Regional Focus

The future is instant: how partnerships and purpose are driving Latin America’s payments revolution

Published: Feb 2023

Citi’s Steve Donovan has seen instant payments take off in Latin America. He describes why eradicating cash usage is one of the biggest opportunities for financial institutions, businesses and society.

Steve Donovan

Latin America Treasury and Trade Solutions Head

In recent years, instant payments have exploded across Latin America, supported by new technology like embedded QR codes, extensive bank API (Application Programming Interface) inventories and e-wallets. The unbanked are moving into the formal economy and cash use is steadily falling encapsulated by flagship innovation like Brazil’s Pix, the Central Bank’s instant payment scheme, only launched in 2020 and now processing around 2.5 billion transactions a day.

Elsewhere, mandatory open banking regulation that permits financial institutions to share customers’ financial data has allowed non-traditional banks to participate in the financial system, fuelling growth of the fintech sector. Central Banks are laying the foundations for digital currencies and venture capital is pouring into the region. According to the Association of Private Capital Investment in Latin America, LAVCA, venture investment reached US$15.7bn in 2021, more than three times 2019 levels and more than the previous ten years of venture investment combined.

“We have seen incredible progress in the last few years,” says Steve Donovan with a ringside seat on the pace of change as Citi’s Latin America Treasury and Trade Solutions Head for the last eight years. “I would say Latin America has not just caught up with the rest of the world, it’s actually leading in many aspects,” he enthuses, listing the multiple digital payment rails Citi now offers clients from supporting regional businesses to sell directly to end-consumers by automating payment journeys and eliminating the need for cash, to offering real time digital payments to employees in the gig economy, paying them straight into digital wallets or bank accounts.

Globally, Citi’s annual technology spend on Treasury and Trade Solutions is around US$1bn, ploughed into improving the bank’s existing payment pipes, building out instant payment infrastructure, and investing in Citi’s APIs and front-end client connectivity. State of the art products include CitiConnect®, its API connectivity platform which houses one of the region’s largest portfolios of APIs, supporting clients with a 24/7 exchange of transactions and data.

Most of Citi’s clients already use APIs and Donovan predicts the next wave of investment will be in enterprise resource planning, ERPs. Witness Citi client Rappi, one of Latin America’s largest online delivery groups, recent adoption of an API solution providing ERP connectivity to enhance visibility and control and make use of multicurrency options in some markets. Rappi’s treasury function can manage payments from initiation through to proof-of-payment and back in 2021 the company processed around 900 payments per minute (up from 150) across the nine countries it operates in the region while a centralised and centrally funded treasury has transformed transparency and efficiency.


Citi has never perceived Latin America’s vibrant fintech scene as a threat. Across Latin America, their success and growth directly benefit the bank’s own commercial banking operations. In addition to being clients, fintechs are also valuable collaborators, working together with Citi on new technology and ways of doing things. “When you are open to engaging with non-traditional financial services you can learn a lot,” says Donovan. “It’s mutually very beneficial.”

Fintechs’ expertise centre around developing so-called last mile payment solutions – completing the final leg of a digital payment towards consumers. Such is fintech’s expertise here, Citi has reduced some development of its own last mile solutions and Donovan spends much of his time overseeing fintech pitches and meeting entrepreneurs in different countries, understanding their technology, and exploring commercial agreements around last mile collaborations that include equity investments in some companies. “I meet with many fintechs assessing their ability to supplement and add value to services we already have on the platform or assessing if they have something different. I love the insight the process offers and the access it gives to the next generation of professionals.”

The collaboration model flourishes given fintechs are typically vertically focused and highly skilled at one thing, he continues. In contrast, Citi’s expertise is horizontal, able to do a myriad of different things. In this way, fintech expertise adds to what the company has and what it needs to build in the future.

Citi doesn’t insist clients only conduct business via its own proprietary channels. It offers corporates the opportunity to use alternative payment technology sitting on its platform whether fintech or from another financial services group according to what best suits them. The bank is like a conductor, keeping the orchestra in time, leading, listening, and interpreting the payments ecosystem on behalf of clients and their underlying consumers, explains Donovan. “We conduct the orchestra for the betterment of our corporate clients and their underlying consumers in any given marketplaces,” he says.


Citi’s collaboration with fintechs in last mile solutions also speaks to the bank’s other key priority in Latin America: helping build financial inclusion. According to statistics from Finnovista, the innovation and venture start-up group, 36% of fintech start-ups in the region offer products to people excluded from the formal economy. Citi sees its aim beyond just offering commercial banking, says Donovan for whom this part of the job is most thrilling.

The firm’s overarching purpose is to support financial inclusion and help grow Latin America’s formal economy spurring economic growth and employment creation, he says. “We want to be leading advocates of change and are able to promote more awareness in support of the unbanked and under-represented populations across the region. We are vocal with bank associations and regulatory authorities,” he says.

It leads him to reflect how a central tenet to the pace and scope of Latin America’s payments revolution has been a conducive regulatory environment. “In the past, regulators could be somewhat hesitant, but this has now come full circle and there is an insatiable appetite to modernize financial services and adopt change,” he says. Most recently this is manifest in innovation around Central Bank digital currencies issuance like Brazil, who have been exploring the feasibility of a digital Real, and Uruguay which is also working on a pilot for the e-peso, a digital currency powered by its Central Bank. Elsewhere a number of countries across the region are exploring similar paths. Tokenisation already exists in varying forms, however now systemic CBDC (Central Bank Digital Currency) architecture supporting one technological framework is under serious consideration, says Donovan.


Despite the rapid financial markets progress of recent years, there is still much to be done to develop the digital economy. Most important is developing a new Financial Market Infrastructure with the proper incentives framework to drive financial inclusion, reduce costs and dependency on cash. “Persuading small shops to ditch cash payments will require careful carrot and stick,” says Donovan. According to the World Bank’s Global Findex report, six out of ten people who remain unbanked in Latam say that financial services are too expensive. Moreover, banked people remain slow to use digital payments. Despite having bank accounts, an estimated 81 million adults across Latin America continue to pay for their utilities in cash while 150 million banked adults made cash only payments to merchants in 2021, including more than 50 million adults in Brazil and 16 million adults in Colombia. “The other side of the coin is that the informal economy accounts for ~70% of employment depending on what country we are looking at. Many of the people in this part of the economy who use cash at the point of sales either don’t have access to a bank account or receive higher value from the small shop owners when using cash,” added Donovan.

Another pain point is managing corporate clients’ expectations regarding the slow and often tough journey to achieving real time payments. With the miniaturization of payments and the fast-growing digital economy, corporates want “immediacy, visibility, control, reliability and security” but this won’t happen overnight, he says. Upgrading the Enterprise Infrastructure to a modern API stack and building a Platform Business is key but it requires a coordinated effort across the treasury and the commercial area of the corporate clients. “What we are seeing in this new model is a merge of vertical business processes that allow for direct interaction with the end consumer,” he says “This is a significant Digital Transformation shift of the corporate traditional businesses model. On the other hand, ensuring robust cyber security and digitized KYC (know your client) remain enduring challenges for financial institutions who have this in the highest priority of technology investments.” The cost of instant payments also needs to fall as the new Market Infrastructure becomes mature and adopted, Donovan adds.

Still, any frustration at the pace of change is outweighed by the opportunity. The growth of fintechs in the region who are connecting the last mile to the unbanked, is bringing significant flows from the informal to formal economy increasing banks’ liquidity, credit and reducing the cost of cash handling. This coupled with the modernization of the Financial Market Infrastructure, processing opportunities whilst benefits for companies spanning efficiencies, transparency, and control to reaching a whole new customer base. For Latin America’s social economic prospects, digital payments offer the holy grail for growth and improving lives of millions of people, Donovan concludes.

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