Latin America is known for being slow in opening bank accounts. The coronavirus pandemic may have brought some relief to Latin America, as millions of people opened bank accounts to help them protect their government stimulus payments.
Mastercard and Americas Market Intelligence, a research firm, released a report stating that over 100 million people in the region (or 15 percent of Latin America) now rely on digital bank accounts.
This encouraging trend can help millions have access to credit and insurance as well as more savings options. It also allows for greater financial resilience. This allows people to weather difficult times knowing that they have money in a savings account or checking account.
“The move to digital is here to stay for the long haul,” said Mastercard’s Kiki Del Valle. “It’s impacting not just the world of eCommerce, but it is also driving advances in transformation, it’s forcing collaboration with fintech and it’s allowing new players to compete.”
Cash is still the currency of choice in Latin America. People living in the region have always been skeptical about the security of cash payments and have never had access to digital accounts. According to the World Bank, half of Latin America does not have access to online financial services.
With the pandemic forcing more people to use online banking tools, more Latin Americans are switching to a more stable alternative. The government’s efforts in helping people get money relief fueled some countries’ shift to online banking. Between April and September of last year, an estimated 40 million people have adopted online financial systems in Argentina, Colombia and Brazil alone, according to Mastercard’s research.
Colombia was one example of this. The government provided emergency payments to one-fifth its population via e-wallets and bank accounts. Brazil’s state banking app gave money to 66 million low income workers. 36 million of these workers had never had a bank account before.
Among the most trending sectors of online banking in the region are virtual banks that don’t have physical locations. These virtual accounts are easier to start because of the increased need for emergency savings due to the pandemic.
“Lower-income families spend more of their income on essential goods than the upper classes, but during the COVID-19 pandemic, these users began developing a more savings mindset,” said Andrés Rodríguez, the COO of the Argentine bank Ualá.
Since 2014, Michael has been a Latin America reporter. He has lived and worked in Mexico, Colombia, Costa Rica and Costa Rica. His work from the region was published in Vice, The Associated Press and The Guardian.