Although cash is preferred by Brazilians, the usage of electronic payment methods (mainly credit and debit cards) has been sensibly increasing. That is what the study “How to: understand payment industry in Brazil”, prepared by the American Chamber of Commerce for Brazil (AMCHAM Brazil) and conceived by the law firm Focaccia, Amaral, Pellon and Lamonica (FAS Advogados), reveals.
According to the document, which is part of the project “How to do business and invest in Brazil”, from AMCHAM Brazil, the significant growth in the use of electronic payment methods in recent years can be related to a series of interventions by policy-making bodies, such as the Central Bank of Brazil and the Brazilian Competition Defense System (SBDC, acronym in Portuguese).
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The purpose of all these interventions was to enhance competition in the payment sector – a highly concentrated market. Up until 2009, the Brazilian e-commerce market consisted of a virtual duopoly. The study found that the two main brands (Visa and Mastercard) which, together, accounted for more than 90% of the credit and 80% of the debit card market, had exclusivity agreements with specific financial institutions of the payment processing sector (Visanet and Redecard, respectively).
Given such scenario and its negative impacts on competition for the payment industry, Brazilian authorities decided to intervene, making room for the growth and creating momentum. Up to 2013, the lack of a specific regulation for the market generated legal uncertainties and doubts among industry players, slowing down its progress.
The consumer within this context
All this upheaval directly affects consumer behavior. As the offer of products and services increase, so does their motivation to buy; and this can be seen mainly in the online environment, which largely influences this decision.
The payment industry, which in Brazil has developed in an extremely dynamic environment and has gone through significant changes over the past few years, reflects the behavior of more connected consumers, who demand flexibility in the payment methods in order to become loyal.
We talked to Karine Evangelista Araújo Oliveira, a partner at FAS Advogados with expertise in legal consulting services to companies in the payment, crypto currency and banking segments, as well as fintechs. Her focus is Regulatory Law and she headed the production of the guide with the support of Paulo Mertz Focaccia and Renata Homem de Melo.
Karine spoke about its preparation and gave some insights on the country’s payment scenario. Check it out:
What is the objective of this first guide? How and why has this idea come to life?
The guide is part of the “How To” initiative by AMCHAM Brazil, which aims at introducing strategic information to prospective foreign investors on the most varied aspects related to doing business in Brazil. The specific purpose of this material is to explain the Brazilian legislation applicable to the payment industry, a quite dynamic market which strongly developed in the last decade and still holds great potential. After being consulted quite a few of times at the office about the legal and regulatory structure of this sector, we had the idea to put the guide together.
Can we say the direction the payment industry seems to be headed serves as evidence to a more modern and mature domestic market?
Absolutely. The use of electronic payment means has grown significantly in the last few years. In 2017, for example, the volume of card transactions was, for the first time, higher then cash transactions: credit, debit and pre-paid cards accounted for transactions in the amount of BRL 1.36 trillion, while the total of cash transactions reached BRL 1.31 trillion, according to the Brazilian Association of Credit Card and Services Companies (Abecs, acronym in Portuguese).
The use of paper money has been decreasing as financial and payment services become more accessible both to payers and receivers. Industry regulations, developed within the scope of the agenda set forth by the Central Bank of Brazil (Agenda BC+), aimed at attracting new players to this market, such as some fintechs which are increasingly gaining space. According to a research conducted by FintechLab, there are more than 100 Brazilian fintechs somehow associated with the payment sector.
Was the behavior of the Brazilian consumer critical to the regulation of the sector detailed in the guide, in your opinion?
Actually, I believe that the regulation detailed in the guide was essential to induce the behavior of the Brazilian consumer. It was the end of the duopoly in the acquisition sector that existed until 2009 that allowed new players to join in and, with competition, more attractive products and services were introduced, offering the consumer better fees and conditions.
What do you expect for the future of the payment sector in Brazil?
I particularly believe it is a sector with great growth potential. Brazilians, in general, are truly interested in technology and enjoy tools that allow them to perform daily tasks, such as payments, in a more practical way. Therefore, the use of electronic payment methods tends to increase, mainly mobile and instant means.
Considering the analysis in the guide, are you optimistic about the opportunities for investors regarding these transactions?
Yes, for sure. The experience of players who already raised investments was quite positive and that makes us very optimistic about new investments in companies of the sector.
Keeping an attentive eye on the demands, interests and the behavior of Brazilians, however, is essential to a strategic definition and the correct decision-making processes regarding the offer of payment methods in Brazil.
A country of peculiar financial habits and consumers continuously connected, attentive and willing to purchase from other countries (nonetheless, who have a very peculiar and local “knack” for making purchases, when it comes to ease, practice, and condition), endorse the development of the ever-stronger industry, which is becoming increasingly important to businesses that wish to prosper in Brazil.