PayU Latam

Jorge Mario Jaramillo, Head of Information Security, PayU Latam

The past few years have seen a wholesale acceleration in the adoption of a more digital financial ecosystem. This is particularly apparent in Latin America. As everyday life became heavily disrupted, services from education to healthcare to commerce moved online. Consequently, an estimated 50 million Latin Americans became online consumers for the first time, and mobile data traffic increased by 25%. The e-commerce sector has undergone monumental growth over the past two years, bringing increased competition, more financial inclusion and lower fees across the region with it.

However, such profound change has naturally increased privacy and cybersecurity concerns. These are nothing new, however, the uptake of online services has created new opportunities for phishing scams, malware and fraud. To understand how to prioritise cybersecurity and build a safe future for all Latin American consumers, we must first understand how the sector fast-tracked to where it is today.

Latin America’s E-Commerce Boom

Before the pandemic, uptake of e-commerce in the region remained relatively low, hampered by the area’s large unbanked population, challenging logistical connections and a lack of trust in online methods. With COVID-19 acting as a catalyst for change, it’s estimated that the sector grew by 37% to around USD 85 billion in less than one year. As a result, Latin America is classified as a ‘hyper-growth’ region, with the volume of e-commerce sales rising by more than 30% per year. This is more than double the global average, and nearly four times as fast as the growth rate of developed regions such as Europe and North America. Now, e-commerce accounts for roughly 16% of the region's total retail sales, up from 3-7% just two years ago.

One of the key reasons that e-commerce grew so quickly was the continent’s mobile-savvy consumers. By 2025, there are expected to be 424 million regular mobile internet users across Latin America, accounting for almost 73% of the population. Further, Brazil and Mexico are among the five countries in the world where users spend the most daily hours on mobile apps, totalling roughly five hours each day. Couple this with a huge unbanked population and a new frontier for e-commerce emerges.

Rising Fraud Rates

For these reasons, Latin America has quickly become an attractive location for cybercriminals. 2020 was ‘the worst year on record for e-commerce fraud’, with one in five e-commerce transactions declining as fraudulent. Alarmingly, this is twice as high as anywhere else on the planet.

It’s clear that with its newfound e-commerce popularity, Latin American merchants must ensure they have the right cybersecurity solutions in place to ensure their longevity in the region.

Here’s what Latin America must prioritise:

Improved Collaboration Between Government, Private Businesses And Regulators

To drive down Latin America’s high fraud rates, governments and regulators must continue to update laws around privacy, user consent and the right to be forgotten. While regulators are pursuing common goals across Latin America – namely reduced cost of payment acceptance and increased security – approaches are varying country by country.

“By establishing strategies to mitigate and prevent losses, trusted payment partners can ensure merchants gain the right balance between approvals and protection”

For long-term success, regulators must build laws that span multiple markets within the region. In doing so this will make payment technologies truly borderless, unlocking new intra-continental growth within the region. It’s critical that any new or updated regulation is developed collaboratively between government, private businesses and regulators to ensure that the results are customer-centric.

1. Enhanced Education

To improve cybersecurity among the population – and particularly Latin America’s mobile-savvy youth – governments, businesses and educational institutions must offer enhanced education on IT security. Users must be taught to recognise common scams and attempted fraud to raise the alarm where possible.

Equally important is raising awareness of cybersecurity internally among retailers. By sharing information between teams, organisations can move from siloed security departments to hyper-connected organisations that share the workload in managing and mitigating risk. In economies that increasingly rely on digital services, such as Latin America, security features must be built in at the core by design, and not retrospectively.

While enhanced education is imperative, technology providers and software developers must focus not only on software functionality but also on ensuring security at every level of the development process. Technologies securely developed from the initial stage of the software development lifecycle will ensure that products and services are more secure and easily rectified, should a security breach occur.

2. Support From Fintech

Perhaps the most important step, particularly for merchants with limited resources and cybersecurity expertise, or those who are new to the region, is seeking out payments partners that are up to date on the current fraud trends and those who incorporate data security as a priority in product development and processes. By establishing strategies to mitigate and prevent losses, trusted payment partners can ensure merchants gain the right balance between approvals and protection.

If the above steps are prioritised, merchants across Latin America will be able to operate with a high level of security and the knowledge that they are part of a cybersecurity infrastructure that can keep pace with the relentless digital transformation we are seeing across the region.