PayPal on Thursday announced a partnership with several Brazilian banks and neobanks to offer the debit card as a payment method for online purchases made within the country.
As LABS showed in August, the COVID-19 pandemic is accelerating the use of debit cards in Brazilian e-commerce. It’s natural for this to happen in a country where the number of unbanked people is still large – 45 million, according to a 2019 survey by the Instituto Locomotiva – and the access to credit is still restricted. But the effective use of debit cards for online purchases is still far from its potential: according to the Brazilian Association of Credit Card and Services Companies (Abecs), currently, 78% of online purchases in the country are made with credit cards and only 6.5% with debit cards.
Consolidated data released by the Central Bank earlier this month show that the country ended 2019 with 132 million active debit cards (14% more than in 2018), and 123 million credit cards (18% more than in the previous year).
If the consumer’s habit is already changing faster than expected before the coronavirus pandemic, what is missing for the use of debit in e-commerce to skyrocket in Brazil is the integration of more issuers (banks and fintechs who are the ones who effectively decide to grant a card to a user) and retailers to debit cards solutions. The increasing offer of this payment method by fintechs that bridge virtual stores and consumers, as is the case of PayPal, is also strategic.
How does the PayPal solution work?
The launch of PayPal’s debit solution comes from a partnership with Itaú Unibanco, Bradesco, Next, Nubank, C6 Bank, Inter, and Caixa Econômica Federal. These issuers account for about 70% of the country’s debit cards, but PayPal hopes to integrate even more issuers into the solution soon.
Carlos Nomura, head of payments for PayPal Brazil, said at a news conference on Thursday morning that the fintech solution does not require additional authentication steps, such as entering a password. “The banks themselves can put some daily or monthly usage limit as yet another layer of security. But on the PayPal side, we want to offer an experience as simple as the others we already do.”
In the PayPal solution, after adding the card, the customer will see a confirmation message in the app or website, and also receive a message by e-mail. Those with multiple cards will see the debit and credit functions separately and will be able to choose between them for each purchase.
PayPal already offers debit cards in several of the 200 markets in which it operates. But Brazil is the only country with a debit solution that comprises multiple cards since this is something typically Brazilian.
On the side of the 350,000 retailers in the country who offers PayPal as payment method, there will be no extra charge for the use of the debit card, that is, the new method is within the standard package for sales in the national territory, which charges: 4,79% + BRL 0.60 fixed for each transaction, in the case of availability of values to the storekeeper in 24 hours; and 3.60% + BRL 0.60 fixed for each transaction for merchants who receive the amount within 30 days.
Nomura explained that the impossibility of using the debit card in international purchases is due to the lack of a process that allows this between networks and issuers in Brazil. “It is not a regulatory issue, but a matter of developing a standard process of payment messaging, which is under development between issuers and flags”.
He also stressed that PayPal is closely following PIX schedule, the Central Bank‘s instant payments system due to be officially launched in Brazil in November, and that fintech will offer the method as part of its payment basket.
PayPal has 346 million active user accounts worldwide, 10.2 million in Latin America and 4.3 million in Brazil. In 2019, 12.4 billion transactions were made worldwide through the fintech, with a total volume of payments (TPV) of $712 billion.