BIS economists isolate the impact of instant settlement, zero fees and interoperability in Peru’s rapid adoption of local digital wallets
New research from the Bank for International Settlements (BIS) finds Peru has transformed from one of Latin America’s least digitally-engaged payments markets to its fastest-growing in just five years, thanks in part to the adoption of digital wallets.
Providers Yape and Plin now account for more than 50% of all cashless transactions in the country, overtaking traditional card payments.
The BIS analysed transaction data from January 2019 to April 2024, comparing digital wallets against five other digital payment methods and cash to identify which features drove consumer preference.
Peru’s digital payment revolution rested on three factors:
- Enablers: Smartphone penetration reached 81% by 2022, while point-of-sale terminal density more than doubled from 26 to 58 per 1,000 adults.
- Catalysts: The Covid-19 pandemic accelerated adoption as social distancing made contactless payments necessary, and government subsidies distributed through digital wallets brought millions into the ecosystem.
- Design features: Yape and Plin eliminated friction at multiple points, with transactions completing in 15-21 seconds compared to over 40 seconds for traditional bank transfers. Users entered mobile numbers or scanned QR codes rather than lengthy account details, while P2P and small merchant transactions carried zero fees.
What the data reveals
The BIS study employed econometric modelling to isolate the impact of individual features, showing user sensitivity to both pricing and functionality changes.
A fee increase on Yape or Plin of just 0.01 Peruvian sol ($0.003) would shift 0.31 percentage points of market share back to debit cards and cash, demonstrating how zero-fee models have become expected as opposed to just market differentiators, and are critical to the success of local wallets.
The study modelled scenarios where core features were stripped away:
Instant 24/7 settlement accounted for 15.75 percentage points of digital wallet adoption, while point-of-sale terminal compatibility represented 26 percentage points, more than half the wallets’ current market position. Elsewhere, QR code payments drove 4.45 percentage points of market share.
With margins for success so tight, functionality restriction would trigger severe market share erosion. The data reveals digital wallet adoption depends on an optimised feature set, rather than any single innovation.
As the functionality and network for digital wallets has expanded, BIS found consumer welfare per transaction increased 68% between 2019 and 2024 – with this trend pointing upwards as more merchants and consumers adopt digital wallets.
How Yape and Plin succeeded
The success of digital wallets in Peru was not always guaranteed, however. When Yape and Plin launched as separate platforms, each controlled its own closed network, a structure which threatened to divide Peru’s digital payments market between competing ecosystems rather than creating unified infrastructure.
The central bank identified this fragmentation risk, issuing regulations in October 2022 that mandated platform interconnection by April 2023.
Adoption following interconnection was rapid, as within eight months, interoperable transactions between the two platforms reached 2.5 million daily, representing 51% of all interbank transfers by December 2023.
This uptake suggests users had been constrained by network boundaries rather than lacking demand for cross-platform transfers.
The intervention compressed what might have been years of gradual market consolidation into months, demonstrating how network effects in digital payments require regulatory architecture.
The merchant dimension
Micro and small merchants proved particularly receptive to digital wallet adoption.
Unlike card payments, where funds typically settle two business days later, digital wallets provide immediate access to received payments – an advantage for cash-constrained businesses requiring liquidity for working capital and inventory.
This instant settlement, combined with zero transaction fees for small merchants, created favourable economics for businesses operating on thin margins with high transaction volumes.
By December 2023, Yape had registered 2.7 million merchant users, surpassing the 2.4 million merchants affiliated with card schemes. By April 2024, it expanded with business accounts accepting card payments whilst maintaining competitive fee structures for higher-volume merchants.
Peru’s experience shows that payment innovation succeeds by rearchitecting transaction economics. The combination of zero fees, instant settlement, simplified user experience, and mandated interoperability created conditions where digital wallets could displace established payment methods within five years.
“The lesson from successful markets is straightforward – when core infrastructure, regulation, and market participation are aligned, adoption accelerates and the private sector can innovate on top of stable, interoperable rails,” says Carlos Marmolejo, CEO at Finsus, a Mexican digital financial platform.
For markets where cash still dominates retail transactions, the Peruvian model offers a viable template: remove friction, ensure openness, and address the working capital needs of small merchants.
Read the full BIS working paper on digital wallet adoption and welfare effects in Peru.
