What are CBP and RTP?
CBP play a crucial role in the global economy, facilitating the flow of money between countries for activities such as international trade, tourism, remittances, investments, and charitable donations. These transactions between parties located in different countries that involve different currencies of origin and receipt can occur among individuals, businesses, financial institutions, or governments.
CBP play a crucial role in the global economy, with expectations to reach USD 250 trillion by 2027. In 2023, wholesale CBP amounted to approximately USD 146 trillion, of which 62% were executed by banks and investors.
RTP are becoming a key tool for improving operational efficiency and financial robustness in the business environment, as they are processed immediately and continuously, 24/7, sending funds to an entity or person within seconds, unlike traditional payment systems, which can take hours or even days to complete transactions.
RTP are not only redefining the speed and convenience of financial transactions but are also playing a crucial role in financial inclusion. This shift is allowing a greater portion of the population to participate in the digital economy, influencing economic growth.
Payments without borders: the financial revolution in Latin America
Latin America is undergoing a notable economic transformation, marked by a rapid adoption of financial technologies that are redefining interactions among consumers, businesses, and the financial system. The adoption of RTP and CBP, accelerated by the circumstances imposed by the pandemic, has demonstrated the region’s capacity to adapt to global challenges and leverage digitalization opportunities to strengthen its economy and trade.
This growing importance of the region in China’s foreign trade has led to a concentration on a limited number of products, with five of them representing 67% of the region’s total exports to China between 2020 and 20221. Brazil leads in the diversity of products exported to China, followed by Argentina, Chile, and Mexico. Mexico stands out as the main importer from China in the region, with a significant trade deficit and direct competition with China in various industrial segments.
Despite the challenges this presents, China is one of the top two export markets for several South American countries and is among the top three suppliers for 26 countries in the region2. The trade relationship with China highlights the need to balance exports and promote sustainable and diversified development.
Digital transformation and E-Commerce in Latin America
Financial digitalization in Latin America has intensified thanks to advancements driven by market needs in the areas of CBP and RTP. This phenomenon, accelerated by the COVID pandemic, has propelled a decrease in the use of cash and has enabled 80% of citizens to have access to digital financial services.
Digital currencies in Latin America
The advancement of Central Bank Digital Currencies (CBDCs) is redefining the global payments landscape, with countries like Brazil, Mexico, and Colombia leading development in Latin America. These initiatives, along with the integration of CBDCs into digital platforms and collaboration with merchants, can lead to more efficient and less expensive onshore and cross-border transactions, enhancing the efficiency of global payments.
In Latin America, the use of cryptocurrencies for Cross-Border Payments (CBP) is already underway, mainly in the field of remittances and personal payments (P2P), but it has not yet been consolidated in the B2B sector. The adoption of cryptocurrencies in trade between businesses (B2B) faces additional challenges such as volatility, the need for more complex integrations with accounting systems, and regulatory uncertainty. Despite this, the potential to reduce costs and transaction times is significant, which could drive greater adoption in the future as more robust solutions are developed and the regulatory landscape in the region becomes clearer.
The future of payments in Latin America
The evolution of CBP and RTP in Latin America is a phenomenon that reflects the diversity and heterogeneity of the region. Each country presents distinctive characteristics that influence its payment market, from economic and regulatory factors to technological advances and cultural particularities.
In summary, understanding the diversity of Latin America and adapting to its regulatory and economic dynamics are fundamental to capitalizing on opportunities in the payments market. Promoting financial inclusion and preparing the ground for an innovative future in the digital age are key objectives that should guide the strategy of companies in the region. From the analysis of the payment market emerges the need for strategic planning around marketing opportunities and the importance of adapting to emerging regulations and technologies that impact CBP and RTP, considering that it is also a market worth billions of dollars, involving everyone from small businesses to multinationals, from migrants to influencers, all seeking a world with fewer frictions and borders.