Financial Cards and Payments in Colombia

COVID-19 impact on consumer payments

The change in credit conditions in the current situation has generated three distinct new trends in the financial cards and payment market: a drop in demand; a loosing of lending criteria; and a greater perception of risk by lenders.

COVID-19 country impact

On 6 March, the first official case of Coronavirus in Colombian territory was confirmed. Following the advice of experts and the measures taken in other countries, from 24 March, all non-essential business in the country were closed, schools were closed nationally, and the airport was restricted by domestic and international flights.

COVID 19 inspires changes in consumer habits and openness to new types of payments

The need to reduce physical contact with other people to safeguard one’s health during the COVID-19 pandemic has raised awareness among the Colombian population of a wider range of non-cash payment options. Supporting this during the year were two initiatives that the Colombian banking sector had previously been building gradually: the development of virtual payment methods on one hand; and the implementation of virtual banking channels on the other.

The COVID-19 pandemic encourages an increase in informal financial activity

One of the less favourable impacts of the COVID-19 pandemic on the Colombian financial services sector is that it has boosted demand for potentially problematic forms of informal credit. These are collectively known as gota a gota (literally “drop by drop” in English), and comprise mainly informal loans extended by private individuals very quickly, without much in the way of scrutiny of the ability of the borrower to repay the loan and without any guarantees or co-debtors.

Increase in banking penetration above expectations

Colombia is prominent among several Latin American countries that have developed new monetary transfer policies in response to the economic pressures created by the COVID-19 pandemic in the official response to it. The money orders that the National Government and the Mayor's Office of Bogotá have delivered to vulnerable families during the pandemic in an effort to ease financial distress and ensure that the wheels of the wider economy continue to turn have been very successful.

What next for consumer payments?

Sources within Colombia’s financial services sector have consistently expressed their belief that the country’s emergence from the COVID-19 pandemic and the adverse economic impact of the pandemic is likely to be very measured. Specifically, consumers are expected to remain circumspect when it comes to spending for extended period, having learned hard lessons about maintaining a financial safety net amidst the economic chaos of 2020.

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