The state of SaaS in Latin America and Africa
Africa and Latin America are the fastest-growing SaaS and cloud markets in the world and should reach USD 1 trillion by 2026.
João Paulo NotiniJanuary 03, 2023
Latin America and Africa are the fastest growing SaaS & Cloud markets in the world, and it is time to uncover the unparalleled opportunities for global techs selling there.
A potential trillion dollars industry pushed by Africa and Latin America
The software as a service (SaaS) and cloud industries definitely have huge growth potential. Currently valued at almost US$ 500 billion, they should increase at a CAGR of 21% through 2026 and reach US$ 1 trillion by that year. Yet, growing economic regions and, to be more specific, Africa and Latin America (LatAm) are the fastest-growing ones with a CAGR of 25% and 28%, respectively.
SaaS/Cloud, CAGR 2021-2026 – Africa x LatAm x World
As small and medium enterprises increasingly digitized and broadband access grows, big tech companies have eyed LatAm, Africa, and other rising markets, looking for untapped opportunities. Thus, let’s look at the scenario in these two regions and uncover payment solutions for global SaaS & Cloud companies selling and reaching more opportunities there.
“It’s clear there is a real opportunity to help organizations in every industry to use digital technology to overcome today’s challenges.”
Satya Nadella, Microsoft’s CEO, during a recent earnings call.
Latin America’s SaaS & Cloud Market
Regionwide, Latin America is the fastest-growing SaaS and cloud market in the world, pacing at 28% per year through 2026, according to EBANX calculations, based on IDC and Statista. This is seven percentage points higher than the global average of 21%.
With a US$ 20 billion market value, the region is strategic for global companies to keep growing and to compete for more market share, with titans such as Google, Microsoft, Meta, Intel, Apple, and many others having offices in Latin American countries.
When we look at the cloud industry alone, the B2B market dramatically contributes. As per EBANX’s annual study, Beyond Borders, 80% of LatAm’s cloud market is now B2B. In this case, the average contract value is USD 45,000 per year, according to the KBCM Private SaaS Company Survey.
“The cloud computing segment is seeing increased revenues.”
Gadjo Sevilla, Senior Tech Analyst for Insider Intelligence
Africa’s SaaS & Cloud Market
As seen previously, Africa’s SaaS & cloud markets are the second-fastest growing in the world (CAGR 2021-2026 of 25%), right behind LatAm. Besides being the fastest-growing digital industry in the continent, they are above the global average growth and represent an important channel for business and innovation in the region.
Although these industries were valued at US$ 3.1 billion, in 2021, SaaS and cloud companies in Africa should reach US$10 billion in sales by 2026, pushed by the digitization of SMBs, the rise of data centers, and more access to broadband in the region. Moreover, global techs such as Google, Microsoft, Amazon, WordPress, China Telecom, and others are operating there and taking opportunities of an infant yet very promising market.
Africa’s SaaS/Cloud TAM 2021-2026
“Africa is poised to leapfrog other regions. We built the foundations, and we’re now at an inflection point for the rapid explosion of digital commerce and financial services.”
Derin Adebayo, Global Lead of Access to Capital at Endeavor, in a statement to Beyond Borders 2022/2023.
Solving the critical roadblocks to selling more SaaS solutions in rising economies
The international expansion of SaaS and cloud businesses is more accessible than other industries, as per Ariel Patschiki, Chief Product Officer and partner at EBANX, in a statement to Beyond Borders 2022/2023.
“SaaS is not an industry focused on one country only; it is global by nature,” said Patschiki. “You can have three developers in Israel selling software to the world. It is easier to expand internationally; it doesn’t require physical infrastructure, and the business is actually designed for global scaling from the beginning – which is likely to garner more investment to accelerate expansion.”
In growing economies, such as Latin America, an outstanding practice, which is performed by many SaaS companies, is expanding cross-border on a test basis. This means entering new markets without localizing products or services at first or offering payment options in local currency. “They test the waters to see if the market has any traction,” said Patschiki. “Only then do they decide to go for it.”
B2B mega payments and alternative payment methods
We have seen that, in LatAm, for example, the B2B market accounts for a significant share of the SaaS and cloud industries. As cloud computing evolves and business digitization becomes more widespread in the region, companies started facing a new challenge: how to process and receive high-ticket payments online.
According to our Beyond Borders study, at least half of the purchases in these industries are paid manually through invoices and account-based transfers – many of them in foreign currency (bank swift), representing a significant burden for suppliers and customers.
Both companies and end users demand more transparent, faster, and simpler billing options and more competitive rates. Since billing requires manual processing, complex tax burdens, and a growing effort from internal teams to support and manage payments, they had to seek an alternative solution. It is time for alternative payment methods (APMs)!
“Payments are both the biggest roadblock and driver for SaaS and cloud companies to grow in Latin America. Alternative payments might make the difference here.”
Ariel Patschiki, Chief Product Officer at EBANX, in a statement to Beyond Borders 2022/2023.
With the evolution and digitization of APMs in LatAm and Africa, paying online has become more frictionless, instant, and readily available. Across these regions, several instant payment initiatives, such as Pix in Brazil, PSE in Colombia, NIP in Nigeria, and RTC in South Africa, are increasingly popular and being used for high-value transactions. Additionally, recurring payment solutions via digital wallets effectively improve B2B high-ticket sales, which might be helpful for subscription services or even annual contracts paid in installments.
Last but not least, companies should be aware that innovative regulations, such as the eFX in Brazil, enable financial institutions to process foreign-exchange transactions up to USD 100,000 with immediate settlement.
The time of growing economies such as LatAm and Africa has arrived for digital businesses, especially the ones in the SaaS and cloud industries. You are now aware of their potential as the fastest-growing markets in the world and how alternative payment methods (APMs) play a crucial role in enabling more sales in these places.
For B2B or B2C companies, including high ticket transactions, billing doesn’t need to be manual and burdensome. Several successful digital APMs, including instant payments and digital wallets, emerged and became popular.
Both businesses operating in, and customers from Africa and LatAm, seek these methods for a more transparent, faster, and simpler way to deal with payments. Despite being the key to driving growth and access in the SaaS industry in rising economies, innovative regulations such as the eFX in Brazil should also push new payment solutions.
Are you eager for more critical insights and valuable data about the SaaS, cloud, and other digital industries in Latin America and Africa? Then, check out the fourth edition of Beyond Borders – EBANX annual study.
You will have the chance to get to know all the ultimate digital commerce and payment trends in growing markets, supported by fresh data and influential industry experts’ statements.
By reading it, you will track down the following:
- The vast advance of cross-border in Latin America
- Africa: a hyper-growing, mobile-driven digital market
- Alternative payments in rising economies
- Leading verticals growing double-digits
- The Latin American SaaS & Cloud boom