Quick note: PROS and CONS of payment methods in México e-commerce

In México there are mainly six different payment methods, all of them have pros and cons but certainly an e-commerce in the domestic market must consider to accept all of them.

  1. Credit cards: Around 32 millions of credit cards in México, only 68% active considering a period of three months. Visa, Mastercard and AMEX are the brands in México. Bancomer and Citibanamex are the main issuers.

PROS: It is actually the most efficient payment method because it can be stored (NOT the CVV please!) to get one click functionality, it also can be tracked, monitored and combined with machine learning it can be built a good fraud prevention score.

CONS: Low penetration within and high fraud rate in México, around 2.2%. I think one of the main reasons why the fraud is getting high, is because the card present payment process is migrating to CHIP+PIN so it is easy for the fraudster to buy online.

2. Debit cards: Around 139 millions of debit cards in México, only 48% active considering a period of three months. Visa, Mastercard and Carnet are the brands.

PROS: Similar to credit card it can be stored, also most of the people receive the salary in the debit card.

CONS: Not all the debit cards are open to online or recurring  so the experience can be bad for the buyer.

3. Wallets: In México there are two players, Paypal and Mercado Pago.

PROS: I think security is the most important because combined with a device it can be implemented biometrics or two factor authentication. Another important benefit is that the wallets can use three payment methods: Credit cards, debit cards or cash.

CONS: Low penetration, around 10 millions of users in México. For those users that do not have a bank card the process to top up money implies more friction than pay directly in cash through a bank branch or a bank correspondent.

4. Cash-Bank branches: This payment method is using a referenced deposit (Ticket) and paying within a bank branch. In Mexico there are around 16.5K branches.

PROS: With this payment method you can reach the majority of the population.

CONS: THIS IS NOT AN ONLINE PAYMENT so the e-commerce experience is broken. However due the relevance of cash in Mexico the Merchants must include it and develop the best customer experience. Another negative point is that almost all banks charge a fee around 10 mexican pesos per payment.

5.  Cash-Bank correspondents: This payment method is through selected retail stores that got the certification of bank correspondent, the most important is OXXO. Considering all bank correspondents there are 38K point of payments.

PROS: The experience is better than visit a bank branch and it is more probable that a bank correspondent is close the buyer location. In some cases the electronic ticket can be read in the store what make it easy to end the payment process.

CONS: THIS IS NOT AN ONLINE PAYMENT. All bank correspondents charge a fee per payment and most of the cases the payment is processed through a batch process so the confirmation can take 24 hours and finally the convertion rate is low, around 50% in best cases.

6. Bank transfer (SPEI): This payment method is using Online Banking or Mobile Banking (APPS) from the banks. It is only for banked people and that use online banking.

PROS: The process is online using SPEI and it is more secure because the payer is authenticated by the bank.

CONS: The process to register the bank account and reference from the Merchant is bureaucratic and generates friction in the process.