25 Jul 2019
Posted in Banking
Financial instability and hyperinflation are driving a shift to electronic payments in Venezuela, says GlobalData
Venezuela is currently undergoing an economic crisis due to declining global oil prices, over-reliance on oil exports and the government’s restricted fiscal policy. Amid political and economic turmoil, non-cash payments in the country are growing rapidly, with payment cards leading the way, says GlobalData, a leading data and analytics company.
The company’s report, Payments Landscape in Venezuela: Opportunities and Risks to 2022, reveals that card payment transaction value recorded a staggering compound annual growth rate of 439.4% between 2014 and 2018.
Sowmya Kulkarni, Payments Analyst at GlobalData, comments: “Hyperinflation, depreciating local currency and the resulting cash shortage have made it inconvenient for Venezuelan consumers to conduct cash payments, as doing so requires carrying cash in bulk. Subsequently, consumers have been forced to migrate from cash-based transactions to card payments, thereby resulting in a significant rise in payment card usage in the country.”
In addition to payment cards, to promote electronic payments, the government introduced ‘Billetera Móvil’ mobile app in January 2018. The app enables individuals to pay for subsidized food products from local supply and production committees using their Homeland identification card.
Venezuela also introduced the country’s own digital currency, the petro, which is based on national petroleum reserves, in February 2018. Using the virtual currency, individuals can pay for fuel, air transport and tourism services. To promote the cryptocurrency, President Nicolás Maduro ordered the country’s largest bank, Banco de Venezuela, to accept transactions in petros in each of its near-790 agencies across the country.
Kulkarni concludes: “The increasing Increasing number of bank account holders, rising adoption of cashless payments, improved payment acceptance infrastructure and hyperinflation are anticipated to further drive electronic payments over the next three years in Venezuela.”