This year the gaming industry has managed to recover in full, and there is no better closing of sales at this time of the year than with the FIFA World Cup in Qatar 2022.
After two very difficult years the industry has been facing due to the COVID-19 pandemic, this year’s closing balance is expected to be positive for most companies in various gaming sectors, especially in iGaming, due to sports betting. As we already know, football is the most popular sport enjoying the highest share of bets, followed by esports, casinos, slot machines, roulette, poker and others. At the same time, we observe that players are actively returning to offline gambling – casinos, racetracks, bingo and others.
It is very important to note that in response to the COVID-19 pandemic the LATAM gaming business started to develop an omnichannel strategic framework. Before the pandemic, the main sales channel was traditional retail through a network of betting shops, with cash being the main means of payment preferred by gamblers. What is more, before 2020 digital transformation, digital payment methods, and financial inclusion had been very slow and scarce in the region.
Today, after the pandemic, we live in a new reality in which business models and commercial strategies are no longer tied to retail. The digital transformation taking place in the region alongside with a wider use of mobile Internet, non-banking digital payment methods, and alternative payment methods, have created a new digital ecosystem, bringing significant progress to some countries.
According to the market research and data provided by international consulting companies specialising on Latin America, digital payment methods account for 54% in the region, while cash is used by 46% of consumers. It is also important to note that the growth and mass adoption of digital payments in the region has been uneven. However, these are average figures that should be taken into account.
The payments digitalisation trend will continue to grow in the coming years, while the use of cash will continue to decline. Our region has over 300 million bank account holders, over 90 million credit card holders, and, last but not least, over 200 million people using banking services but not having credit cards or bank accounts.
Due to the penetration and spread of digital payment methods, Latin America should no longer be considered a ‘non-banking’ region. This digitalisation trend is led by such countries as Chile (97%), Brazil (96%), Argentina (95%), Colombia (90%), Uruguay (84%), followed by Mexico (58%) and Peru (53%). According to the VISA and Mastercard LATAM reports, the use of credit and debit card payments grew by more than 40%, and the number of network sales outlets increased by 30%. In the ecommerce segment, credit card payments accounted for 53% in 2021.
Important is the fact that the use of smartphones and mobile Internet averages 75% in urban 4G LTE networks. The most popular social networks are TikTok, WhatsApp, Instagram, Facebook, and YouTtube. Another very important aspect is the beginning of 5G networks rollout in such countries like Chile and Brazil, expected to continue across the region up to 2026. The new networks bring faster internet connectivity and better services in streaming, games/bets and ecommerce applications, which are the three sectors projected to grow most in the coming years.
This year we had the opportunity to participate in major gaming industry events in the region, in particular in such countries as Colombia, Brazil, Argentina, Chile, Peru and Paraguay. We observed achievements in digital transformation, digital payment methods, financial inclusion, and 100% reactivation of every gaming sector, with iGaming being the fastest growing. Player age profiles range from 20 to 45 years old, mostly male, with a growing share of women in a similar age range.
In addition to the gaming industry recovery, Colombia saw an increase in exploitation rights proceeds for the health sector, a success of the Raspa&Listo (Instant Lottery) games in their first year of operation, with sales exceeding 80 mln USD. Based on our preliminary analysis, we believe that the Colombian market is ready for the introduction of innovative games. We believe that sales of such games can exceed 300 mln USD a year during the next five years, boosted by diversification of game portfolio, increased payouts, introduction of Scratch & Ready virtual games into the online channel where users can play with their smartphones and erase virtual tickets by swiping the screen.
Latin America has everything that is needed to ensure growth and development of all markets targeted by iGaming companies during and after the pandemic. Today, we observe two types of companies. First of all, it is fully online iGaming companies that have achieved significant growth on the markets where they operate. Secondly, and more importantly from our point of view, it is the companies that used to work via the traditional retail channel with minimal online involvement. Due to the pandemic, they had to drastically adapt and transform to include online capabilities into their business strategies and adjust their business plans accordingly. These companies have now found synergy between the online channel and traditional retail by developing an omnichannel business model that is ideal for the gaming sector in Latin America.
Due to the exponential growth of online iGaming, the regional governments intend to impose regulations to streamline and control gaming operations, as well as to leverage necessary resources through exploitation rights. Being on the region’s political agenda, certain regulation projects were imposed in Argentina and Peru in the period from December 2021 and August 2022.
In Argentina, we observe a positive market regulation evolution and a continuous regulatory process going on in every province. In Peru, on 2 December 2022, the regulator (MINCETUR) closed the period for submitting proposals for the draft technical regulation to govern sports betting and online gaming. The law is expected to come into force in March 2023, and national and international companies interested in this market must initiate legal, technical and financial processes to procure a licence.
In other countries, for example Chile, there has been a heated debate concerning sports betting and internet gaming, and we see certain bans and restrictions, such as relating to sports betting advertising on football jerseys, broadcasting sports events on radio, television, streaming, and others, with municipalities taking respective measures to control and close gambling and betting rooms. From our point of view, there is a legal vacuum in the country (as in most countries in the region where there is still no online gaming and sports betting regulation), which does not prohibit sports betting and online gaming. What we do notice is that there are outdated laws not aligned with the current state of the gaming industry.
We also note that there is an important unattended and unprotected market segment which, as a result of evolution or out of need, goes to bookmakers and unregulated gambling rooms due to the reason that, as I have already mentioned, the Chilean state policy lacks proper regulations that would foster market development and maturity.
As far as Brazil is concerned, this year we have witnessed a strong political debate in the congress with differing positions, mainly from the opposition sector made of religious groups allied to President Bolsonaro. However, since it was the year of election, it was difficult to achieve progress with the sports betting law.
With regard to Paraguay, we believe that it is an emerging market for the gaming industry with a lot of work to do and a potential to grow in the coming years. We have seen the efforts of business associations and gambling companies to move the sector forward, but in the last three years they have not seen any support or guidance from the regulator (CONAJZAR). The Paraguayan market needs transparent laws to streamline access and foster free competition. This is the basis to enable the industry to make a technological leap through introduction of cutting-edge innovations.
What is more, we observe that crypto is gaining momentum in Latin America. In 2021, the number of crypto purchase and sale transactions in Brazil amounted to 38 bln USD, with some developments also taking place in Venezuela, Argentina, Colombia, Peru and Mexico.
Cryptocurrencies are making much headway in the digital economy of the region, and, according to some international studies, 8% of the region's population has already bought some kind of cryptocurrency, while 18% of the population is ready to buy it. The main reasons include economic instability, inflation and depreciation of the currencies of such countries as Venezuela and Argentina. Many of those who bought cryptocurrencies did so out of curiosity among other things, and as an alternative method of making savings (54%).
According to statistics, 40% of cryptocurrency holders in the region do not have a bank account. Such countries as Brazil, Argentina and Panama are considering the need to regulate the use of cryptocurrencies. Based on the reference data, the share of crypto games and crypto players in the gaming sector will also grow in the coming years, so companies should be ready to provide attractive gaming platforms and portfolios for crypto players whose profile is now very different from traditional. These are very tech-savvy players who won’t spend time on the games which they don’t find appealing or which fail to grab their attention.
We expect that in 2023 the sector, supported by the digital ecosystem that we have described above, will continue to grow and consolidate around the omnichannel commercial strategy, increasingly empowering the online channel, attracting traditional retail players and new customers by diversified portfolios of multi-segment games catered for specific player profiles.
In terms of regulation, we hope that in Peru the respective law will come into force in 2023 to initiate development of the Peruvian market. Similarly, we hope that the new government of President Lula da Silva and the new congress will finally come to a consensus and be able to approve the sports betting bills in order to promote the development of the main market in the region, and obtain important resources for the state in the coming years.
In the case of Chile, we hope that in 2023 the draft regulation will become an important point of the political agenda of the country whose priority is to change the constitution.
As far as Paraguay is concerned, we hope that in August 2023 the new government will appoint a new regulator who will start a new regulatory initiative, which will contribute to the development of the Paraguayan market in the coming years.
We also hope that our industry will continue to be resilient not only to pandemics, but also to the political ups and downs in the region.
Jonathan Daniel Felix Vilchez
International executive with 20+ years of experience in the gambling industry in Latin America, currently serving as Regional Business Development Manager in LATAM of the international iGaming firm SOFTSWISS. He was part of the international staff of companies operating in Peru. In addition, he has advised companies based in the US, Europe and Asia on business development and projects in Latin America. He is CEO of Global Business Company de Perú S.A.C. https://globalbusinesslatam.com/, a Peru-based company specialising in consulting and business development in gambling, financial and additional services.