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Commonly used payment methods:
South America has a diverse range of payment methods, with cash still being the most widely used payment method in the region. However, with the increasing adoption of smartphones and the internet, digital payments are becoming more popular. The most commonly used digital payment methods in South America include:
Credit and Debit Cards: Visa and Mastercard are the most popular card networks in South America, with American Express and Diners Club being accepted in some countries. However, card payments in South America can be subject to high fees and lengthy processing times, particularly for cross-border transactions.
Bank Transfers: Bank transfers are widely used for online payments in South America. Many banks offer their own payment gateways, but third-party payment providers also offer bank transfer options. However, bank transfers can be slow and may not be suitable for time-sensitive transactions.
The high-risk merchant industry in South America is a significant market, with a growing demand for payment solutions. Here are some statistics and numbers on the size and growth of the high-risk merchant industry in South America:
The online gambling industry in South America is expected to reach $4.31 billion by 2024, growing at a CAGR of 10.3% from 2019 to 2024. (Source: Mordor Intelligence)
The adult entertainment industry in Brazil is estimated to be worth $1.1 billion, with online revenues accounting for around 70% of the total market. (Source: Newzoo)
The nutraceuticals industry in South America is projected to reach $25.09 billion by 2025, growing at a CAGR of 6.9% from 2020 to 2025. (Source: Research and Markets)
The high-risk merchant account market in Latin America is expected to grow at a CAGR of 8.1% from 2020 to 2027, reaching $10.18 billion by 2027. (Source: Verified Market Research)
PayPal: PayPal is a global payment provider that offers a range of payment solutions for individuals and businesses. PayPal is widely accepted in South America, particularly for cross-border transactions.
Mercado Pago: Mercado Pago is a popular payment platform in South America, particularly in Argentina, Brazil, and Mexico. The platform allows users to make payments using their Mercado Pago balance, credit or debit cards, bank transfers, or cash deposits.
PagSeguro: PagSeguro is a Brazilian payment provider that offers a range of payment solutions, including POS systems, online payments, and peer-to-peer transfers. PagSeguro is particularly popular among small and medium-sized businesses in Brazil.
PayU: PayU is a global payment provider that operates in several South American countries, including Brazil, Colombia, and Mexico. PayU offers a range of payment solutions, including online payments, mobile payments, and recurring payments.
High-risk merchants, such as those operating in industries such as adult entertainment, online gambling, or nutraceuticals, may face significant challenges in finding a payment solution in South America. Some of the most common challenges include:
Higher Payment Processing Fees: High-risk merchants may be subject to higher payment processing fees than low-risk merchants, due to the increased risk of chargebacks and fraud.
Lengthier Application Process: High-risk merchants may face a more lengthy and complicated application process than low-risk merchants, due to the additional due diligence required by payment providers.
Higher Chargeback Fees: High-risk merchants may be subject to higher chargeback fees than low-risk merchants, due to the increased risk of disputes and refunds.
Cash Reserve Requirements: Payment providers may require high-risk merchants to maintain cash reserves to cover potential chargebacks or refunds.
High-risk merchants in South America may be subject to higher payment processing fees than low-risk merchants, due to the increased risk of chargebacks and fraud. However, the exact payment processing fees for high-risk merchants can vary depending on several factors, including the industry, transaction volume, and the payment provider.
In general, high-risk merchants in South America can expect to pay processing fees ranging from 3% to 10% or more per transaction, which is significantly higher than the fees charged to low-risk merchants. For example, some payment providers may charge a base fee of 3.5% per transaction, with an additional fee of 1% for high-risk merchants.
High-risk merchants may also be subject to other fees, such as chargeback fees or reserve fees. Chargeback fees are charged when a customer disputes a transaction, and the merchant is required to refund the payment. Reserve fees are fees charged by payment providers to hold a portion of the merchant’s revenue as a reserve to cover any potential chargebacks or refunds.
The exact chargeback fees for high-risk merchants in South America can vary depending on several factors, including the industry, transaction volume, and the payment provider. However, high-risk merchants can generally expect to pay higher chargeback fees than low-risk merchants.
For example, some payment providers may charge a base fee of $20 to $50 per chargeback, with an additional fee of 1% to 5% of the transaction amount for high-risk merchants. This can result in significant fees for high-risk merchants who experience a high volume of chargebacks.
Cash reserve requirements are a common practice used by payment providers to manage the risk of chargebacks and refunds for high-risk merchants in South America. Cash reserves are a portion of the merchant’s revenue that is held by the payment provider to cover any potential losses. There are three types of cash reserve requirements that payment providers may impose on high-risk merchants:
Capped Reserve: The payment provider may require the merchant to maintain a certain amount of cash reserve, which is capped at a specific amount. For example, the payment provider may require the merchant to maintain a cash reserve of $10,000, which cannot be exceeded.
Rolling Reserve: The payment provider may hold a percentage of each transaction as a reserve, which is released after a certain period of time. For example, the payment provider may hold 10% of each transaction for a period of six months, after which the reserve is released to the merchant.
Upfront Reserve: The payment provider may require the merchant to pay a lump sum upfront, which serves as the cash reserve. For example, the payment provider may require the merchant to pay a cash reserve of $5,000 upfront.
The exact cash reserve requirements for high-risk merchants in South America can vary depending on several factors, including the industry, transaction volume, and the payment provider. Cash reserves can range from a few thousand dollars to tens of thousands of dollars, depending on the level of risk and the volume of transactions.
High-risk merchants face additional requirements when seeking a Merchant Identification Number (MID) with a Payment Service Provider (PSP) or Acquiring Bank. These requirements are in place to mitigate the additional risks associated with high-risk industries. Some of the specific requirements that high-risk merchants must fulfill are:
Detailed Business Information: High-risk merchants must provide detailed information about their business, including their business model, industry, and target audience. PSPs and Acquiring Banks want to know as much as possible about the business to assess the level of risk involved.
Financial Statements: High-risk merchants must provide financial statements, including balance sheets, income statements, and cash flow statements. This information is used to assess the financial stability of the business and its ability to manage chargebacks and refunds.
Chargeback and Fraud History: High-risk merchants must provide information about their chargeback and fraud history, including the number of chargebacks and the reasons for them. PSPs and Acquiring Banks want to know how the merchant manages chargebacks and fraud and how likely they are to occur in the future.
Technical Requirements: High-risk merchants may be required to use specific software or hardware to process payments. For example, online gambling merchants may be required to use a specific type of gaming software that is certified by the regulator.
Reserves: High-risk merchants may be required to maintain a cash reserve, which can take the form of a capped reserve, rolling reserve, or upfront reserve. These reserves help PSPs and Acquiring Banks mitigate the risk of chargebacks and fraud.
Being on the TMF/MATCH List: High-risk merchants must not be on the Terminated Merchant File (TMF) or the Member Alert to Control High-Risk (MATCH) list. These lists contain merchants who have been terminated by a PSP or Acquiring Bank due to chargebacks, fraud, or other reasons.
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