Citi Perspectives Fall 2023: Transforming Treasury

Latin America is one of the regions leading the implementation of new payment schemes, not least because of the region’s progressive regulations regarding payments. | 21 The global payments transformation: Where next? Q. Howwould you describe the payments landscape in Latin America? A. Latin America is one of the regions leading the implementation of new payment schemes, not least because of the region’s progressive regulations regarding payments. We already have 12markets with instant payments schemes, which has been driven by regulators, and three others are due to be implemented this year. Among themwe have success stories like the Pix instant payment scheme in Brazil, which was launched two years ago and is already processing close to 2.6 billion transactions per day. Argentina and Mexico are likewise big volume markets which have already implemented successful payment schemes. But it’s not just about instant payments. The big markets like Mexico, Brazil and Argentina not only have the basic component of an instant payments scheme, but also QR codes on top of that rail, and Request to Pay schemes that enable consumers to pay online or offline at any time of the day. Interoperability is also very important, and Argentina in particular offers the ability to do payments between virtual wallets and bank accounts in the same clearing system in a transparent way. Q. What sort of developments do you expect to see in the coming year? A. One of the main drivers behind this transformation is the regulators trying to create more financial inclusion, particularly by improving interoperability. In Latin America, a high percentage of employment is in the informal economy, and a lot of people either don’t want to open a bank account, or don’t qualify to do so. Having these types of virtual accounts that can be regulated in a different way is a really critical role of governments and regulators. Some countries are already discussing the implementation of Central Bank Digital Currencies (CBDCs), which could further increase financial inclusion by adding the unbanked population into the system and replacing cash, which is the instrument used by that portion of the population. Beyond that, I expect to see the integration of instant payment schemes into a cross-border payment structure or system that could take advantage of local schemes that are already there. As the evolution of payments continues, consumer adoption will be key — and that requires trust from the end consumer. Regulators and governments in Latin America will need to play a role in addressing this in order to help drive adoption. Payments in Latin America Originally published by Treasury Today in May 2023. Gabriel Kirestian LATAMHead, Payments and Receivables, Citi Treasury and Trade Solutions