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The Cards and Payments Market in Brazil | yStats report

yStats Report | Brazil is one of the world's largest card payments markets, where 687 million cards are currently active, and the market continues rapid growth while undergoing fundamental change. 

 

How competitive is the card and payments market in Brazil?

The ending of exclusive acquiring agreements with the two major international card networks, Visa and MasterCard, resulted in declining merchant discount rates and increasing competition. Further, retailers are forming partnerships with banks to issue cobranded cards, increasing the competitive pressure in the market.

 

What are the biggest challenges and problems in the cards and payments business in the Brazilian market?

The biggest challenge is the changing scene, with the development of new payment methods such as mobile payments, while banks and credit card providers try to reach a larger share of the population. The Brazilian government also is involved in change, generally trying to encourage competition for the benefit of the economy. One example of government implementing change in payment practice: trucking and transportation companies traditionally gave drivers a paper voucher (carte frete) to use to pay for fuel and travel expenses. In April 2011, the Agência Nacional de Transportes Terrestres prohibited further use of the vouchers, mandating the use of prepaid cards or electronic fund transfers.

 

What developments are taking place in mobile payments in Brazil? Are many mobile transactions taking place?

Mobile payments represent a significant opportunity in Brazil, as mobile phone penetration is much higher than credit card use. Several M-Commerce initiatives have reached the market after new products and services had been introduced. Anatel (National Telecommunications Agency), together with the Central Bank and the Ministry of Communications, drafted a proposal which was published by the government in May as MP 615. This legislation clarifies the roles of government agencies in facilitating Telecom's move into the payments picture.

 

Are there any major initiatives? If so who is involved - banks, retailers, mobile network operators, or other technology players?

There are several vendors competing in the market to provide financial services through mobile devices to the unbanked population as well as to the wealthier Brazilians who want to have access to the latest payment options. Visa plans to launch its V.me digital wallet in Brazil later in 2013. Meanwhile, PayPal launched a new payment tool in Brazil, allowing online payment with a debit card, and MasterCard partnered in February 2013 with several local companies to launch a trial run of the PayPass wallet. PagSeguro has released an m-payment product that enables shops and professionals to process credit card transactions using mobile phones and tablets. One more M-payment provider looking for a slice of the market is Zuum, a joint venture between Telefonica International and Mastercard Worldwide.

 

What trends and developments are taking place with debit cards?

The debit card market in Brazil, currently valued at around BRL 250 billion, is expected to double in size by 2016. Debit cards have seen 25% annual growth rate over the past 5 years, as consumers have found this payment method easy to adopt, while debit card providers have marketed the security and convenience of their use.

 

What trends and developments are taking place with credit cards?

In 2012, the credit card transaction volume in Brazil reached BRL 480 billion, having grown at CAGR of 21% in 2007-2012, as Abecs, the Brazilian Association of Credit Cards and Services, reports. Facing competition from debit cards and mobile payments, credit cards are under pressure to lower their interest rates. The public banks, Banco de Brasil and Caixa Econômica Federal were the first to lower rates, followed by private banks. With lower rates of return, some banks are attempting to end the Brazilian practice of "credit on credit" where retailers offer self-financed payments by submitting request payments from the credit card over as many as 18 months. The banks make little money on this arrangement, unless a cardholder misses a payment. Some observers feel that additional government regulation will define the role of credit cards in the evolving payments market.

 

How competitive is the card and payments market in Brazil?

Brazil is one of the world's largest card payments markets, where 687 million network-branded cards are currently active, and the market continues rapid growth while undergoing fundamental change. The ending of exclusive acquiring agreements with the two major international card networks, Visa and MasterCard, resulted in declining merchant discount rates and increasing competition. Further, retailers are forming partnerships with banks to issue cobranded cards, increasing the competitive pressure in the market.

 

What are the biggest challenges and problems in the cards and payments business in the Brazilian market?

The biggest challenge is the changing scene, with the development of new payment methods such as mobile payments, while banks and credit card providers try to reach a larger share of the population. The Brazilian government also is involved in change, generally trying to encourage competition for the benefit of the economy. One example of government implementing change in payment practice: trucking and transportation companies traditionally gave drivers a paper voucher (carte frete) to use to pay for fuel and travel expenses. In April 2011, the Agência Nacional de Transportes Terrestres prohibited further use of the vouchers, mandating the use of prepaid cards or electronic fund transfers.

 

What developments are taking place in mobile payments in Brazil? Are many mobile transactions taking place?

Mobile payments represent a significant opportunity in Brazil, as mobile phone penetration is much higher than credit card use. Several M-Commerce initiatives have reached the market after new products and services had been introduced. Anatel (National Telecommunications Agency), together with the Central Bank and the Ministry of Communications, drafted a proposal which was published by the government in May as MP 615. This legislation clarifies the roles of government agencies in facilitating Telecom's move into the payments picture.

 

Are there any major initiatives? If so who is involved - banks, retailers, mobile network operators, or other technology players?

There are several vendors competing in the market to provide financial services through mobile devices to the unbanked population as well as to the wealthier Brazilians who want to have access to the latest payment options. Visa plans to launch its V.me digital wallet in Brazil later in 2013. Meanwhile, PayPal launched a new payment tool in Brazil, allowing online payment with a debit card, and MasterCard partnered in February 2013 with several local companies to launch a trial run of the PayPass wallet. PagSeguro has released an m-payment product that enables shops and professionals to process credit card transactions using mobile phones and tablets. One more M-payment provider looking for a slice of the market is Zuum, a joint venture between Telefonica International and Mastercard Worldwide.

 

What trends and developments are taking place with debit cards?

The debit card market in Brazil, currently valued at around BRL 250 billion, is expected to double in size by 2016. Debit cards have seen 25% annual growth rate over the past 5 years, as consumers have found this payment method easy to adopt, while debit card providers have marketed the security and convenience of their use.

 

What trends and developments are taking place with credit cards?

In 2012, the credit card transaction volume in Brazil reached BRL 480 billion, having grown at CAGR of 21% in 2007-2012, as Abecs, the Brazilian Association of Credit Cards and Services, reports. Facing competition from debit cards and mobile payments, credit cards are under pressure to lower their interest rates. The public banks, Banco de Brasil and Caixa Econômica Federal were the first to lower rates, followed by private banks. With lower rates of return, some banks are attempting to end the Brazilian practice of "credit on credit" where retailers offer self-financed payments by submitting request payments from the credit card over as many as 18 months. The banks make little money on this arrangement, unless a cardholder misses a payment. Some observers feel that additional government regulation will define the role of credit cards in the evolving payments market.

 

What do you think will be the most important developments and innovations in the Brazilian cards and payments market over the next 1-2 years?

The credit card market in Brazil is considered mature, with a CAGR of 10.7% over recent years. One emerging trend is the use of prepaid and private label cards. Higher internet penetration will spur the growth of B2C E-Commerce which will drive further credit card use. Tourist inflows into the country will increase demand for travel and transit cards.

 

What impact do you think that the forthcoming two major sporting events (World Cup and Olympics) will have on the Brazilian cards and market? Will it lead to big improvements in payments infrastructure?

Fraud prevention is a concern for card providers and payment facilitators as well as for consumers. With millions of people booking hotels and transport online, there is plenty of opportunity for fraudsters to offer false tickets or accommodation to collect card details. A report of the U.S. Department of State in 2012 advised US visitors to Brazil to only use their credit cards at "major hotels and formal, established restaurants and shops". Prepaid cards in Brazilian Reales will offer consumers the opportunity to limit their losses on cards and avoid carrying cash. With these two major events, Brazilian banks and payment providers have an opportunity to impress or disappoint domestic and foreign customers with their efficiency.

 

How far advanced is EMV migration? Is there much left to do? Are there any liability shift dates left?

In Brazil, the financial community decided that the whole infrastructure will accept smart cards, both contact and contactless. Most important financial institutions migrated their cards to contact EMV a few years ago, resulting in a ratio of over 80% smart cards among banking cards in 2013, according to IMS Research.

 

What is the level of card fraud in Brazil? Is it a major problem? Which are the most common types (CNP, counterfeit etc)?

Brazil ranked as one of the countries reporting the highest percentage of consumers experiencing card fraud as of Q3 2012, according to ACI Worldwide. One third of card owners (33%) in Brazil experienced fraud in the past five years. After experiencing fraud, most cardholders (61%) decide to use an alternative payment method or cash, with about 9% of cardholders changing their payment behavior persistently. Most financial institutions in Brazil send a replacement card after an incidence of fraudulent activity, with 72% of the customers having received new cards.

 

What are the most popular methods for internet payments in Brazil?

According to the Online Payments Database, 68% of internet shoppers use credit card, and 31% use boleto bancario, a local bank transfer system. Both of these methods are restricted to payment in BRL. Foreign currency payment pathways for online purchases outside Brazil are still evolving.

 

Do you have figures for the volume and value of internet payments in Brazil, and what these are as a percentage of total payment card transactions?

A study by eMarketer at the end of the last year projected that Brazil's B2C e-commerce sales would total USD 18.7 billion in 2012, growing by 21.9% compared to 2011. With an increasing internet penetration, nearly 31.6 million Brazilians will purchase online at least once in 2015, while B2C e-commerce sales in Brazil are expected to reach USD 26.9 billion in the same year. The credit card market in Brazil is considered mature, with a CAGR of 10.7% over recent years. One emerging trend is the use of prepaid and private label cards. Higher internet penetration will spur the growth of B2C E-Commerce which will drive further credit card use. Tourist inflows into the country will increase demand for travel and transit cards.

 

What impact do you think that the forthcoming two major sporting events (World Cup and Olympics) will have on the Brazilian cards and market? Will it lead to big improvements in payments infrastructure?

Fraud prevention is a concern for card providers and payment facilitators as well as for consumers. With millions of people booking hotels and transport online, there is plenty of opportunity for fraudsters to offer false tickets or accommodation to collect card details. A report of the U.S. Department of State in 2012 advised US visitors to Brazil to only use their credit cards at "major hotels and formal, established restaurants and shops". Prepaid cards in Brazilian Reales will offer consumers the opportunity to limit their losses on cards and avoid carrying cash. With these two major events, Brazilian banks and payment providers have an opportunity to impress or disappoint domestic and foreign customers with their efficiency.

 

What is the level of card fraud in Brazil? Is it a major problem? Which are the most common types (CNP, counterfeit etc)?

Brazil ranked as one of the countries reporting the highest percentage of consumers experiencing card fraud as of Q3 2012, according to ACI Worldwide. One third of card owners (33%) in Brazil experienced fraud in the past five years. After experiencing fraud, most cardholders (61%) decide to use an alternative payment method or cash, with about 9% of cardholders changing their payment behavior persistently. Most financial institutions in Brazil send a replacement card after an incidence of fraudulent activity, with 72% of the customers having received new cards.

 

What are the most popular methods for internet payments in Brazil?

According to the Online Payments Database, 68% of internet shoppers use credit card, and 31% use boleto bancario, a local bank transfer system. Both of these methods are restricted to payment in BRL. Foreign currency payment pathways for online purchases outside Brazil are still evolving.

 

Do you have figures for the volume and value of internet payments in Brazil, and what these are as a percentage of total payment card transactions?

A study by eMarketer at the end of the last year projected that Brazil's B2C e-commerce sales would total USD 18.7 billion in 2012, growing by 21.9% compared to 2011. With an increasing internet penetration, nearly 31.6 million Brazilians will purchase online at least once in 2015, while B2C e-commerce sales in Brazil are expected to reach USD 26.9 billion in the same year.

 

This information is sourced from yStats newsletter of September 3rd, 2013 and gathered from the yStats report 'Global Online Payment Method Reports - First Half 2013'. Please contact us (contact@about-payments.com) if you want to purchase your copy of the report and profit from a special discount.

 

 

 

 

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