Despite this progress, Latin America still trades less than many other regions in both goods and services. This underperformance is in part due to the current state of cross-border payment systems. They also involve many intermediaries creating an overall fragmented progress. 

Historical attempts to improve regional payment systems have had limited success, often due to financial instabilities. However, improving cross-border payments is crucial to boosting economic growth in the region – and recent efforts are helping make this happen. 
 

The challenges:   

One of the key challenges is the percentage of the population who remain underbanked or unbanked – across all of Latin America only 51% of adults have a bank account. As a large proportion of the region's population lack access to traditional banking services, they rely on cash transactions. This reliance makes it difficult for them to send or receive cross-border payments through formal channels. Instead, they tend to go for riskier options.  

Disparate infrastructure can also present challenges for cross-border merchants when deciding how is best to facilitate payments on a country-by-country basis. While some countries, such as Brazil, Mexico and Chile, have robust infrastructure and good internet accessibility – meaning good, reliable payment processing systems – others, such as Guatemala, do not. This requires merchants to tailor solutions to each country individually if they want to facilitate cross-border transactions effectively. 

Regulations also vary across the region with each country having its own set of rules and regulations governing cross-border payments, resulting in a complex regulatory landscape. Some countries like Brazil are making progress. In 2021 the National Monetary Council (CMN) and Central Bank of Brazil (BCB) approved a series of measure to simplify receiving and remitting international payments. The New FX Legal Framework was introduced at the end of 2022 aiming to modernise Brazil's foreign exchange market, reduce bureaucracy and facilitate transactions for both individuals and companies. However, many nations still lack specific regulations for cross-border payments, creating uncertainty and potential barriers for businesses.
 

On the regulatory front, there are encouraging signs of progress towards greater harmonisation across Latin America. The Open Finance Framework (originally a legislative proposal from the European Commission) has evolved from an EU concept to a reality in Latin America - with countries like Brazil, Chile and Mexico leading the charge by implementing its regulations. Other countries across the region are recognising the need to update their regulatory frameworks to accommodate the evolving landscape of cross-border payments and in the process of adopting the framework or considering its implementation. This will simplify and automate Know Your Customer (KYC) processes and help facilitate cheaper and faster cross-border transactions. 

Great progress has been made in the Latin American region so far; however, there is still a way to go. New technologies are having a significant impact on the accessibility and improved efficiency of cross-border payments, but Latin American governments must commit to complete regulatory harmonisation. Only an integrated approach with a more interconnected payment system can facilitate more efficient cross-border payments across the region – which is vital for boosting economic growth, international trade and financial inclusion.