The Latin American Opportunity: An Overview of a Dynamic Aviation Region

The Latin American Opportunity: An Overview of a Dynamic Aviation Region

The airline, travel and passenger transportation sectors in Latin America are rapidly expanding. When Lima Airport Partners (LAP) took over operations for Jorge Chávez International Airport in 2001, they were handling around four million passengers per year. The airport – which is home to LAN Airlines, Avianca Peru, Peruvian Airlines, Star Peru and LC Peru – welcomed 18.8 million passengers in 2016, five times as much traffic as 2001 and in the region’s fifth most populous country. Meanwhile, Mexico City has become the busiest city in the world for Uber, and Sao Paulo, Brazil is second, which underscores Latin America’s increasing demand for mobility-as-a-service (MaaS) and new travel technology.

Latin America is part of an emerging travel sector that includes China, India, Southeast Asia, Africa and the Middle East. Global demand for air travel will double to reach 7.2 billion passengers by 2035, according to IATA. Latin American markets will grow by 3.8%, serving a total of 658 million passengers versus 313 million today. For CellPoint Mobile and other technology partners in the region, Latin America has its own unique “geographies” – physical, cultural, technical and economic – that require strong local partnerships, proficiency with local and regional payment methods and direct connections to local acquirers.

With deeper mobile penetration across the continent, more Latin Americans can now search, book, plan and pay for products and services directly from their smartphones. They can also use alternative payment methods such as Apple Pay or Samsung Pay. But in such a large and diverse region, with an underdeveloped payments infrastructure and unpredictable regulation, airlines and other travel merchants need to focus on problems they can control – like user experience (UX) in the booking and payment process – and not be overwhelmed by the complex landscape in Latin American travel, payments and ecommerce.

The Mobile Channel in Latin American Ecommerce

More Latin American airlines, hotels and hospitality venues are upgrading their digital and mobile offerings for booking, payments and ecommerce to help reduce fragmentation and optimize conversions. LAN, for example, a member of LATAM Airlines Group, was named the region’s company of the year in 2016 for its exemplary management of LAN.com. The carrier’s Digital Director remarked at the time that digital products represent an increasingly important part of passengers’ travel experience, which is why it is a priority.

The payment experience in Latin America can come as a shock to people accustomed to payments in North America and parts of Europe. The idea of installments, for instance, may be unfamiliar in other regions, where consumer credit is easy to access and popularly attached to frequent flyer programs, but is commonplace in many LATAM markets. In Latin America, very few shoppers have credit, and if they do it will likely be a domestic or regional card with no support for cross-border payments. Latin Americans who do own credit cards tend to be more affluent, but even they prefer to use credit cards mostly for larger purchases.

Fragmentation, Optimization and Alternative Payment Methods

Cash is still king in Latin America – but that hasn’t slowed down the pace of growth in mobile ecommerce. In Latin America’s largest markets, mobile adoption has grown particularly quickly: since the beginning of 2016, almost 85 million new smartphones are in use in the region, with Brazil adding more than 20 million and seeing a strong 4G growth rate. By 2020, Latin America will have a smartphone adoption rate of 71%, ahead of the global average of 66%.

Payments will be key for Latin American airlines looking to capture new market share or stimulate demand for travel. Airlines have to understand that their passengers are increasingly comfortable with ecommerce, and they want an experience that optimizes the unique capabilities of the mobile channel. To meet these expectations, airlines need solutions that can unite the selling and payment sides of travel, reduce fragmentation and inefficiency, optimize transaction flows and booking experiences, support local and regional APMs and “bridge the gap” between cash and the mobile economy across the contintent.

The mobile gap persists even as more payment service providers (PSPs) enter the Latin American market. What they find upon arrival is that unless they can support and complement cash, unless they have direct connections to local banks, and unless their website is optimized for Latin American Spanish or Portuguese, they have no chance to succeed. These are not the kind of problems that make the top of airlines’ priority list – they have their hands full with global strategy and operations – but these are the kinds of problems that can really differentiate Latin American airlines in the eyes of domestic and international travelers.

Payment Service Providers (PSPs) in Latin America

There is a huge opportunity across the entire region for innovation in travel and ecommerce, but airlines and their PSP partners must approach Latin America – and each country – on its own terms. The region requires long-term vision and investment that starts small with better ecommerce experiences, a faster and more seamless path to purchase and support for local and regional APMs. Rather than grand solutions, Latin American airlines need working relationships with new payment service providers (PSPs) to match mobile and ecommerce solutions to their local, domestic and regional needs.

Want to learn more about our work with carriers and other travel supports in Latin America and the Caribbean?  Connect with James Schildknecht at james@cellpointmobile.com.