Argentina's Underbanked Start to Accept Cashless Payments
Introduction to Argentina
An overview of Argentina's currency, population and key statistics.
Argentina's official currency is the peso ($). The currency is represented by the code ARS in the foreign exchange market. The Argentine peso is subdivided into 100 centavos. Peso banknotes circulating in the country are in the denominations of $20, $50, $100, $200, $500, $1,000, and $2,000. The currency also comes in coins worth $1, $2, $5, and $10.
The country has experienced high inflation since the mid-20th century, including several bouts of hyperinflation. Hyperinflation refers to a condition of excessive, out-of-control price growth. This situation has prompted many Argentines to exchange their pesos for US dollars.
Although Argentina does not consider crypto as a legal tender, there has been a surge in the adoption of digital currency among its people. In 2022, around 2.5 million (5.3%) Argentines owned cryptocurrency. The high inflation rate in the country is partially responsible for the growing crypto market. Several crypto companies even say Argentina is one of the most lucrative markets in the region.
The Argentine government has tried to reduce its exposure to digital currency, unlike several other Latin American countries that encourage the use of crypto. For instance, Argentina in May 2023 prohibited payment providers from processing crypto transactions.
Argentina had a population of 46,435,702 as of the middle of 2023, according to United Nations data. With a total land area of 2,736,690 square kilometres, this meant the country had a population density of 17 people per square kilometre at the time. More than 92.8% of Argentines live in urban areas such as Buenos Aires and Córdoba.
Languages spoken in Argentina
Spanish is the official language of Argentina, with nearly all Argentines speaking the language. However, due to the country's history of immigration, several other European languages are spoken, including German and Italian.
Argentina reported a gross domestic product of US$632.77 billion in 2022, which accounted for 0.28% of the global GDP. The figure increased from US$487.23 billion in 2021. Argentina has experienced an economic slowdown since the end of 2022, with its GDP projected to contract by 1.6% in 2023. Most experts expect the Argentine economy to recover in 2024.
The country's gross savings rate jumped to 21.55% in 2021 from 17.02% the year before. In 2021, the world's average gross savings rate was 23.15%. The World Bank reported that Argentina had a gross domestic savings rate of 20.73% in 2022.
Argentina's Internet & mobile phone trends
Argentina's internet penetration rate stood at 83% in 2022, with experts projecting the number to increase by 4.4 million users between 2023 and 2028.
Research data show that most Argentines access the internet from their mobile devices. In early 2022, GSMA Intelligence reported 56.28 million cellular mobile connections in the country. In 2023, 82.28% of Argentines owned smartphones, with this number expected to grow by 5.7 percentage points by 2028.
Argentina's e-commerce statistics
According to eCommerceDB, Argentina is the world's 35th-largest e-commerce market. By 2023, the sector is expected to generate US$8,890.4 million in revenue. Experts believe the country's e-commerce market will expand at a compound annual growth rate of 14.6% between 2023 and 2027.
The furniture & appliances category is the largest contributor to e-commerce revenue in Argentina, accounting for 24.5% of the total. Other significant categories include electronics & media, fashion, and food & personal care.
Summary of Argentina's fiscal policy
The Argentine government has worked with global financial organisations, including the International Monetary Fund (IMF), to improve its macroeconomic framework. The country has faced global economic uncertainty and pressures from its domestic market in recent years.
According to the IMF, Argentina had a fiscal deficit of 2.5% of GDP in 2022. This is expected to shrink to 1.9% in 2023. The government aims to improve its energy, water, and transportation subsidy system, re-prioritise spending on poor households and critical investment projects, and strengthen tax compliance.
The country has made changes to its taxation policy in recent years. In September 2020, authorities introduced General Resolution No. 4815/2020, imposing a 35% tax on the purchase of foreign currencies. Since late 2022, the government has also imposed a tax on transactions made with foreign currencies. A few exceptions to this regulation include purchases of travel tickets and tours with foreign fiat currencies.
How people pay in Argentina
An overview of how people in Argentina choose to make payments.
Most popular payment methods
Prepaid cash card
Direct carrier billing
Traditional payment methods
The primary traditional payment methods used in Argentina
Payment processing firm Mastercard offers its service in Argentine commercial banks. Several Mastercard providers in Argentina include Banco de Córdoba, Banco de La Nación Argentina, and Banco Provincia.
Visa provides payment solutions via credit or debit cards with the brand's logo. It is Argentina's more popular payment processing firm, with a market share of over 60%. Several Visa card providers in Argentina are Banco de La Nación Argentina, Citibank, and Grupo Financiero Galicia.
Alternative payment methods (APMs)
The top APMs used in Argentina
This Argentine payment service enables users to transfer money to other users, top up their smartphone credit and make payments at merchants. Argentines use PagoFacil to make online and offline purchases at merchants that support this service. Alternative payment methods like PagoFacil became popular in Argentina because of the rising e-commerce sector. It also facilitates unbanked people.
Rapipago is an offline payment method offered by leading financial services firm GIRE. Customers must visit Rapipago locations to make payments. This service can accommodate shoppers in purchasing products and services online. Rapipago handles up to 19 million monthly transactions, showcasing its popularity among Argentines. It also allows people who lack banking access to shop online.
It is one of the largest online payment platforms in the country. Mercado Pago can provide payment links to charge consumers via social media platforms or QR and point. Customers can use this payment service via cards, bank transfers, and cash. Besides helping merchants to easily manage payments, Mercado Pago also provides consumers access to various sales promotions.
This payment service allows users to pay bills and services, withdraw cash, make international transfers, and buy tickets. In addition to consumers, merchants can also benefit from services like Cobro Express. They help expand merchants' outreach, allowing them to serve customers nationwide. Users can top up their accounts virtually or by visiting any Cobro Express location in the country.
The digital payment system enables customers to use their accounts, debit or credit cards, and bank accounts to make various payments. PayPal allows users to do online shopping and send or receive money. This service is more popular among people who often conduct international transactions.
Google Pay has also gained more recognition in Argentina, thanks to the growing use of smartphones in the country. This service allows users to make contactless payments with their smartphones. Many Argentine merchants support the use of Google Pay. Despite that, the government sets different exchange rates for payments made with digital wallets such as Google Pay.
How to accept payments in Argentina
A guide to accepting payments in Argentina.
How to accept online payments in Argentina
Businesses must choose which methods to use before accepting online payments. The next stage includes choosing the payment gateway provider and authorisation service. Each service has a distinctive system to process online payments.
Argentina has numerous providers that offer payment gateway and authorisation services. Regardless, Argentina's general online payment process is similar to other countries. The process involves the acquirer, issuer, merchant, and buyer.
Here is the process of accepting online payments in Argentina.
1. The buyer begins the payment process by presenting the preferred payment method, such as cards and digital wallets, to merchants for buying goods or services.
2. The merchant forwards the payment details to the acquirer, who will process the payment request and send it to the payment processing firm.
3. The payment processing firm, such as Visa or Mastercard, sends the payment request to the issuer (a bank or a licensed issuer who issued the payment account to the buyer).
4. The issuer confirms if the buyer has enough funds in their account to complete the transaction. It can approve or decline the payment request depending on the fund availability. If the issuer approves the request, it will send an authorisation code to the payment processing firm.
5. The payment processing firm sends the authorisation code to the acquirer, who will forward it to the merchant. The transaction is declared complete.
How long does it take to make an international payment from Argentina?
The time needed to complete international payments from Argentina depends on the user's chosen payment method. Some methods may take longer than others.
Debit/credit cards: The time needed to complete international payments with debit or credit cards varies widely depending on the payment processing firm and the bank. Debit card payments can take up to one to three business days.
Wire transfers: International wire transfers from Argentina may take one to five business days. Customers are advised to send their payments before the bank's cutoff time to ensure the process begins on the transfer day.
Online money transfers: Digital payment services like PayPal can help users transfer money in minutes or hours. The speed of transfer using online wallets makes many users in Argentina use them to make international payments.
Fees imposed on merchants depend on the payment methods and payment processing services used. The acquirer will charge merchants a fee, usually for every transaction. The fee is usually relatively low, but it will affect merchants' profit margins. Some merchants opt to pass the costs to their customers.
The Argentine government has worked with stakeholders to further reduce merchant fees to support domestic businesses.
Interchange fees: Merchants pay this fee to the buyers' banks to cover the payment processing costs. In 2017, the average interchange fee for merchants stood at 1.50% for debit payments and 2.17% for pay later.
Payment gateway fees: Merchants pay gateway providers for using their platforms. It can be a percentage of each transaction value or a flat fee determined by the provider.
Cross-border fees: Argentine merchants may also pay additional fees for receiving payments from outside the borders. Cross-border fees include international processing fees and currency conversion fees.
Merchant discount rate: This fee applies to debit or credit card transactions. In 2017, the service charges were set at 1.2% on debit cards and 2.5% on credit cards. Starting in 2021, the rates have decreased to 0.6% on debit cards and 1.3% on credit cards.
Security challenges of online payments in Argentina
PaySafe reported that 64% of people in Latin America are uncomfortable providing their financial data online. About 75% of people in the region also voiced concerns about online payment fraud. According to experts, safety concerns are a major reason Argentines choose offline payment methods, like prepaid cards, for online payments.
Besides security concerns, inadequate banking infrastructure and a large unbanked population also become barriers to online payment adoption in Argentina. People residing in rural areas also have a limited understanding of digital payments. Furthermore, many merchants still do not support online payments.
According to a Rapyd survey in 2021, Argentina's digital banking services penetration rate lagged behind Mexico and Brazil. Most Argentines still prefer bank transfers or cash to make payments. Despite that, experts note that the Argentines' confidence in digital payment systems will continue to increase in the coming years.
The government has tried to establish a regulatory framework to improve digital payment security. Efforts include lowering merchant fees, raising investment in the point-of-sale (POS) infrastructure, and promoting payroll cards. Authorities reason that improving safety can boost the growth of Argentina's fintech sector, which is expected to contribute significantly to the global economy.
Key sectors & industries in Argentina
The following list contains several key sectors in Argentina that contribute to the country's economy. These sectors also have opportunities for further development.
Argentina is one of the world's largest agricultural producers. Its top commodities are soybean, corn, wheat, and sunflower. The country is also famous for producing high-quality cattle. Recent data further indicate the rapid growth of poultry and pork production in the country.
Given its abundant agricultural resources, the food processing sector in Argentina is also a key part of its economy. There is a growing demand for plant-based protein products in Argentina. Experts said these food products have become more popular because of increasing awareness of healthy consumption. People are also becoming more aware of the sustainability issue in dairy production.
Argentina produces valuable commodities, including lime and granite. The Mining Ministry claims that 75% of the country's mining potential remains unexplored. The agency also says Argentina can increase its production of gold, silver, and lithium in the coming years. According to Mining Investment Law No. 24,196, foreign and local entities can explore mining opportunities in specific areas of the country.
The country has abundant wind and solar energy resources. The government implemented Law No. 27,191 on Renewable Energy to ensure that 20% of the country's electricity is generated from these two resources by 2025. One of the government's strategies is the Renovar Plan, which encourages private companies to participate in public tenders. Argentina is also exploring energy generation from biogas and biomass.
Argentina's geographical location makes it a hub for regional digital traffic. According to the Argentine Investment and International Trade Agency, its strategic location provides numerous opportunities to improve the quality and speed of connectivity. Argentina is expected to serve as a hub in Latin America for the development of new technologies such as 5G.
Compared with other Latin American countries, Argentina has more advanced infrastructure. The US International Trade Administration says the Argentine government now focuses on small-scale infrastructure projects, providing opportunities for local construction companies to participate in infrastructure development. Priorities include roads, railways, social housing, and ports.
Textile is one of the sectors in Argentina with the highest growth potential. The coronavirus pandemic contributed to higher demand for clothing because of a spike in e-commerce activity during this period. Most industry players in the Argentine textile sector are micro and small firms producing apparel for the domestic market. Experts predict increasing demand for smart textiles in the country in the coming years.
Argentina's chemical sector is important to its economy and that of the entire Latin America. This sector accounts for more than 10% of domestic manufacturing revenue. Key products are urea, ammonia, and propylene. The country's strength in agriculture can be attributed to its growing chemical industry. The chemical sector also benefits from the country's abundant natural resources.
According to the Argentinian Fintech Chamber, the country's fintech sector has good growth prospects. Many companies in the industry reported difficulties in securing financing in 2022 due to macroeconomic uncertainty. Yet, the sector still saw a significant increase that year. There have also been collaborative projects between fintech companies and traditional financial firms.
The country is one of the top tourist destinations in the region, with more than 7.4 million foreign visitors per year. The country has 11 UNESCO world heritage sites, including the Perito Moreno Glacier and the Iguazú Falls, according to the Ministry of Tourism and Sports. Argentina is committed to protecting more than 400 natural sites, which account for 36 million hectares.
Regulation in Argentina
The regulatory environment of Argentina.
Summary of the regulatory environment in Argentina
The Argentine government has passed several laws to ensure fairness for businesses operating in the country. These laws also aim to protect all stakeholders, including consumers and workers.
Company law: The Argentine Companies Law governs the establishment of business entities in the country, their operations, and protection for shareholders.
Labour law: The labour law in Argentina governs employees' working hours, minimum wages, and pension rights. This law also protects employees from unfair dismissal.
Product liability law: Based on the Argentine Civil and Commercial Code, a product liability action has a statute of limitation of three years. The period begins when the consumer sues the business.
Consumer protection law: The consumer protection legal framework in Argentina encompasses various phases in a deal, from advertising to the performance of services.
Competition law: The Argentine government regularly monitors compliance with this law to prevent anti-competitive behaviour and market manipulation.
Data protection law: Personal Data Protection Law No. 25,326 covers personal data privacy, including providing individuals with access to public and private databases.
How card payments are regulated in Argentina
The issue of payment systems in Argentina, including card payments, falls into the Banco Central de la República Argentina's jurisdiction. The central bank has developed a legal and regulatory framework for the national payment system.
Law No. 25,065 on Credit Cards oversees different facets of transactions on credit and debit cards. This law encompasses using cards for purchasing or hiring goods, services, or works, accessing loans and cash advances, and other expenses.
Do I need a licence to do business in Argentina?
A business needs a licence to operate in Argentina. The standard form of a legal business entity in Argentina is the Sociedad de Responsabilidad Limitada. Registering a business in Argentina is a long process with multiple stages. It also involves several government agencies, such as the National Tax Office and the Office of Corporations.
Payment solutions in Argentina
An overview of how to accept payments from customers in Argentina.
Payment gateways and providers in Argentina
To stay afloat in today's competitive business landscape, every company must ensure a streamlined payment experience for their clients. In many cases, making payments can prevent customers from closing transactions. London-based payment technology firm APEXX offers a comprehensive solution for Argentine merchants.
APEXX enables merchants to accept payments from multiple providers, creating a seamless customer payment experience. With APEXX's Payment Orchestration Layer (POL), merchants can connect several payment providers in a single platform. The presence of a payment processing hub simplifies the entire operation.
POL offers several features to enhance the payment experience. Its intelligent routing feature automatically chooses appropriate payment providers for each transaction, considering cost, currency conversion rate, and risk assessment. It results in lower transaction fees and a minimum rate of transaction failures.
Merchants can easily integrate POL into their existing payment systems. POL provides several APIs and pre-built plugins to facilitate integration with POS systems and e-commerce sites. It eliminates disruptions in integrating POL functions, enabling customers to use the offered features immediately.
Cheapest payment solutions in Argentina
Argentine merchants can implement the following strategies to optimise their payment system.
Select a suitable provider: Merchants must compare multiple payment providers to get the lowest rate possible.
Incorporate alternative payment methods: Alternative payment methods, such as digital wallets, enable merchants to reduce fees and complete transactions faster.
Negotiate fees: Negotiating fees, including interchange and monthly fees, will allow merchants to push down costs further. This method usually applies to large-scale merchants that process many transactions regularly.
Avoid chargebacks: Merchants should provide comprehensive product descriptions, respond promptly to complaints, and provide refunds quickly to avoid chargebacks.
Take fraud prevention measures: Fraud can result in chargebacks and extra merchant fees. Therefore, merchants must adopt prevention strategies to avoid illicit transactions.
Keep up with fees: Sometimes, payment processing providers may change their fee policies. Merchants must keep tabs on these changes to find opportunities to reduce payment costs.
Working with service providers like APEXX can help merchants manage their payment system easily. APEXX will update merchants with the changing fees in Argentina's payment landscape. It automatically creates a payment routing system for each transaction to ensure efficiency.
BNPL in Argentina
The buy now, pay later (BNPL) sector is a promising finance sector in Argentina. It is because this service can help Argentines fulfil their daily needs amid soaring costs. Experts project that BNPL payments in the country will grow by 54.6% to US$2,070.9 million in 2023.
The BNPL market is expected to see a compound annual growth rate of 31.3% between 2023 and 2028 as more Argentines adopt this payment method. At this pace, the BNPL sector in Argentina will achieve a gross merchandise value of US$8,068.9 million by 2028. The value stood at US$1,339.7 million in 2022.
Numerous BNPL firms offer their services in Argentina. The largest ones are Wibond, Wipei, PagoMisCuentas, and Uala. As consumer spending continues to increase in Argentina, more BNPL offerings will become available to cater to rising demand.