2019 J.P. Morgan Global Payment Trends

2019 Global Payments Trends Report - Mexico Country Insights

MEXICO INSIGHTS REPORT


With high levels of cross-border spending the Mexican e-commerce market is associated with a confident double-digit growth prediction to 2021. To capitalize on this nascent market, merchants could start to offer a wider range of payment options. Social media offers another chance to capture the attention of the Mexican online shopper, who is spending increasing amounts of time on their smartphone. To help our clients locate, attract and keep their customers, we have tracked and assessed e-commerce developments in 34 mature and emerging markets around the globe.

Introduction

 

While investors were concerned that the election of Donald Trump in the U.S. would damage relations with Mexico’s most important economic partner, confidence was restored to some degree following the completion of the U.S.-Mexico-Canada trade agreement.1 Although growth is limited, the financial conditions in Mexico are expected to benefit from strong economic activity in the U.S. However, despite low unemployment, reducing poverty remains the key priority for the Mexican government.2 Retail sales were modest in 2018 but that has not stopped the e-commerce market posting strong sales, driven by government investment in internet infrastructure.3

This document is based on projected figures and is subject to change at any time.

 

Double-digit growth in market with huge potential

 

Enjoying a rapid annual growth rate of 28.3 percent, the Mexican business to consumer e-commerce market is worth $22.6 billion.14 That said, e-commerce has a long way to go before it unseats bricks-and-mortar sales as the dominant commerce channel in the country – online shopping accounts for just 1.7 percent of the country’s overall retail market.15 From this low baseline, however, double-digit growth is expected to continue. The Mexican e-commerce market is projected to expand at a compound annual growth rate of 12.6 percent to 2021.16

Consumer electronics and travel are the most popular online shopping categories, taking a 31.6 percent and 30.2 percent share of the domestic e-commerce market, respectively.17 The leading shopping sites are MercadoLibre, Latin America's most visited e-commerce platform, Amazon and Mexico’s own Coppel.18 MercadoLibre’s reach is set to grow after it announced plans to open two new distribution centers in Mexico last year in a bid to speed up delivery times.19 Amazon, too, has said it will invest in increased infrastructure in the country.20

Private investment is being complemented by the efforts of the Mexican government. Internet penetration has risen by 47 percent since 2013 after reforms to telecommunications regulation made domestic internet packages cheaper and more readily available.21 Since 2015, the Mexican federal government has also run the Mexico Conectado program, which provides free internet in each state in public areas and is designed to be used for research and online shopping.22

 

International purchases are popular with straightforward customs procedure

 

Cross-border shopping is a significant part of the Mexican e-commerce market, taking a quarter of total sales.23 Some 67 percent of Mexican e-consumers have shopped from an international site,24 suggesting international merchants hoping to break in to this market have a good chance of finding receptive customers. The neighboring U.S. is the most popular international shopping destination, followed by China and then Japan.25 Mexico has a streamlined imports and customs clearing procedure for items valued under US$50, which may also account for the popularity of cross-border shopping.26

 

Mexican shoppers quick to adopt mobile commerce

 

Mexico represents an exciting opportunity for mobile commerce providers. While smartphone penetration stands at 39.5 percent,27 one of the lower rates of the countries included in our report series,* this represents the highest rate in Latin America. Within Mexico, mobile commerce already takes a significant share of the overall e-commerce market, accounting for 34 percent of all transactions,28 or $7.7 billion in sales.29

The Mexican mobile commerce market is expected to grow at a compound annual growth rate of 23.2 percent to 2021, driven by falling smartphone prices and the increasing adoption of mobile commerce by Mexico’s large unbanked population.30 At present, just 37 percent of the population has a bank account. Smartphones and apps with digital wallet options allow unbanked citizens to access and purchase products without a bank account.31

 

Hours spent on social media represent sales opportunity

 

Strong social media uptake could also help bolster mobile commerce sales, as shoppers increasingly click through to shopping sites via social platforms. At present, Mexican citizens spend three hours and 46 minutes on social media every day.32 Facebook is the most-used site, followed by Twitter, Tumblr and Pinterest.33

However, converting mobile browsing to sales could pose a challenge. At the moment, transactions are typically completed on a desktop device.34 Merchants must develop easy-to-use shopping apps that streamline the mobile shopping process in order to grow mobile commerce.

Developing app-only offers tied in to discounting events could also increase mobile commerce uptake. Merchants should target ‘Hot Sale’, an annual week-long e-commerce promotion that takes place in late May, 35and ‘El Buen Fin’, Mexico’s own ‘Black Friday’. Another important commercial date in Mexico is ‘Children’s Day’ when kids will often be given presents by their families.36

 

Debit card payments rule as cash use declines

 

Card is the dominant payment method in Mexico, used in 45 percent of all transactions and worth $10.2 billion in sales.37 Debit card penetration is high, at 1.12 cards per capita, compared with 0.25 for credit cards,38 bucking a trend seen elsewhere in Latin America. The use of cards will increase in the period to 2021, by which point they are expected to be used for half of all online transactions (50.9 percent).39

Cash and digital wallets tie as the second-most used payment method, each taking a 17 percent share of the overall e-commerce payments market.40 The high use of cash, which is often used to settle payment on delivery, can be attributed to Mexico’s large (63 percent) unbanked population.41 There is also a culture of ordering items via mobile and then paying for them in cash at convenience stores, with Oxxo standing as the retail chain that is leading this method.42 However, the use of cash is expected to drop dramatically over the next two years, falling to just 2.6 percent by 2021.43

 

Digital wallets rise in popularity

 

In contrast, digital wallets are expected to rise sharply in use, in line with growing smartphone penetration. By 2021, digital wallets will occupy a 27.7 percent share of the business to consumer e-commerce payments market.44 Popular options include market leader PayPal®, and domestic player Mercado Pago.45 Visa® Checkout and Masterpass are also recognized digital wallet options in the country.46

Paying for bigger-ticket items, such as consumer electronics, in installments is another growing trend in Mexico.47 The associated short-term debt is usually provided via banks in partnership with merchants.48

Bank transfers are used for 16 percent of all online payments,49 and are projected to rise in use only slightly to 2021, to take an 18.6 percent share of the market.50 Banco de México developed and operates the country’s primary faster payments system, called SPEI. The scheme settles funds in near real time.51 Participating banks must send customers payment orders to recipient banks within 30 seconds of the order being made.52

 

Reports of e-commerce fraud on the rise

 

According to Mexican financial consumer watchdog Condusef, reported incidences of suspected e-commerce fraud across different payment methods increased 74 percent year-on-year in 2018, representing a value of $64 million.53 It appears fraudsters are turning their attentions to Mexico’s burgeoning online shopping market, as incidences of fraudulent physical transactions fell.54

 

Key takeaways

 

Just over two-thirds of Mexico’s online consumers have shopped at an international site. This overseas consumption has been aided by a simplified customs clearance regime for low-value express commercial shipments. However, international brands should be aware that new regulations proposed by the Mexican tax authority could result in additional requirements that would make express delivery shipments to Mexico more difficult and costly. Although cards are the dominant payment method in Mexico, used in 45 percent of all transactions, 55 cash remains relevant due to a low rate of financial inclusion. As a result, many online retailers offer payment alternatives such as cash payments at convenience stores.

 

Data may vary from historical figures, due to certain categories being re-stated as new information sources have become available.

* J.P. Morgan 2019 Payments Trends – Global Insights Report series includes the following countries: Australia, Brazil, Canada, China, Hong Kong, India, Indonesia, Japan, Malaysia, Mexico, New Zealand, Singapore, Thailand, Turkey, U.S., Vietnam.

 

Global Payments Trends Reports

International e-commerce success can hinge upon understanding the needs, nuances and growth patterns of individual nations. J.P. Morgan’s Global Payments Trends Reports aims to offer merchants the knowledge they need for global success through in-depth, country-by-country analysis.

For more information, please contact:

Your J.P. Morgan Relationship Manager or visit: https://www.jpmorgan.com/country/US/en/merchant-services/payment-insights

 

This presentation was prepared exclusively for the benefit and internal use of the J.P. Morgan client or potential J.P. Morgan client to whom it is directly delivered and/or addressed (including subsidiaries and affiliates, the “Company”) in order to assist the Company in evaluating, on a preliminary basis, the feasibility of a possible transaction or transactions or other business relationship and does not carry any right of publication or disclosure, in whole or in part, to any other party.  This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by J.P. Morgan.  Neither this presentation nor any of its contents may be disclosed or used for any other purpose without the prior written consent of J.P. Morgan. This presentation does not constitute a commitment by any J.P. Morgan entity to extend or arrange credit or to provide any other services to Company.

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© 2019 JPMorgan Chase & Co

1 OECD: Mexico - Economic forecast summary (November 2018). Accessed March 2019.

2 IMF: IMF Country Focus – Mexico. Accessed March 2019.

3 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Mexico B2C E-commerce Report, 2017.

4 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

5 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

6 World Bank Open Data. ‘Mexico.’ Accessed December 2018.

7 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Mexican Internet Association E-commerce Study, OECD, 2017.

8 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2017.

9 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Mexican Internet Association E-commerce Study, 2017.

10 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

11 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2017, World Bank, 2017.

12 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

13 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Trends in Payment Instruments, World Bank, 2016, 2017.

14 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Mexican Internet Association E-commerce Study, OECD, 2017.

15 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2017.

16 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2017.

17 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Ecommerce Study Mexico, 2017.

18 Similarweb.com, February 2019. ‘Top sites ranking for Shopping in Mexico.’ Accessed February 2019.

19 Reuters.com, February 2018. ‘E-commerce firm Mercado Libre to open distribution centers in Mexico.’ Accessed February 2019.

20 Reuters.com, February 2018. ‘E-commerce firm Mercado Libre to open distribution centers in Mexico.’ Accessed February 2019.

21 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Mexico B2C E-commerce Report, 2017.

22 Itu.int, 2019. ‘Punto México Conectado Program.’Accessed February 2019.

23 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Mexican Internet Association E-commerce Study, 2017.

24 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Mexican Internet Association E-commerce Study, 2017.

25 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Mexico B2C Ecommerce Market, 2017.

26 Export.gov, November 2018. ‘Mexico – eCommerce.’ Accessed February 2019.

27 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2017, World Bank, 2017.

28 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Mexican Internet Association E-commerce Study, 2017.

29 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2017.

30 Eshopworld.com, 2019. ‘Fashion, Facebook & Mobile are the Future of the Mexican eCommerce Market.’ Accessed February 2019.

31 elEconomista.com.mx, June 2018.‘¿Está el m-commerce hecho para México?’ Accessed February 2019.

32 Eshopworld.com, 2019. ‘Fashion, Facebook & Mobile are the Future of the Mexican eCommerce Market.’ Accessed February 2019.

33 Eshopworld.com, 2019. ‘Fashion, Facebook & Mobile are the Future of the Mexican eCommerce Market.’ Accessed February 2019.

34 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Mexican Internet Association E-commerce Study, 2017.

35 Vallartadaily.com, May 2018. ‘‘Hot Sale’ Aims to Increase Online Sales in Mexico.’ Accessed February 2019.

36 Entrepreneur Europe:  Mark Your Calendars: The Key to Latin American Ecommerce Is Knowing the Right Dates, August 2018.

37 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

38 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Trends in Payment Instruments, World Bank, 2016, 2017.

39 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

40 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

41 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

42 Onlinepaymentacceptance.worldline.com, 2019. ‘What you should know about ecommerce in Latin America.’ Accessed February 2019.

43 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

44 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

45 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

46 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

47 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

48 Onlinepaymentacceptance.worldline.com, 2019. ‘What you should know about ecommerce in Latin America.’ Accessed February 2019.

49 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

50 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

51 Anterior.Banxico.org.mx, 2019. ‘Interbanking Electronic Payment System.’ Accessed February 2019.

52 Anterior.Banxico.org.mx, 2019. ‘Interbanking Electronic Payment System.’ Accessed February 2019.

53 BNAmericas.com, July 2018. ‘Fraud-related complaints soar in Mexico e-commerce.’ Accessed February 2019.

54 BNAmericas.com, July 2018. ‘Fraud-related complaints soar in Mexico e-commerce.’ Accessed February 2019.

55 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.