Struck by hyperinflation and cash insecurity, Venezuela is leading Latin America in the use of digital payments, according to new data shared with Rest of World by Colombian fintech company Treinta.
Out of 10 million transactions across 17 countries in Latin America over the course of a six-month time period, Treinta found that 28.6% were conducted digitally in Venezuela, compared to an average of 5.93% in the rest of the region.
Even as homegrown financial technology companies in the region like Clip and Addi try to shift countries like Mexico and Colombia away from cash transactions, the data shows that Venezuela is far and away ahead of the region in adopting digital tools. Treinta’s data breaks these into two main categories: transfers and card payments.
Part of the reason for digital payment adoption is the country’s ongoing economic crisis: The national currency, the bolívar, has collapsed with more than a 2,500% increase in inflation over the last year alone.
In 2019, Venezuelans began to adopt the U.S. dollar as their primary currency. The government of Nicolás Maduro facilitated the shift through banking regulation that allowed for dollar-based accounts. As of June of this year, nearly 70% of transactions were conducted in dollars, according to the economist Luis Vicente León.
Venezuela’s experience with hyperinflation, dollarization, and the subsequent adoption of digital payments has been amply covered. In March, Spanish newspaper El País followed a Caracas parking attendant who wrote down his bank details for clients in order to encourage them to make a transfer as a tip. Earlier this year, Reuters reported that the state-owned Banco del Tesoro was advertising a dollar-based credit card.
Despite anecdotal evidence of Venezuela’s experience with digital payment adoption, there has, up until now, been little data detailing the extent of the transformation in Venezuela, especially in comparison to the rest of Latin America.
“Even for us, it was surprising,” said Lluís Cañadell, the co-founder of Treinta, which was part of the winter 2021 cohort of Y Combinator. “We knew there was a larger degree of digital adoption, but until we put the numbers together, we didn’t realize that it was really over 10 times adoption [in Venezuela] compared to other countries.”
Treinta provides financial tracking tools to microenterprises, defined as businesses with fewer than 10 employees, of which there are an estimated 26.2 million across Latin America and the Caribbean. In its study, which ran from January to June 2021, Treinta drew from transactions from around 280,000 businesses, including 40,000 in Venezuela.
“It is raw transactional information self-reported by Treinta users across 17 countries,” Cañadell told Rest of World. He added that data may be biased toward retail stores, which account for the majority of Treinta users.
Along with the overall adoption of digital payment tools in lieu of cash, Treinta’s data also suggests that Venezuela is far ahead of the rest of the region in the use of credit and debit cards, which account for 10.7% of transactions in the country — the next highest country is Panama at 1.3%.
In other Latin American countries, bank transfers and digital wallets are quickly outpacing card transactions, according to Treinta's data. In Colombia, for example, bank and digital transfers represent 13 times more transactions than cards.
Cañadell said that another unexpected takeaway from the data is that there isn’t always a correlation between a country’s tech ecosystem and its adoption of digital payment tools. Mexico, for example, is a leading hub for fintech startups in Latin America. Even so, it has one of the highest cash usages at microbusinesses, with 97.5% of transactions done in hard currency.
Cañadell has found that businesses in Latin America are wary of shifting away from cash, due to concerns over transaction fees, the need for immediate liquidity, and a general distrust of financial institutions.
"We are fighting against habits,” he told Rest of World.