The Shift From Cash to Digital Payments in Argentina
With its Parisian architecture, cobblestone streets, and bustling cafes, Buenos Aires is a city that has always been synonymous with charm. However, one aspect of its culture has remained stubbornly old-fashioned: the use of cash.
One of the most significant areas where cash use has been prevalent is gratuities at eateries. While it’s legal to tip up to 15% on a debit card, this practice is rarely seen. As a result, customers often carry large amounts of cash to leave as tips, given that the country’s largest denomination banknote was until recently just 2,000 pesos (about $1.50).
A Digital Revolution in Tipping
However, tipping in Argentina is finally going digital. This shift has been fueled both by a surge in financial technology and a proposal from President Javier Milei to revamp the economy.
E-commerce giant MercadoLibre Inc.’s payments unit, Mercado Pago, has developed a new feature in its popular app specifically for tipping. According to a report from the Inter-American Development Bank, this update reflects how fintech has been incorporated into Argentina’s cash-heavy economy, with the number of fintech firms increasing from 72 in 2017 to 312 in 2020.
Enabled by Fintech, Supported by Legislation
The move towards digital tipping has been uneven but growing, with some servers sharing their personal Mercado Pago alias for tips, similar to how Americans use Venmo or Zelle. “The spread of digital payments and decline of cash use started to negatively impact the amount of tips waiters received,” said Agustin Onagoity, senior director for Mercado Pago Argentina.
Meanwhile, President Milei plans to propose a law to formalize tipping on credit and debit cards. His government is also working to enable commuters to pay for public transport with QR codes or a card, similar to systems in New York or London.
Challenges and Benefits of the Shift
Despite these advances, cash — particularly US dollars — continues to thrive in Argentina. However, there are clear signs that the reign of peso banknotes is dwindling, with cash payments at supermarkets dropping from 36% in early 2020 to just 17% in May.
Pedro Filippini, a barista in Buenos Aires, accepts tips via his Mercado Pago account. He claims that tips tend to be more generous on the app, averaging around 1,000 pesos, compared to cash tips, which are usually whatever bills a customer has on hand.
However, Filippini acknowledges the challenges of digital payments, particularly for those struggling to make ends meet. With the rise in cell service prices, he often runs out of data before the end of the month and relies on WiFi to access his Mercado Pago account. “If you’re out in the street without mobile data, you can’t count on Mercado Pago,” he said. “Cash will always be indispensable, but Mercado Pago has had a lot of success because it truly offers a lot of advantages.”
