Not Mastercard, nor fintechs. The biggest enemy of Visa in Latin America is cash. In Brazil, from 2008 to 2018, the value exchanges via credit card purchases in the country went from BRL 335.67 billion to BRL 1.5 trillion, according to data from the Brazilian Association of Card and Services Companies, the ABECS.
The credit card payments account for 40% of family spending in Brazil—a level that is also due to the gradual opening of the segment by regulating institutions since 2010, and the subsequent entry of new plays in the chain as a whole. Until 2022, the goal of brands, such as Visa and Mastercard, lenders and acquirers, is to make the card and electronic payment methods correspond to 60% of family spending in Brazil.
Challenges behind this goal are not only a question of technology, but rather of culture and of how the payment methods, together with the popularization of cell phones, have the power to contribute to the formalization of relations of production and to the social inclusion of the population. This means that the development of payment methods follows several paths, which vary from country to country.
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The fact is that this potential is enormous in Latin America. It is only necessary to look at the number of countries such as the United States or South Korea, where the use of credit cards reaches 45% and 70% of family spending, respectively.
If in China the mobile payment and/or instantaneous has already exceeded the cash alternative via credit cards and the margins of the regulated market bloomed, this will not happen in Brazil, where there is a fixed park of card machines and in full development.
“I would say that there is no silver bullet, a single solution on which we bet on, and the person that decides is the consumer, that is sufficiently empowered to choose that which offers the most convenience in their day to day,” evaluates the Country Manager of Visa in Brazil, Fernando Teles.
In an interview with LABS, he spoke of the future of payments and also of how a true transformation, in the past three years, with a focus on innovation opened new horizons for Visa operations in the country. Browse what he said:
LABS – You already said that the evolution of payments would not eliminate, so soon, the card machines and, much less, the debit card. This also, looking at Latin America and Brazil, in a context of unbanked individuals, informality, and also in the optimization of existing physical payment methods. Thinking of that, what will be the next payment solution to be adopted by Brazilians?
Teles – According to ABECS [Brazilian Association of Card and Services Companies], the payments completed with credit, debit, and pre-pay cards should grow about 16% in 2019, reaching the level of BRL 1.8 trillion. Purchases with cards should register, in the fourth quarter of 2019, a record participation of 40% concerning the volume of consumption of Brazilian families.
This strong increase follows a process of digitization of payments, in which more and more consumers from all over the country uses cards and other digital means, be it in person or through the Internet or applications, in their purchases. And more and more stores and service lenders are accepting this kind of transaction.
In other words, there is still quite a bit of space for growth. I would say that there is no silver bullet, a single solution that we bet on, and the person that decides is the consumer, that is sufficiently empowered to choose that which offers the most convenience in their day to day.
Beyond payments by approximation, I also believe that the upcoming solutions that will be more broadly adopted by Brazilians will be instantaneous transfers from person to person and/or between companies; and the acceptance of online debit, be it in e-commerce or in applications.
In the case of instantaneous transfers, it will be possible to make direct payments between peers (P2P), payments of companies to individuals, such as insurance compensations and payments to service lenders (B2C), payments from consumer accounts to businesses (C2B) and transference of funds between businesses (B2B). The transfer can be completed any day of the week and at any time of the week, including weekends and holidays. Visa in collaboration with Cielo and the Bank of Brazil have already made available such technology through Visa Direct.
The case of debit online is an excellent ally in digital inclusion for Brazilians. With the update of our authentication protocol, called 3DS 2.0, the utilization of debit on a large scale, without a card machine, directly via the app, without the need to re-introduce the password in each operation, became a reality. Currently, debit went on to occupy an important space between new businesses, such as mobility, streaming, delivery services, among others.
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LABS – What is the adherence of the Brazilian public to payment technologies by approximation and wearables like?
Payment by approximation has been defining the way in which Brazilians complete their purchases, by the convenience of being more practical and fast, and by the security of the user not having to pass their card from hand to hand, so that the payment might be concluded.
Public transport is one of the sectors that has been helping to popularize the technology. In May of this year, Visa announced the payment by approximation for credit cards in collaboration with MetrôRio. Cariocas and tourists already adhered to the payment by approximation technology in the subway of Rio de Janeiro.
According to data from VisaNet, from the launch of the new payment option at the end of April to July, the number of transactions by approximation completed in the 41 stations of the Rio de Janeiro subway grew 58%. In addition, 94% of the people that used the solution in the subway for the first time, continued using the solution in a recurrent manner, according to MetrôRio.
In June, Visa surpassed the number of 2.5 million monthly transactions completed using the technology of contactless payment in Brazil. And that growth has been exponential since January, when we registered a million. These numbers demonstrate that Brazilians are more and more technologically adept, which transforms the payment experience into something faster and more practical.
This increase is also due to the fact that the country is practically ready to accept the technology, more than 82% of payment terminals installed in the Brazilian market are already prepared to receive the technology.
LABS – Some surveys show that Brazilians are more open to new technologies than individuals from other places. Why does that happen?
Teles – We are a strategic country, since we have a gigantic acceptance park and a people thirsty for experimenting with new technologies. Brazilians are early adopters and like to try out new things. And because they are favorable to implementing new technologies, they became assiduous users of business solutions, as well as spreading the word and validating that which was launched.
LABS – What are Visa’s investments in innovation?
Teles – We do not offer investment values, but innovation is one of the pillars that make Visa one of the biggest companies in the world. In the last few years, we complet?ed a true transformation in the way that we work disruption inside the company.
Three years ago we opened our own Innovation Studio in São Paulo. It was in that space that we brought together employees from Visa, clients, and startups to co-create the future of the technology industry for payments in Brazil. Our center of innovation bears witness to the emerging solutions of artificial intelligence, modes of facilitating digital payments, among others. Our clients arrive with a problem that they want to solve and, through the design thinking methodology, we were able to come out of the co-creation session with solutions and assertive products. We gained agility. Often, we launch complex and secure projects in less than 3 months—what has been a real revolution in the industry.
Visa does not have a team responsible for innovation. All our employees participate in developing solutions. Since we implemented shared goals, we managed to generate an exchange in the experience of incommensurate riches among executives of the most diverse areas. Today, we see in a single work group, a mix of knowledge and extremely rich experiences from different areas.
By narrowing our link with startups, we grow together. In the last three years, we became all the more acquainted with the digital entrepreneurship ecosystem through the Visa Acceleration Program. Up to the end of the year, more than 70 startups went through our program and what is more important, we learned as much as they did.
We made it our goal to place our employees, from all positions and areas, to work as mentors of the fintechs that participated in our Startup Acceleration Program, given that we knew of the importance of learning with the mindset of digital entrepreneurs to think quickly, to not be afraid of making mistakes, and to look for exponential results. And this should not be centralized the areas focused only on technology. Whoever thinks that innovation is necessarily high tech, is not on the right track. Since I came to Visa, I have been surprised by the quantity of innovation that is lead by procedural areas, such as payments of account, for example. To understand how to do the same tasks in a more flexible way, it is convenient and better to become disruptive, and this team has done that like nobody else.
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LABS – What is the program Cities of the Future, that began with three and now has more than 200 cities, in this innovation context like? Is it the broadest and most complex project by Visa in terms of innovation?
Teles – Brazil is a heterogeneous country, very diverse. From the beginning of the program, we took care to contemplate the actions and initiatives that catered to the characteristics and needs of each city served by the program. We promote a series of activations, with incentive promotions for the use of cards, hackathons, actions in financial education, and growth in the issuing of electronic payment acceptance.
We see that the objective of transforming the payment ecosystem of those regions is being fulfilled, thanks to the care we take with our partners such as EBANX, that have been helping us leverage the development and reinforce the benefits of electronic payment methods in the cities of Cascavel and Paranaguá, in the southern region of the country.
We celebrate a year in August, and according to a survey made by our consulting firm, Visa Consulting & Analytics (VCA), we can see an expressive growth close to 84% in the adoption of electronic payments in pilot cities—Maringá, Belém, and Campina. There is still much to be done, but we are happy with these results, for there are more than two hundred cities that have benefitted from our initiative.