Insights 14 August 2020 By: Howard Blankenship

Apple Pay in Mexico: a key opportunity for airlines and travel brands

This year, Mexico will become the second Latin American country to offer support for Apple Pay, after Brazil. It's another step in Apple's global expansion, following the hugely popular payment method's launch in over a dozen European countries last year. Apple Pay now accounts for 5% of all card transactions worldwide – and projected to grow to 10% in the next five years.

The ability to access Apple Pay is a clear benefit to iOS users in Mexico who have been waiting for a feature their neighbors to the north have enjoyed for years. It also represents a massive opportunity for consumer-facing businesses serving the country and the broader Central American region, especially airlines, travel companies, and transportation providers.

Airlines and travel brands that want to tap into the Mexican domestic market, expand their reach internationally, and provide their customers with alternative methods of payment (AMOP) they expect should consider adding Apple Pay to their digital payment mix.

The Opportunity in Mexico

The Mexican ecommerce market is currently worth $22.6 billion, and growing at 28.3% annually. Travel purchases make up 30.2% of that spending, or about $6.8 billion. How much of that overall volume will flow through Apple Pay is still unknown, but deployments in other regions suggest it will be significant.

Mexico may have higher initial Apple Pay adoption rates than comparable countries. That's because consumers in Mexico are already primed for digital wallets. At 17%, they're the second-most used payment method for ecommerce. Next year, that's projected to grow to 27.7%. Coupled with the fact that three of the four largest commercial banks in the country – BBVA Mexico, Scotiabank Mexico, and Santander Mexico - already support Apple Pay in other markets, the availability of Apple Pay could spike immediately. With nearly 48 million account holders in Mexico, there will likely be a surge in demand for companies to support this APOM.

Demand may also be driven by a well-established fear of credit card fraud in Mexico, making consumers hesitant to store their card details at the merchant level. According to the most recent National Survey of Financial Inclusion, half of all Mexican consumers report never or rarely saving their bank information with a merchant for future purchases, and 60% say they do not have confidence in giving their banking information online. Apple Pay, which encrypts card details at the device level and requires authentication (often biometric) to complete a transaction, alleviates consumers' fear of fraud. This in turn enables faster, frictionless repeat purchases for merchants, including travel brands.

And because airlines and travel brands also struggle with abandoned transactions in their digital channels, mainly due to insufficient or inconvenient payment options, incorporating Apple Pay into a user-friendly checkout flow can help meet this demand while simultaneously boosting revenue and trust.

Mobile and Digital Payments in Latin America

Supporting Apple Pay and other AMOPs isn't just a revenue driver in Mexico. Digital and mobile payments were already on the rise across Latin America, and the launch of Apple Pay will contribute to this upward trend. The share of online transactions conducted on a mobile device in Latin America is now 58%, outpacing both North America and Europe. Mobile wallets are used frequently in the region, too; 34% of Latin Americans report using mobile wallets for transactions according to ComScore, compared to 22.5% of Americans and Canadians.

There are a variety of factors that contribute to the widespread use of mobile and digital payments in the Latin American region, including a relatively low card penetration rate and a higher than average rate of smartphone ownership. But the important takeaway for airlines and travel brands isn't why consumers prefer these payments. It's how they expect to transact. Any airline or travel company in Latin America should be ready to meet those expectations.

The COVID Coefficient

Our 2019 report on digital commerce and payment trends in Latin America predicted the growth of AMOPs throughout the region, particularly in the travel sector. The coronavirus pandemic may be accelerating this trend, as Latin American consumers turn to mobile wallets as a safer, contactless method of payment.

There's also good evidence that consumers' preference for digital payments globally will persist even as the pandemic abates. In Latin America, where AMOP use is already on the upswing, this is an important development. Airlines and travel brands should seize the moment and get ahead of this positive growth trend.

The state of Mexican ecommerce, broader Latin American regional payment trends, and the impact of COVID-19 all point to a successful launch of Apple Pay in Mexico. More importantly, the success airlines like Southwest have had with incorporating Apple Pay into their payment mix proves that airline passengers will embrace new payment methods when they're available to them.

Integrating Apple Pay represents an ideal opportunity for airlines and travel brands to gain market share and meet their passengers' expectations. Passengers want more flexibility and options, and everything possible to make travel easier. More than ever, we should help make that a reality.

Learn more about we support airlines to offer more payment methods through our Velocity Payment Orchestration Platform.