- Key insight: Across Latin America, central bank-led instant payment networks have seen enormous growth, with Mexico as the next breakout market. If bankers in the U.S. want to see the future of consumer payments, they should look south.
- Supporting data: In Mexico, a third of people are unbanked, but 96% of the population owns a mobile phone. This creates the perfect launchpad for a digital-first payment system that can reach those historically excluded from traditional banking systems.
- What’s at stake: Payment systems in the U.S., U.K. and EU are built on infrastructure that is often decades old. The process of building new systems is therefore incredibly complex as these systems can’t just be “switched off.”
Across the globe, the drive toward
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But while financial leaders such as the U.K., U.S. and EU have the complicated task of detangling legacy systems in order to introduce instant payment networks, one region is already well ahead of the curve:
Throughout the region, digital-first and instant payments are embedded into everyday life, despite some populations suffering from low financial inclusion. From real-time account-to-account transfers to QR-based payments and mobile wallets, money already moves immediately, and at scale.
Across the board, instant payment systems now account for
Brazil’s Pix is the poster child of Latin American
However, Pix is by no means the outlier, with the likes of Transferencias 3.0 in Argentina and SINPE Móvil in Costa Rica also becoming enormously popular.
These successes signal the world should be watching Latin America for future central bank-led payments systems. The region in particular is primed to adopt and drive central bank digital payments infrastructure forward because there is a direct need in these informal, cash-reliant economies with uneven payments acceptance.
Latin America has been able to build up sleek and effective payment systems in record time because it is not held back by legacy payment technology that isn’t built for instant money movement.
In the likes of the U.K., U.S. and Europe, payment systems are built on infrastructure that is often decades old. The process of building new systems is therefore incredibly operationally complex. Money must continue moving, so these systems can’t just be “switched off.”
Emerging markets, such as those in Latin America, did not have to contend with legacy technology on the same scale. Many of these communities were cash dominant until recently, due to the high fees associated with card usage and the lack of banking infrastructure in rural regions.
However, while many people didn’t have a local bank on their corner, they did have mobile phones.
Latin America has capitalized on this opportunity, using mass smartphone adoption to leapfrog past traditional banks and the outdated systems on which they operate to bring millions into the financial system through their phones. Through these digital channels, money moves instantly, via account-to-account transfers, QR codes and mobile wallets.
While phones were the opportunity to capitalize on, central banks have provided the core frameworks that turbocharged the adoption of instant payment infrastructure in Latin America. In established markets with legacy infrastructure, updates to payment systems are slow and incremental. Stability has to trump speed in the building process, and multiple governance frameworks must collaborate on the regulations that will support these systems.
By contrast, in Latin America, attitudes to payment systems are far more flexible. These systems are perceived as public infrastructure and key models for enabling broader economic participation for populations that are traditionally unbanked and cash reliant.
By providing clear operational rules, standardized technical norms and consumer protections, central bank payment systems remove fragmentation and ensure system-wide compliance. Intentionally structured low pricing, with these systems often free for individual consumers and capped with low fees for merchants, also removes pricing barriers that would traditionally limit ecosystem-wide adoption.
Beyond this, real-time and traceable digital payments generate valuable cash-flow data that can transform credit underwriting for small and medium-size businesses, or SMEs. Historically, many SMEs in emerging and cash-reliant markets have struggled to access credit due to a lack of documented transaction histories, audited accounts or formal credit records.
Moreover, the prospect of access to credit functions as a powerful incentive for SMEs to adopt central bank digital payments, further driving adoption.
Brazil and others have provided proof of concept that a central bank-led digital payment infrastructure that aligns core infrastructure, regulation and market participation accelerates adoption. Mexico is now poised to be the next success story.
In Mexico, a third of people are unbanked, but 96% of the population owns a mobile phone. This creates the perfect launchpad for a digital-first payment system that can reach those historically excluded from traditional banking systems.
Banco de México has already done the hard work by establishing a series of bank-backed digital payment systems, including SPEI, CoDi and DiMo to meaningfully displace cash and boost financial inclusion. SPEI functions as a real-time interbank transfer system with standardized connectivity across the financial system, while CoDi and DiMo allow QR code and phone number-based transactions, respectively.
These systems set the stage for the next generation of financial services: lowering the cost of digital acceptance, improving interoperability, and reducing dependency on closed-loop or proprietary systems.
With a central-bank-led payment infrastructure built, Mexico’s challenge is no longer one of infrastructure but of adoption and everyday use. The impetus is on financial and banking technology innovators to leverage this architecture to their advantage.
If Mexico continues to strengthen interoperability, incentives, and everyday usability around central-bank based payments systems and ensures fair access for regulated participants, it can accelerate the shift away from cash while creating a platform on which innovation translates into real economic participation.