutual funds (FCI) through payment service providers (PSP, virtual wallets), which together represented … 4.89% of the total private sector deposits in the Argentine financial system.

Just a year ago that weight was barely 1.6%.

“The number is exciting: eight out of ten transfers made in Argentina have a fintech account at one or both ends.“, Biocca stressed.

Wallets appeared in Argentina around 2016, but became massive in 2020-2021. Their growth is based on technological reasons – access to smartphones, good connectivity, development of services ‘fintech’ robust and reliable – and sociocultural – security, convenience of not carrying cash and making investments or payments in a simple way – but especially economical.

With the Argentine peso greatly devalued, the digital wallet avoids the cumbersome action of having to pay for a purchase in a store or a dinner in a restaurant with a large wad of bills.

But, in addition, the very high inflation in Argentina, with a rate that in 2023 was the highest in the world (211.4%), This has led many Argentines to choose to deposit part of their income in wallets that pay a daily return for having money invested there, a simple form of coverage.

According to a recent survey by the firm Taquion, eight out of ten Argentines use virtual wallets, a 78% choose them to transfer money and a 40% for the returns they provide.

“High inflation, the nominal value of our banknotes and the security provided by electronic money transactions were accelerating factors. In addition, in an inflationary scheme, the need to generate at least partial protection coverage became increasingly evident.“, Biocca observes.

According to official data, there are 149 PSP (payment service provider) companies that offer payment accounts registered with the Central Bank, although about thirty of them are actually operating in a market clearly dominated by Mercado Pago, the fintech of the Argentine e-commerce giant MercadoLibre, which has a strong presence in other countries in the region.

According to data from the Argentine Central Bank, Mercado Pago accounts for almost a 80% of funds in wallets.

But there are other important players in the market, such as the ‘unicorn’ Uala; Modo, owned by around thirty banks operating in Argentina; Cuenta DNI and BNA+, owned by the country’s two largest public banks; Naranja X, and Personal Pay, owned by the telecommunications company Telecom Argentina.

With a high level of adoption already consolidated, Biocca maintains that market growth will come from a greater offer of services through wallets.

According to Worldpay projections, by 2027 the use of cash at points of sale in Argentina will fall to a 22% and digital wallets will take the lead as the most used payment method, with a 27% of the total.