Peru: an e-commerce & payments primer
Peru’s short-term growth prospects are good. In the medium-to-long term, there is every reason to expect the government projects to improve digital and financial inclusion to bear fruit. Any company entering the market must have a strategy for overcoming the challenges presented by geographical and social variations in connectivity and to have a local-payments strategy.
Peruvians prefer to pay for online purchases with cards, which are used in 51% of all online transactions [1]. 11% of purchases are paid for by bank transfer, 12% by cash and 13% with wallets [1]. Visa is the most popular card brand, with 52% of the card market. Mastercard has 33%, American Express 1% [1]. 14% of online card payments are made with localized credit cards issued by the global brands Visa, Mastercard and American Express but restricted to domestic use.
Those localized versions of international credit card schemes are characteristic for the LatAm countries Argentina, Brazil, Chile, Colombia, Mexico and Peru. Those local cards are limited in use, as they are restricted to local purchases and cannot be used cross-border. Even if those cards are issued by international brands and may seem like standard credit cards, they can only be used in the country in which they are issued and can only be used to make payments in that country’s currency.
The IMF expects Peru’s economy to grow at a rate of 3% in 2022 and to carry on expanding at a steady rate of 3% a year thereafter, to well beyond 2025 [2]. In the summer of 2022, inflation hit a 25-year high [3]. Unemployment is around 9%, down from a recent high of 14% in 2021 [2].
Peru, like its neighbour Chile, sits on top of a foundation less of bedrock and more of copper. This relatively small country is home to 10% of the world’s known copper reserves [4]. Copper, we are now being told, is “the new oil”, with the Bank of America speculating it may double in price over the next five to ten years [5]. At the time of writing, the price of copper on the commodity markets was rising, buoyed by strong Chinese manufacturing demand [6].
The e-commerce market
Peru’s e-commerce market is worth $9.3 billion a year and is growing and expected to grow at an average annual rate of almost 25% over the next five years [1]. Just 6% of all retail sales are completed online [1]. During lockdown the proportion of Internet users who said they had shopped online rose from 31% to 54% [7]. Even when lockdown had ended, this figure only fell to 51% [7], suggesting a new normal in which the majority of Peruvians who have an Internet connection use it for e-commerce.
38% of all online purchases were completed on a mobile device [1]. According to market intelligence by the US International Trade Administration, there are over 31 million smartphones in Peru, of which 77% are connected to the Internet [8].
E-commerce success factors (and challenges) in Peru
Peru lags behind its neighbours in financial inclusion. Only 46% of the population has a bank account and 13% a credit card [1]. As with other Latin American markets, the Peruvian government has made financial inclusion a priority in recent years. According to a plan announced in August 2020, the publicly owned Banco Nación has been opening bank accounts for unbanked citizens and depositing accountholders’ welfare benefits into these accounts [9].
Peru has an Internet penetration rate of just 63% [1]. 73% of Peruvians have an Internet-capable smartphone [1]. In February 2021, the Peruvian government issued an emergency decree, backed by an investment of US$40 million, ordering the creation of digital centres and the use of satellite and wireless technologies to bring the Internet to 3.2 million underserved rural dwellers [10].
Peru is 83rd on the World Bank’s Global Logistical Performance Index. In its advice to US e-commerce exporters, the state department lists logistics and delivery as one of the challenges to doing business in Peru [11].
- Original PPRO research
- https://www.imf.org/en/Countries/PER
- https://www.bloomberg.com/news/articles/2022-07-07/peru-to-hike-rate-as-inflation-hits-25-year-high-decision-guide
- https://www.statista.com/statistics/605580/distribution-of-global-copper-reserves-by-select-country
- https://www.cnbc.com/2021/05/06/copper-is-the-new-oil-and-could-hit-20000-per-ton-analysts-say.html
- https://www.mining.com/copper-price-rises-on-china-demand-optimism
- https://www.statista.com/statistics/1191649/peru-online-shopping-ordering-channels-usage-type
- https://www.trade.gov/market-intelligence/peru-ecommerce
- https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/peru-forces-bank-accounts-onto-millions-a-potential-financial-inclusion-boon-60231754
- https://www.bnamericas.com/en/news/peru-embarks-on-new-rural-connectivity-push
- https://lpi.worldbank.org/international/global
