Brazil

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Payments

Domestic and Preferred Card Schemes

Online payments in Brazil are dominated by Credit Cards and BoletoBancário, accounting for more than 93% of all online purchases in Brazil.

Credit cards are used in 69% of all online payment transactions. However, it is important to differentiate between national and international credit cards. National cards can only process in Brazilian Reais (BRL), whereas international credit cards can process in both foreign and local currencies. But, as only 20% of Brazilian buyers have access to international credit cards, it is key for merchants to have access to local credit cards.

Alternative Payment Methods

The most important Brazilian payment method is the BoletoBancário. This is a payment slip issued through banks with all the relevant information for purchasing a product. Boleto enables both payments through the customer’s bank account and cash payments.

This payment method accounts, for around 24% of the market and within industries with higher ticket sizes, its relevance can reach up to 40% of all online purchases.

Other Payment Methods

There are also a variety of smaller, but still active payment methods:

Co-branded Cards are used at select retailer while some can be used anywhere depending on the brand. They are issued by department stores (C&A, Renner, Marisa, Pernambucanas, etc.), grocery stores (Carrefour, Pão de Açúcar, Extra), drugstores and others.

DébitoAutomático is Portuguese for Direct Debit, are only used for utilities payments (such as water, electricity, and telephone) because Brazilian banks generally only allow these companies to directly charge the bank accounts. Different payment providers have tried without success to offer it in ecommerce.

E-financing is available at some banks, like Itaú, Bradesco, and Banco do Brasil. It is not as commonly used, since the bank requires the customer to have a pre-approved credit with the bank before the transaction.

E-wallet service in Brazil is similar to what it provides in other countries. Both PayPal and MercadoPago allow users to store, or add money to their ‘virtual wallet’.

Prepaid Cards are cards with limit normally used for payment of specific services (telephone and public means of transportation issued by public service concessionaires and meal cards which are authorized commercial establishments). [1]

Digital Invoicing

Mexico, Brazil and Argentina have teamed up to launch a pilot program that strengthens cooperation between the countries in exchanging digital invoices. The nations are already situated in one of the world’s highest-ranked continents when it comes to digital billing. [2]

Customer Experience

eBay has begun allowing shoppers to fund their PayPal accounts using BoletoBancario; shoppers are invoiced at checkout and can pay bills at banks, post offices, lottery agents, and some supermarkets. [3]

Brazil's history of payment by installments can create working capital challenges for e-commerce retailers. In Brazil, credit card payments are often conducted in installments, with a credit card charged every month until the purchase is paid off. Customers receive their goods immediately but there is added risk to the card issuer. “That is more complicated than in the United States,” Prins notes, “where there is one charge made immediately upon purchase.[4]

Payments Regulation

The "closed" BRIC countries Brazil and India, in which it is harder to conduct business and where cross-border payments do not enable merchants to comprehensively reach local customers and prevent the full support of all business models (e.g. local pricing, subscription models, etc.). Spotify, a music streaming subscription service, confirmed the above analysis: "Brazil and India are markets where regulations can change suddenly, so merchants need a contingency plan for payments. Both India and Brazil pose challenges around cross-border transactions. Brazil has been difficult because cross-border related regulations can change very quickly, which creates a lack of long-term visibility and a lot of "fire fighting". International cards have low penetration, and no local payment method offers a cross–borderfriendly payment model".

Local entities

High impact countries: In countries like Germany, Italy, Brazil, and the US, a local merchant of record generated an uplift in card approval rates greater than 5%, which is a major impact. [5]

Mobile payments

In the other emerging market of Brazil, mobile shopping sales are currently more modest and clearly in their early days. But with an estimated annual growth rate of 53% over the next five years, higher than any of the other markets surveyed, the value of Brazil’s mobile cross-border transactions is estimated to increase more than eightfold to nearly $2.5 billion in 2018. In the future, then, more consumers than ever will be shopping and paying for goods from overseas on their tablets and smartphones. That means more opportunities for businesses around the world, whose online presence automatically opens doors to a global customer base. It also underlines the importance of developing websites or apps that are optimised for mobile devices and offering a simple and secure payment option – entering a 16-digit credit card number on a smartphone can challenge even the nimblest of fingers. In fact, eight out of 10 cross-border shoppers value a mobilefriendly website for shopping and payments, with the highest response from China and Brazil. [6]

Logistics

Implementation of faster product delivery can aid in improving the overall customer experience of e-consumers, according to the Research Analyst, Ken Research.[7]

Infrastructure

Brazil’s shipping network is not as developed as in other markets; it is well developed in the regions with the highest demand, but there is still progress to be made in the more remote areas. Government and business are trying to take steps to improve this. The government has built more than 1 million miles of roads and highways, and plans to invest $30 billion more in infrastructure. Meanwhile, Rio de Janeiro-based B2W, Brazil's largest online retailer, acquired Direct, a local logistics provider, part of a year's worth of investment in logistics and technology. Walmart, one of the most active international players in Brazilian e-commerce, is investing in distribution, part of a push to capture a larger share of Brazil's online retail market. In 2014 the company redesigned its Brazilian website; it also has plans to increase inventory and hire more employees. [8]

Import Duties

Import duties apply to import transactions based on the customsvalue of the goods. The customs value is generally based onthe cost plus insurance and freight (CIF) value of the goods plusothers costs specified by the customs valuation rules. ImportDuty is levied when products are imported into the country.Import duty rates vary depending on the tax position of thegoods imported according to the MERCOSUR common externaltariff (TEC) which follows the Brussels Harmonized Code (see section C.6 for more detailed information). [9]

Marketing

TBD

Shoppers

Brazil is the fastest growing online shopping region outside of Asia, with a predicted CAGR of 18% over the next three years (Forrester). Online shoppers generally spend a higher proportion of disposable income over the internet than the global average, 27% against a global average of 23% although internet penetration sits at just above a third of the population (37%). In contrast to more established regions, particularly in Europe, Brazilian online shoppers have experienced less online fraud (11%), yet express slightly higher levels of concern regarding security (67%).

Purchase drivers and differentials

While the faster-growth economies in the research tend to have prevalent shoppers better represented in the higher age groups (35yrs and above), Brazil’s heavy spenders (as a proportion of disposable income) are more likely to be under 25yrs. Popular goods purchased in this group are music downloads and personal disposables, such as toiletries. Consistent with global average trends, light and medium shoppers are attracted by more conventional shopping needs, such as customised offers and flexible delivery dates. However, heavy shoppers identify faster payment processes and better website navigation as drivers for increasing internet spending. Globally, heavy shoppers are more likely to favour choice of payment over speed.

Shopping cart abandonment drivers are consistent with global average, unexpected costs (59%) and better prices found elsewhere (44%). However, complex navigation is also cited (34%) in the top three issues, consistent only with a selection of developing economies. [10]

Social Media

Social media is particularly popular in Brazil, whose population ranks third in the world in terms of total users of Facebook. Kanui.com is one e-commerce site that has been particularly adept at tapping into social media; its Facebook page (with more than 2.8 million followers) includes not only promotions, but also content marketing such as educational videos for using sports gear and apparel. [11]

Major shopping categories

Clothing, shoes and accessories represent the largest cross-borderonline shopping category in five out of the six markets, Brazilianshoppers buck the trend by buying more computer hardware thananything else. And, unlike consumers in any of the other countriesresearched,[12]

Major retail holidays

December 25th is by far the most profitable shopping date for the Brazilian retail sector. A common trait among Brazilian customers is that last minute shopping is a recurrent fact. Shopping malls and popular commerce centres are packed with people looking for a final gift on Christmas Eve, which also leads to many promotions aimed at this period. The second most important date for the retail sector in Brazil is Mothers’ Day, celebrated on the second Sunday of May since 1918. Unlike most countries, where Fathers’ Day is celebrated in June, in Brazil it is celebrated on the second Sunday of August. October 12th [Children's Day] is considered the fourth most important date for retail companies in Brazil. Dia dos Namorados is the Brazilian equivalent to Valentine’s Day. In Brazil, Dia dos Namorados happens on June 12th. The date is very important to companies that sell flowers, as this is one of the most popular gifts.[13]

Legal / Regulatory

Some structural challenges have also stymied Brazil's e-commerce growth, starting with burdensome regulations and taxes. [14]

Tax implications and currency controls

In countries like Brazil, consumers and / or international merchants might have to pay tax on cross-border transactions. Adyen-EDC-Report-Cross-Border-Payments.pdf

FX Policies

Brazil has historically imposed strict controls over cross bordercurrency transactions through a foreign exchange policy thatrequired the registration of transactions and placed controlsmainly on transactions involving outflows of funds from the country.Changes were introduced in early 2005 in an attempt to makeBrazil’s foreign exchange regulations more flexible and simplerfor Brazilian, foreign companies and individuals alike. The overall goal was to facilitate cross border transactions, especially the maintenance of funds held in foreign currency abroad by Brazilian residents. Recent changes have also introduced a deferral to the requirement to internalize foreign funds associated with export receipt. However, regulations remain in force that requires the registration of most inbound transactions with the Brazilian Central Bank (BACEN) in addition to strict controls on the repatriation of capital in foreign currency. As a general rule, investment flows, in either share or debt capital, must be registered with the BACEN within 30 days to allow subsequent repatriation or remittances in foreign currency (including dividends, capital repatriation, interest payments or remittance of principal on loans). Failure to register an inflow of funds may not only jeopardize a subsequent outflow of the funds, but it may also result in high penalties being imposed by BACEN. [15]

Technology

Brazil has one of the world's most connected populations—more than half of the population uses the Internet, and those who do are connected nearly all the time. The country's online market grew about 18 percent year-over-year to about $13 billion in 2014. Even as the country drops 13 spots in this year's Index due to weak infrastructure and e-commerce growth that is somewhat slower than global rates, online retailers still find Brazil to be a growing e-commerce market that is impossible to ignore. In particular, Brazil is highly connected, with heavy use of mobile phones and broadband Internet, attributes that will drive future growth. Brazil's macroeconomic conditions have been a concern across all industries, as the country is expecting economic contraction of 1 percent for 2015. Still, some companies—primarily those that play across categories—have managed to succeed despite the conditions. One such firm is Argentina-based MercadoLibre, whose Brazilian site accounts for about half of its revenue. It has defied the downturn with strong revenue growth, thanks to a strong and growing payment service (MercadoPago) and efforts to improve the shipping experience. [16]

Security

Nine out of ten consumers on average also place great importance on having buyer protection for their overseas purchases. Interestingly, shoppers in the emerging markets of China and Brazil proved particularly keen to be protected should something go wrong with a purchase, showing that a perceived lack of security can be a far bigger barrier to a purchase than any country border. Happily, the reverse is also true. With trust and confidence in making payments to overseas merchants, consumers are more than willing to enrich their lives with fresh discoveries. And for an increasing number of businesses around the world, that translates into a global opportunity that is well worth taking.

5.3 million online cross-border shoppers, spending R$2.6 billion in 2013 – with up to 9.4 million online cross-border shoppers expected to spend R$16.8 billion billion a year by 2018. Top five cross-border purchase categories over the past 12 months are: computer hardware (R$1.6 billion); personal electronics (R$1.4 billion); clothes, shoes and accessories (R$1.3 billion); health and beauty products (R$1.3 billion); and home electronics (R$936 million). Where they shop: US (79%), China (48%), Hong Kong (17%), UK (17%), Canada (14%). [17]

Mobile appetite

Website functionality also plays a part in how Brazilian respondents view the mobile web. While smartphone penetration is high (50%) and intention to use smartphones and tablets for online purchases is consistent with global averages (46%), mobile optimisation of shopping websites is cited in the top three reasons for not shopping via mobile online. [18]

References

  1. The Paypers "Payment Methods"
  2. Pymnts.com "Global Spotlight."
  3. AT Kearney. "ECommerce Index."
  4. NRF. "Clearing the Path to Purchase."
  5. Adyen. [Adyen-EDC-Report-Cross-Border-Payments.pdf "Cross-Border Payments"]
  6. Paypal. "Modern Spice Routes"
  7. Primeiro Pay "Brazil ECommerce Market to Grow"
  8. AT Kearney. "ECommerce Index."
  9. EY.com "Doing Business in Brazil"
  10. Worldpay. [www.Worldpay.com/global_shopper "Global Shopper."]
  11. AT Kearney. "ECommerce Index."
  12. Paypal. "Modern Spice Routes"
  13. The Brazil Business "Shopping Seasons in Brazil"
  14. AT Kearney. "ECommerce Index."
  15. EY.com "Doing Business in Brazil"
  16. AT Kearney. "ECommerce Index."
  17. Paypal. "Modern Spice Routes"
  18. Worldpay. [www.Worldpay.com/global_shopper "Global Shopper."]