Peru
Credit Cards Dominate Peru's Cashless Payments
Introduction to Peru
An overview of Peru's currency, population and key statistics.
Cash currency
The sol, denoted by the code PEN and the symbol S/, is Peru's official currency, and it is available in coins and banknotes. Coins come in denominations of 10, 20, and 50 centavos, as well as 1, 2, and 5 soles, making them ideal for smaller transactions. For larger sums, banknotes in denominations of 10, 20, 50, 100, and 200 soles are available.
Digital currency
Peru is actively developing a central bank digital currency, according to Julio Velarde, president of the Central Reserve Bank of Peru (BCRP). The digital currency will be seamlessly integrated into future payment systems. The BCRP is leading the charge in this initiative, working with several other central banks to create a domestic digital currency. This strategic move is consistent with a global trend in which many countries are investigating and embracing digital currencies.
Population
Peru's population was expected to rise to 34.35 million in 2023, representing a 0.89% increase over the previous year. The country has a population density of around 27 people per square kilometre, spread across a total land area of 1.28 million square kilometres. Approximately 27.16 million people, or 79.1% of the population, lived in urban areas as of 2023. Peru's population has a median age of 28.7 years.
Languages
Peru's official languages are Spanish and Quechua. Spanish is the dominant language and it is widely spoken throughout the country. Quechua, an indigenous language, is also officially recognized, particularly in areas where it is the primary language. Furthermore, Aymara and other indigenous languages are recognised and protected in areas where they are generally spoken. This linguistic diversity reflects Peru's rich cultural heritage.
Key statistics
The Peruvian economy is expected to grow at a rate of 2.4% in 2023. Inflation has fallen to 5.6% in August 2023 from 8.5% in December 2022. Nonetheless, this rate still exceeds the central bank's target range of 1% to 3%. In terms of macroeconomic stability, Peru has strong fundamentals, including a relatively low public debt-to-gross domestic product ratio, substantial foreign reserves, and a well-regarded central bank. Examining economic sectors, growth is expected to pick up slightly in the coming years, potentially reaching 2.8%. This forecast is based on expectations of gradual improvement in business confidence and a rebound in investment, particularly in large-scale mining projects.
Internet & mobile phone trends
Peru has made significant advances in digital connectivity as of 2023. The country currently has approximately 24.31 million internet users, indicating an internet penetration rate of 71.1%. This represents an increase of 0.8%, or approximately 196,000, in the number of internet users over the previous year. Peru has even more impressive statistics in terms of mobile phone usage. With approximately 40.03 million active cellular connections, it accounts for 117.1% of the population.
E-commerce statistics
Peru is emerging as a significant player in the global e-commerce sector, ranking 43rd in terms of market size. E-commerce revenue is expected to increase by 32% to $25.5 billion by the end of 2023. The country's e-commerce market is expected to expand at a compound annual growth rate (CAGR) of 6.1% to $8,234.5 million between 2023 and 2027. Looking ahead, the Peruvian e-commerce sector has a bright future. The gross merchandise value in the e-commerce sector is expected to rise significantly, from $11.2 billion in 2022 to $16.1 billion by 2023. This trend highlights the rapid growth and potential of the digital marketplace in Peru.
How people pay in Peru
An overview of how people in Peru choose to make payments.
Traditional payment methods
The primary traditional payment methods used in Peru
Visa
A Visa credit/debit card is a financial payment card issued by banks or financial institutions. It allows users to make purchases, and withdraw cash and can be used online and in person. Visa's processing network can handle over 65,000 transaction messages per second.
Mastercard
Mastercard is a worldwide payment network that links financial institutions, merchants, and individuals, facilitating seamless transactions. This renowned company provides a range of credit and debit cards issued through partner banks. Customers may enjoy supplementary benefits such as rewards programs, cashback offers, and insurance coverage depending on the specific bank.
American Express
American Express cards encompass a range of payment cards provided by the multinational financial services corporation, American Express Company. The Amex card portfolio includes diverse options like credit cards, charge cards, and prepaid cards. Renowned for their broad acceptance among merchants, these cards grant cardholders access to various advantages, including perks, rewards programs, travel benefits, and dedicated customer service assistance.
PagoEfectivo
PagoEfectivo is a Peruvian payment service that allows for cash-based online purchases. Users are provided with a code to make payments at affiliated banks or agencies, thereby making e-commerce accessible to individuals who do not possess credit cards or prefer cash transactions.
Alternative payment methods (APM's)
Alternative payment methods
Apple Pay
Apple Pay is a mobile payment and digital wallet service developed by Apple Inc. that is seamlessly integrated with a variety of Apple devices such as iPhones, Apple Watches, iPads, and Macs. This service transforms traditional credit or debit card transactions into a digital format that is compatible with contactless payment terminals. With a focus on security and user convenience, Apple Pay employs a unique device-specific number and transaction code rather than transmitting actual card details to merchants. Apple Pay is widely accepted around the world and can be used to make purchases in physical stores, apps, and online.
SafetyPay
SafetyPay is a global online payment method that allows customers to make purchases from international merchants and settle transactions using their bank accounts or cash at designated banks and affiliated outlets. It caters to e-commerce buyers who do not have credit cards or choose not to use them, putting a premium on security by eliminating the need to disclose personal financial information to online retailers. The service is popular in many countries because it provides a safe alternative payment option for online shopping.
Google Pay
Google Pay is a digital wallet and payment service developed by Google. It allows users to make secure payments using their mobile devices or computers. It supports various payment methods, offers compatibility across different devices, and provides features like loyalty program integration and transit ticketing. Google Pay prioritises security and convenience with tokenisation and biometric authentication. It has expanded to include digital banking services and continues to evolve.
Yape
Yape is a digital payment method primarily accessed via a mobile application. It allows for instant and secure money transfers via smartphones. Developed by Banco de Crédito del Per (BCP), one of the country's largest banks, Yape simplifies transactions by associating a user's bank account with their phone number. This integration allows users to make or receive payments effortlessly using a contact's phone number, eliminating the necessity for sharing bank account details. Yape is popular in Peru because of its user-friendly interface and convenience, making it the go-to option for quick peer-to-peer transactions.
Accepting payments in Peru
A guide to accepting payments in Peru
How to accept online payments in Peru
Before accepting online payments, you must determine which methods you prefer. Then you can choose a payment gateway provider, a service that authorises and processes online payments with their specific system.
Although there are plenty of payment gateway options in Peru, the general process for online payments typically involves an acquirer, issuer, retailer, and cardholder in the following steps:
1. The cardholder initiates a payment by presenting their payment card to the retailer to purchase goods or services.
2. The retailer sends the payment details to the acquirer, who processes the payment request and sends it to the payment scheme (such as Mastercard or Visa).
3. The payment scheme sends the payment request to the issuer (such as a bank or licensed issuer) who issued the card to the cardholder.
4. The issuer checks if the cardholder has enough funds to complete the transaction and approves or declines the payment request. If the payment is approved, the issuer sends an authorisation code to the payment scheme.
5. The payment scheme sends the authorisation code to the acquirer, which then sends it to the retailer, completing the transaction.
How long does an international payment from Peru take?
The payment processing time may vary depending on the method and the recipient's bank. For instance, online money transfers through platforms like PayPal can quickly and conveniently send money to multiple destinations.
Bank debit/credit cards: International payments with bank debit or credit cards may take a few minutes to a few hours, depending on bank processing times.
Online money transfers: Platforms like Google Pay can process international payments within minutes to hours, depending on the service and destination country.
Wire transfers: Traditional bank-to-bank transfers or wire may take one to five business days or longer, depending on the destination country, intermediary banks, and transaction requirements.
Fees
Merchant fees
Merchant fees for online payments in Peru can vary depending on the payment method and the merchant services provider used. Here are some examples of typical merchant fees for online payments in Peru:
Credit and debit cards: Merchant fees for accepting online credit and debit card payments can range according to the transaction amount. It also varies depending on the type of card used and the merchant services provider.
Bank transfers: Bank transfer fees can vary depending on the bank used, with some banks charging a flat fee per transaction and others charging a percentage of the transaction amount.
Other fees
Other fees surrounding online payments in Peru include charges incurred by merchants, payment processors, and financial institutions involved in the payment processing chain. Below are some common fees:
Interchange fees: Interchange fees are charges paid by merchants' banks to cardholders' banks to cover the costs of processing card transactions. These fees are usually based on a percentage of the transaction value and can vary depending on the type of card used and the merchant's industry.
Payment gateway fees: Payment gateway providers charge a fee for processing transactions on their platform, which may be a percentage of the transaction value or a flat fee per transaction.
Cross-border fees: If a merchant accepts payments from customers outside the country, they may be subject to additional fees for cross-border transactions, including currency conversion fees and international processing fees.
Merchant discount rate: A processing fee that merchants are charged for transactions made using credit or debit cards. This fee generally falls within 1% to 3% of the total transaction amount.
Security challenges of online payments in Peru
Online payment systems in Peru, as in many other countries, face significant security challenges, with phishing attacks being particularly prevalent. These attacks entail duping people into disclosing sensitive information, laying the groundwork for more sophisticated fraudulent activities.
Another critical concern is ensuring strong encryption for online payments. Businesses must integrate payment gateways that adhere to PCI Compliance standards and include additional security layers, such as 3D Secure technology. This ensures end-to-end encryption of transactions.
Furthermore, scammers frequently entice users to reveal their card details and confirmation codes via SMS messages on fraudulent platforms. To safeguard online transactions, both businesses and consumers must remain vigilant. Adopting secure and reliable payment gateways, remaining vigilant against phishing schemes, and regularly upgrading and strengthening security systems are all critical steps in this regard.
Key sectors & industries in Peru
According to Statista and various other sources, the top 10 industries in Peru are:
Food Industry
Peru's food industry, which accounts for approximately 28% of its industrial GDP, has grown significantly. However, it has faced challenges such as reduced public spending, rising poverty, and more frequent natural disasters since 2017. As of 2021, more than half of the population was food insecure, accompanied by an increase in youth obesity rates. To address these issues, the World Food Programme will increase its assistance to the Peruvian government as part of its 2023-2026 strategic plan. The emphasis will be on Sustainable Development Goals 2 and 17 to reduce food insecurity and malnutrition through the implementation of national and subnational policies.
Tourism
Peru's travel and tourism industry is on the rise, with projected revenues of $1.84 billion in 2023 and an annual growth rate of 5.26%, reaching $2.26 billion by 2027. Tourist arrivals increased by 156,922 in February 2023, a noteworthy increase from the previous month. However, this figure falls short of the July 2019 high of 412,415 visitors. The United States has established itself as the primary source of tourists, accounting for 39.8% of all visitors in 2021. The package holidays segment leads the market, with a projected volume of $789 million in 2023. Additionally, the hotel market is expected to expand, reaching 5.394 million users by 2027. Online sales are expected to generate approximately 76% of industry revenue by 2027.
Textiles
Peru's textile and clothing sector, known for its high-quality cotton and fine fibres, has grown significantly, with over 46,000 companies employing over 400,000 people. It makes a significant contribution to the nation's GDP and the manufacturing sector. Despite challenges from low-cost imports and counterfeit goods, the industry has made a significant recovery since the pandemic. This recovery is most visible in the sector's performance, which includes a remarkable 65% increase in clothing exports in 2021. This rise can be attributed to increased demand from the United States, which has been fuelled by trade sanctions imposed on Chinese imports.
ICT
Peru's information and communications technology market was valued at $9.18 billion in 2022. According to projections, the market will be worth $16.64 billion by 2027. ICT providers could earn $74.53 billion during this period. The country had 24.31 million internet users as of early 2023. Application development, artificial intelligence, and cloud computing are key sectors in the IT landscape. Manufacturing and retail are the two largest market segments, while the energy sector is expected to record the fastest growth.
Manufacturing
The manufacturing sector's contribution to Peru's GDP decreased by 4.91% in 2021 to its lowest share of 11.64%. This figure represents the sector's share of total GDP. Manufacturing contributed an average of PEN 16.2 billion to GDP between 2007 and 2023, peaking at PEN 19.3 billion in the second quarter of 2022. This sector encompasses diverse industries, including food and beverages, textiles, non-metallic minerals, chemicals, and metal mechanics. Despite challenges such as import competition, the need for technological upgrades, and a skills gap, Peruvian manufacturing offers significant opportunities in value-added and export-oriented manufacturing.
Renewable Energy
Peru's renewable energy market is expected to grow rapidly, with a CAGR of more than 5% projected from 2023 to 2028. This upward trend is fuelled by favourable government policies and the need to reduce reliance on fossil fuels, thereby reducing carbon emissions. Notably, wind energy has grown significantly since 2014 and is expected to play a critical role in driving advancements in the renewable sector, as evidenced by numerous ambitious projects currently underway. Furthermore, solar energy and biomass, which together contributed more than 15% of renewable installation capacity in 2019, show significant potential for further expansion. Despite Peru's modest renewable energy target of 5% by 2025, the government has implemented several initiatives aimed at encouraging commercial and residential renewable energy expansion.
Fishing
Peru has one of the world's largest fishing industries, primarily focused on the export of fish meal for poultry feed. The sector meticulously tracks anchovy fishing seasons, especially in Peru's north-central zone, where anchovy is a critical resource. The global supply of fishmeal and fish oil has been bolstered by increased quotas in the North Atlantic and increased production in Chile, which has been influenced by Peru's fluctuating catch rates. China, which accounts for half of global fishmeal imports, will see decreased demand in 2021 due to flooding and disruptions in its aquaculture production.
Transportation
Peru's road freight transport market is expected to grow at a rate of more than 6.5% in the coming years. The government has initiated 31 infrastructure development projects worth more than $14 billion, which are being carried out primarily through public-private partnerships. In 2020, the Development Bank of Latin America (CAF) approved two operations totalling $723 million to assist Peru in mitigating the effects of the pandemic and improving subnational road infrastructure. Furthermore, the country's freight and logistics market is expected to expand at a 7.45% CAGR to $36.97 billion by 2028. This expansion is attributed to strong agricultural exports and the government's strategic plans to increase these exports.
Water and Sanitation
Peru has nearly 4% of the world's freshwater resources, primarily in its Amazon region, which is home to less than 5% of the population. In contrast, Lima, the world's second-largest desert city, is dealing with the problem of approximately 1.5 million residents in the greater metropolitan area lacking access to running water. Despite progress in water management, Peru faces floods, droughts, and pollution, which pose challenges to achieving universal access to clean water and sanitation.
Education
Peru's education sector has diverse enrolment rates and faces significant challenges in 2023. Approximately 34% of individuals aged 15-19 are enrolled in upper secondary education, with lower percentages for lower secondary and tertiary education. Enrolment in early childhood education has increased from 10% for 2-year-olds to 100% for 5-year-olds. Nonetheless, the system faces a 56% learning poverty rate among 10-year-olds, as well as significant educational inequality caused by geographic and socioeconomic factors.
Imports and exports
In 2023, raw materials for industry dominated Peru's import landscape, accounting for 32% of total imports, followed by fuels and lubricants (19%), capital goods (16%), and consumer goods (13%). China was the largest import partner, accounting for 29% of the total, followed by the United States (19%), Brazil (6.8%), Argentina (4.6%), and Mexico (3.7%).
In terms of exports, traditional products such as mining accounted for 58% of the total, agriculture accounted for 13%, and oil and natural gas accounted for 9%. China remained the top export destination, absorbing 32% of total exports, followed by the United States (13%), South Korea (5%), Japan (5%), and Canada (5%).
Regulation in Peru
The regulatory environment of Peru.
Summary of the regulatory environment in Peru
To maintain fairness and operational smoothness in business ventures in Peru, entrepreneurs are required to comply with a range of laws and regulations, which include:
Company law: This includes regulations governing companies' establishment, operations, and dissolution.
Employment law: This includes regulations governing employment contracts, working conditions, and employee rights.
Product liability law: This includes regulations governing the legal liabilities and responsibilities of manufacturers, sellers, distributors, and other parties involved in the production and sale of goods.
Intellectual property law: This includes regulations governing copyrights, patents, and trademarks.
Competition law: This includes regulations governing competition and antitrust matters to promote fair competition.
Consumer protection law: This includes regulations governing the rights of consumers, product safety, and advertising standards.
Data protection law: This includes regulations concerning the collection, use, and storage of personal data.
Different government bodies oversee and enforce various laws in Peru. Specifically, the Ministry of Labor and Employment Promotion is responsible for regulating employment and corporate laws. Its responsibilities include monitoring labour standards, overseeing employment contracts, and dealing with issues involving foreign workers. Furthermore, the ministry is tasked with protecting employee rights and establishing standards for recruitment processes. These regulations apply to both Peruvian nationals and foreign employees working in the country.
How card payments are regulated in Peru
The BCRP oversees card payment regulations in Peru, including a 2020 mandate for standardised QR code payment systems. Contactless payments are becoming more popular, with major banks such as BBVA Continental reporting that by late 2019, 10% of transactions would be contactless, extending to public spaces. The emergence of digital-only banks, such as RappiBank in 2021 and Credicorp's iO in 2023, is driving up debit card adoption in the country.
Do I need a licence?
Yes. Starting a business in Peru entails various steps, including drafting the minutes of incorporation, opening a bank account, registering with the National Superintendence of Public Registries (SUNARP), obtaining a tax identification number (RUC) from the National Superintendence of Customs and Tax Administration (SUNAT), formalising statutory books, and acquiring a municipal licence. Each of these steps requires specific documentation as well as strict adherence to legal procedures.
Payment solutions in Peru
An overview of how to accept payments from customers in Peru.
Payment gateways and providers in Peru
In the rapidly changing landscape of payment methods, businesses must prioritise a smooth payment experience for their customers. APEXX, a forefront payment technology company, offers a solution that consolidates payments from a spectrum of providers.
Anticipating the varied payment preferences of modern consumers, APEXX's Payment Orchestration Layer (POL) platform serves as a central hub, bridging various payment methods and financial institutions. The primary benefit of the POL solution is its capacity to handle multiple payment streams within one cohesive platform, supplemented by tools that elevate business efficiency.
One notable feature is Intelligent Routing. This function evaluates aspects like cost, risk, and currency to select the best payment channel for each transaction. Such precision reduces transactional errors and can decrease associated fees.
Integration of the APEXX POL with existing payment infrastructure is straightforward. The platform provides user-friendly plugins and adaptable APIs, facilitating its blend with a range of payment platforms, from e-commerce portals to POS systems.
As a prominent payment solution provider, APEXX assists businesses in Peru and beyond, refining their payment processes. Leveraging its versatile payment orchestration platform, businesses can adeptly manage diverse payment methods, enhancing overall customer satisfaction.
Cheapest payment solutions in Peru
To reduce fees in their payment stacks, merchants in Peru can implement the following strategies:
Negotiate fees: Merchants should negotiate with their payment providers for better rates, which can include transaction fees, interchange fees, and monthly fees.
Choose a suitable payment provider: Merchants should research and compare different payment providers to select the one that offers competitive rates and low fees.
Use alternative payment methods: Merchants can reduce fees by using alternative payment methods such as e-wallets or bank transfers instead of traditional card payments.
Prevent chargebacks: To avoid chargebacks and additional fees, merchants can offer clear product descriptions, prompt customer complaint resolution, and refunds when necessary.
Implement fraud prevention measures: Merchants should adopt fraud prevention measures to prevent fraudulent transactions, which can lead to chargebacks and additional fees.
Monitor payment processing fees: Merchants should keep a close eye on their payment processing fees and use payment analytics tools to track their expenses and identify areas where they can reduce costs.
Merchants can also consider using payment aggregators such as APEXX, which allow them to accept multiple payment methods through a single platform, reducing the need for multiple payment providers and lowering costs.
BNPL in Peru
The buy now, pay later (BNPL) industry is expanding globally, particularly in Peru and other Latin American countries like Mexico and Colombia, where it has the potential to capture 20% of the region's e-commerce market.
The global BNPL user base currently stands at around 360 million, with the market valued at more than $150 billion. Projections indicate that it will reach $309.2 billion in 2023, growing at a CAGR of 25.5%. This expansion is attributed to the increasing prevalence of online payments, which is being driven by increased consumer engagement in online shopping.
Adoption of APEXX's solutions by Peruvian businesses can facilitate the seamless integration of various payment methods, including popular BNPL options. This improves payment management and contributes to higher customer satisfaction.