Colombia is a country with a very high informal economy. This is one of the reasons why, culturally speaking, paying cash is the preferred method of payment for Colombians. Added to this, costs, low acceptance and perception of insecurity lead Colombians to avoid electronic payments. Multiple factors contribute for these payment decisions, according to a Bank of the Republic survey, “How do Colombians pay and why?“.
For users, cost-effectiveness is essential when it comes to the use of electronic channels. Therefore, Colombians opt for the mechanism that has the lowest possible cost. In this scenario, cash emerges ahead of other payment methods. One piece of research that illustrates that this is not a simple statement is the fact that 97% of daily purchases of Colombians are made in “cash money.”
Other reasons for this behavior is the small acceptance of the electronic payment methods for the trading due to the costs and taxes associated with them, as well as the lack of confidence of the users in technological resources, since they find cash payments, effective and widely accepted, easy and quick to use, besides being convenient for controlling expenses.
In part, this explains why only 3% of Colombian expenses are charged to cards (debit or credit). On the other hand, merchants’ acceptance to receive payments via cards is low due to high access costs and higher tax bill expectations.
The Bank’s research also points out that there are at least five barriers for electronic transfers to take over cash operations in Colombia:
- Pre-registration and authentication processes: to avoid fraud, companies require that the accounts with electronic transfers must have a pre-registration and validation;
- Money movements are not always recorded in real time: when the transaction is carried out between two different banks, a reasonable amount of time passes until the clearing and payment takes effect, this is the reason why people prefer to use money.
- Transaction Costs: users often complain about transaction costs, since a fee usually must be paid when the transaction is made between different cities and banks.
- Financial Inclusion: to be able to make electronic transfers, it is necessary to have an account in a banking institution, which is still not widespread in Colombia.
- Financial education: economic literacy for users to lose their fear of eletronic banking operations and institutions should design mechanisms to make transactions simpler.
Given this scenario, having a partner that conveys security to sellers and buyers regarding payment methods directly can provide the development of the business. BoaCompra, for example, offers all locally issued credit cards in the market, for real, including Exito, a local card from Colombia. Even in transfers and banks, BoaCompra has the best coverage for local banks to make it easier for your users to pay in Colombia.