Subscriptions and recurring payments: The LATAM revolution

Subscriptions and recurring payments have become the backbone of modern online businesses, providing consistent revenue streams and improving customer satisfaction. In Latin America (LATAM), this trendy business model has also gained popularity, driven by the region’s diverse demographics, rapid digital transformation, mobile adoption, and unique local payment preferences.

In this article, we explore the latest trends, challenges, and best practices for businesses looking to expand their reach in LATAM’s fast-growing subscription economy.

Opportunities in the LATAM subscription economy

The LATAM subscription economy is on a steady growth trajectory, currently valued at $20 billion and expected to nearly double to $39 billion by 2026. This significant expansion is fuelled by a mobile-first consumer base, with 80% of users accessing subscription services via smartphones. Subscription Video on Demand (SVOD) or “streaming” leads the market, with 165 million subscribers projected by 2029, compared to 110 million in 2023¹.

Yet, the path to success in LATAM’s dynamic subscription market comes with its unique challenges. Affordability concerns, fragmented payment systems, local cards and complex regulations require merchants to adopt tailored payment strategies and solutions to navigate this evolving landscape effectively.

The rise of subscriptions in LATAM

LATAM presents significant opportunities for merchants looking to capitalise on its expanding subscription economy. Cross-border e-commerce is projected to grow from $52.5 billion in 2023 to $114.6 billion by 2026, marking the region as a global leader in digital service adoption².

Consumer loyalty also sets LATAM apart. A remarkable 70% of subscribers have “forever subscriptions” they would never cancel, emphasising the potential for long-term customer relationships. While video streaming dominates, other sectors like music (over 50% adoption)¹, gaming, and fitness are growing, creating opportunities for innovative bundling solutions.

The widespread adoption of digital payment systems such as Pix in Brazil and OXXO Pay in Mexico is transforming financial accessibility. Pix is positioned for further expansion with the planned launch of its recurring payment solution in June 2025. Meanwhile, OXXO Pay provides instant confirmation for one-time payments, making it yet another valuable solution for certain transactions.

Challenges to overcome

While the opportunities are promising, there are a few key challenges merchants should consider before entering the market. Affordability is a major issue, with nearly 70% of consumers unable to afford all desired subscriptions. This sensitivity to price leads to high churn rates, with over half of users cancelling services after price increases.

LATAM’s fragmented payment ecosystem adds another layer of complexity. Real-time digital payments like Pix dominate in Brazil, while cash-based methods remain crucial in countries like Mexico and Peru. Merchants must cater to these diverse local preferences to maximise their reach.

Another obstacle is the complexity of subscription management. Many consumers are frustrated by the inability to manage multiple subscriptions in one place, contributing to “subscription fatigue.” Furthermore, approximately 20% of users resort to piracy due to the lack of convenient options, highlighting a crucial need for more streamlined solutions.Lastly, navigating the varying regulatory environments across LATAM requires careful planning. Merchants must ensure compliance with local laws to avoid operational setbacks.

Step-by-step guide to LATAM recurring payments and subscriptions for merchants

In this section, we’ve provided a comprehensive 7-step guide for international merchants to effectively navigate LATAM’s complex subscription economy. 

Step 1) Understand local payment preferences

Local cards remain the most reliable payment method for recurring subscriptions, offering the highest approval rates. In Brazil, Pix is gaining momentum, and its upcoming recurring payment capability will further expand its role. OXXO Pay, on the other hand, enables instant confirmation for one-time purchases in Mexico.

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Step 2) Optimise local card payments for subscriptions

To maximise approval rates and minimise friction, businesses should:

• Offer a range of payment/subscription plans (monthly, weekly, bi-weekly, yearly) to appeal to different buyer segments.
• Utilise tools like Card Updater or Account Updater to reduce failed payments by automatically updating expired or lost card details.
• Implement Card on File / Credential on File solutions, ensuring smooth recurring transactions with customer consent.
• Leverage Merchant 3DS exemption for fixed-amount subscriptions, reducing authentication friction after the first transaction.
• Apply a right-time model to optimise payment collection and retries, addressing issues like insufficient funds.

Step 3) Offer flexible pricing models

Merchants should adopt strategies such as mobile-only tiers, ad-supported plans, and discounts for bundled or annual subscriptions to cater to LATAM’s cost-sensitive consumers and boost retention rates.

Step 4) Simplify subscription management

As highlighted in the previous section, centralised platforms for managing subscriptions are in high demand in LATAM. Merchants can enhance user satisfaction by providing tools to modify, pause, or cancel subscriptions with ease. Features like billing transparency, reminders, and temporary service suspension options further improve the customer experience.

Step 5) Enhance security and transparency

E-commerce fraud is a growing issue in LATAM, making robust fraud prevention systems a necessity. Merchants must also ensure compliance with data security regulations and prioritise clear communication about pricing and subscription terms to build trust and reduce churn.

Step 6) Build partnerships with local providers

Collaboration with local payment processors, banks, and telcos simplifies integration and improves transaction success rates. Telcos, in particular, are valuable partners for bundling services due to their established networks and customer reach.

Step 7) Adapt marketing strategies

Tailored marketing strategies resonate with LATAM’s diverse audience. Highlighting benefits such as mobile-first accessibility and flexible payment options can drive engagement. Analytics can further refine these efforts by offering insights into consumer behaviour and preferences.

How can PPRO help succeed in LATAM’s subscription economy?

PPRO provides essential solutions for merchants looking to simplify payment integration in LATAM. Through a single platform, PPRO enables access to multiple local payment methods, including Pix in Brazil, OXXO in Mexico, and various digital wallets and bank transfers. This comprehensive coverage ensures merchants can cater to the diverse payment preferences of LATAM consumers.

PPRO’s single API streamlines the integration process, reducing operational complexity while ensuring compliance with local regulations. It also enhances the consumer experience by offering faster approval rates, secure transactions, and options for recurring billing and refunds. By leveraging PPRO’s capabilities, merchants can overcome the complexities of LATAM’s payment ecosystem and deliver seamless service to their customers.

Foornotes

1. https://go.bango-payments.com/rs/054-WXB-933/images/Bango_LATAM_Consumer_Survey_ENG.pdf?version=0&mkt_tok=MDU0LVdYQi05MzMAAAGXfajxamfGloQ8Hk35t72sbu2T50EocQyEi-BmjefO0LZ1tNaeVdaiPrOJk4OlinN1XqW9EcvoGFovLd-vdU9EfAfUkZTXo_utwpObfCgicg
2.  https://www.ppro.com/wp-content/uploads/protected/PPRO-A-Quick-Guide-to-Local-Payments-in-Latin-America-2024-1.pdf