Electronic payment methods gather steam with household shoppers
The use of electronic payment methods for consumer purchases is gaining more ground in the Uruguayan economy. According to research conducted by El Observador, purchases with credit cards now represent between 50% and 70% of payments made at Uruguayan shopping malls. This trend matches Economy ministry policies focused on formalizing and spreading Uruguay’s financial system.
Fierce competition between banks and credit agencies to sign up new consumers has led to numerous promotions and discounts on credit cards. Those promotions have in turn inspired a dramatic increase in the number of credit card users. In contrast, the number of debit card transactions has only just begun to grow gradually. The majority of Uruguayan’s are not familiar with how debt cards work.
The president of Uruguay’s chamber of trade and services, Marcelo Lombardi, explained to El Observador that in the last 10 years the population at the lowest socio-economic levels have gained access to electronic payment methods. “Access to credit cards has increased dramatically because credit businesses oriented them to those segments [of the population]. Credit has migrated from an informal to a formal system. This is a good thing because the formal system offers a series of guarantees that the informal system doesn’t”, he said.
At the same time, he explained that although for the average family debt as a percentage of income has recently increased to “26% or 27%”, it was over 50% before Uruguay’s 2002 financial crisis, and that number didn’t account for informal credit which was more prevalent at the time.
Shopping malls have emerged as one of the centers for credit card use, a product of discounts offered by companies that issue credit cards.
Rodrigo Ferreiro, the head of Montevideo Shopping, a shopping mall in Uruguay’s capital, said that after the 2002 crisis, credit cards gained ground little by little. Today they account for around 70% of the mall’s total sales. The mall offers a discount of 20% for purchases made with credit cards issued by a private bank. “Today every day more people use credit cards because they are more economical for the consumer”, explained Ferreiro.
Julio Durlacher, head of Montevideo’s Punta Carretas shopping mall reported that credit cards account for between 50% and 70% of total sales. “For certain items, like electronics, credit cards are used almost exclusive”, he explained.
Similarly, at Costa Urbana Shopping in Canelones, purchases by credit card account for between 60% and 65% of store sales. As with the other shopping malls, credit card usage varies by product reported Alberto Gossweiler, the mall’s manager.
Outside shopping malls, credit card usage is not growing as quickly. The CFO of the Multi Ahorro supermarket chain, Jose Zablaza, said that that excluding domestic appliances, total sales with credit cards have remained stable at about 30%. “We have higher percentages when there are temporary discount offered as promotions by credit card companies” he added. For items like domestic appliances,
the percentage of clients paying by credit jumps to around 50%.
This Uruguay Business Reports article is a translation of a news story that appeared in the Uruguayan Newspaper El Observador. The original article in Spanish is available here. Uruguay Business Reports translation by Donovan Carberry.
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