Brazil Online Shoppers Shaping Digital Payment Services
Introduction to Brazil
An overview of Brazil's currency, population and key statistics.
The currency of Brazil is the Brazilian real (BRL). The real's symbol is "R$" or simply "R." It is divided into smaller units called centavos, with 100 centavos equalling one real.
Banknotes are available in denominations of 2, 5, 10, 20, 50, and 100 reais, each with distinct colours and designs. Coins in circulation include 1 real, as well as 5, 10, 25, and 50 centavos.
Brazil plans to introduce a digital currency by 2024, following a pilot program involving financial institutions. The digital currency will facilitate payments through distributed ledger technology and support retail financial services through tokenised deposits within Brazil's financial and payment systems.
According to UN data, 212,559,417 people lived in Brazil in mid-2020. By February 21, 2021, the population had increased to 213,526,848, with 87.6% residing in urban regions, particularly São Paulo and Rio de Janeiro. The median age of the population is 33.5 years
Languages spoken in Brazil
Portuguese is the official language of Brazil and it is widely spoken by most of its population. It is used in government affairs, education, the arts, and everyday life.
In the first quarter of 2021, household savings accounted for an impressive 20.6% of Brazil's gross domestic product. Data released by the International Monetary Fund (IMF) in 2022 showed the country's nominal GDP reaching a significant milestone of $1.894 trillion. The country's GDP per capita, which measures the average economic output per person, amounted to $8,857.
The PPRO Report revealed that 70% of Brazilians had bank accounts in 2020, while only 27% of the population held credit cards.
Brazil internet & mobile phone trends
Around 97% of internet users in Brazil are in the 16-24 age range, as reported by Statista in 2020. Datareportal's findings indicated growth in the number of internet users to 160.0 million by January 2021, representing an increase of approximately 9.6 million users, or 6.4%, compared with the previous year. The internet penetration rate stood at 75% during the same period. Furthermore, 60% of the population owned smartphones in 2020.
Brazil boasts a sizable internet user base of around 182 million individuals as of 2023.
Brazil e-commerce stats
Brazil's e-commerce market continues to face significant obstacles due to the internet, banking, and smartphone penetration rates. According to the PPRO Report, the country's average annual revenue per paying user was $379 in 2020. Brazilian consumers conducting cross-border e-commerce mainly purchase products from China, the United States, and Japan.
Summary of Brazil's fiscal policy
The coronavirus pandemic presented Brazil with unprecedented health and economic challenges, exposing vulnerabilities in its macroeconomic policy, particularly in the fiscal aspect.
As a result, there is a pressing need for Brazil to implement solid fiscal consolidation measures and structural reforms. Despite progress in fiscal consolidation during 2021, restoring fiscal sustainability remains Brazil's most urgent economic priority.
Several risks could impact Brazil's fiscal policy, including lower-than-expected economic growth, increased borrowing costs, and unforeseen spending escalation if the pandemic deteriorates.
A recent IMF report stated that Brazil's fiscal position is projected to improve from 2024 onwards. The IMF fully supports the government's commitment to enhancing the country's fiscal position.
This can be achieved by improving the fiscal framework, broadening the tax base, and addressing inflexible spending patterns. These measures promote sustainability and credibility and provide flexibility to accommodate new spending priorities.
How people pay in Brazil
An overview of how people in Brazil choose to make payments.
Traditional payment methods
The primary traditional payment methods used in Brazil.
Visa offers electronic payment solutions through Visa-branded credit or debit cards. Some major retail banks in Brazil that may offer Visa credit cards include Banco Bradesco, Caixa, Banco Safra, Banco Itaú, and Banrisul.
Global payment and technology company Mastercard offers its service of processing payments between retailers' banks and card-issuing banks. Some examples of Mastercard credit cards available in Brazil include those issued by Banco do Brasil, Banco Bradesco, and Caixa Econômica Federal.
American Express is a company that provides various financial services, such as credit cards, charge cards, and traveller's cheques. Even though Amex is not as commonly accepted as Visa or Mastercard in Brazil, some merchants can still use it, mainly in the travel and hospitality sectors.
Alternative payment methods (APMs)
The top APMs used in Brazil.
Apple Pay, a mobile payment service from Apple Inc., allows users to make in-person, online, and in-app payments. It replaces chip and PIN transactions at contactless terminals.
PayPal is a frequently used digital payment system that allows clients to use their PayPal accounts, debit/credit cards, or bank accounts. Customers use PayPal for secure online shopping and to send/receive money.
Via Pagamentos is a fintech startup that provides a BNPL solution known as "Via Quero-Quero." This service allows customers to divide their purchases into 12 instalments, with attractive interest rates. Via Quero-Quero differentiates itself through its strong partnerships with retailers, allowing customers to access BNPL options directly from their preferred stores.
Ame Digital is a digital wallet and payment platform that provides a BNPL option known as "Ame Flash." This service allows customers to divide their purchases into a maximum of 12 instalments with no interest charges.
Upnid is a Brazilian startup specialising in BNPL services designed for e-commerce businesses. This platform allows merchants to provide their customers with flexible payment terms and competitive interest rates.
How to accept payments in Brazil
A guide to accepting payments in Brazil.
How to accept payments online in Brazil
Before accepting online payments, you must determine which methods you prefer. Then you can choose a payment gateway provider, a service that authorises and processes online payments with their specific system.
Although there are plenty of payment gateway options in Brazil, the general process for online payments typically involves an acquirer, issuer, retailer, and cardholder in the following steps:
The cardholder initiates a payment by presenting their payment card to the retailer to purchase goods or services.
The retailer sends the payment details to the acquirer, who processes the payment request and sends it to the payment scheme (such as Mastercard or Visa).
The payment scheme sends the payment request to the issuer (such as a bank or licensed issuer) who issued the card to the cardholder.
The issuer checks if the cardholder has enough funds to complete the transaction and approves or declines the payment request. if the payment is approved, the issuer sends an authorisation code to the payment scheme.
The payment scheme sends the authorisation code to the acquirer, which then sends it to the retailer, completing the transaction.
How long does an international payment from Brazil take?
The processing time for payments may vary depending on the method and the recipient's bank. For instance, online money transfers through platforms like PayPal can be quick and convenient for sending money to multiple destinations.
Bank debit/credit cards: International payments with bank debit or credit cards may take a few minutes to a few hours, depending on bank processing times.
Online money transfers: Platforms like PayPal can process international payments within minutes to hours, depending on the service and destination country.
Wire transfers: Traditional bank-to-bank transfers via SWIFT or wire may take one to five business days or longer, depending on the destination country, intermediary banks, and transaction requirements.
Merchant fees for online payments in Brazil can vary depending on the payment method and the merchant services provider used. Here are some examples of typical merchant fees for online payments in Brazil:
Credit and debit cards: Merchant fees for accepting credit and debit card payments online can range according to the transaction amount. It also varies depending on the type of card used and the merchant services provider.
PayPal: For domestic payments, PayPal charges a fee of 4.79% plus a fixed fee for receiving domestic commercial transactions in Brazil.
Bank transfers: Bank transfer fees can vary depending on the bank used, with some banks charging a flat fee per transaction and others charging a percentage of the transaction amount.
Other fees surrounding online payments in Brazil include charges incurred by merchants, payment processors, and financial institutions involved in the payment processing chain. Below are some common fees:
Interchange fees: Interchange fees are charges paid by merchants' banks to cardholders' banks to cover the costs of processing card transactions. These fees are usually based on a percentage of the transaction value and can vary depending on the type of card used and the merchant's industry.
Payment gateway fees: Payment gateway providers charge a fee for processing transactions on their platform, which may be a percentage of the transaction value or a flat fee per transaction.
Cross-border fees: If a merchant accepts payments from customers outside the country, they may be subject to additional fees for cross-border transactions, including currency conversion fees and international processing fees.
Merchant discount rate: A processing fee that merchants are charged for transactions made using credit or debit cards. This fee generally falls within the range of 1% to 3% of the total transaction amount.
Security challenges of online payments in Brazil
Online payments in Brazil face numerous security challenges. The rapid expansion of e-commerce in the country has attracted cybercriminals who recognize the potential for obtaining and selling valuable credit card and personal data on the dark web.
This trend highlights the urgent need for merchants and financial institutions, particularly small ones transitioning to e-commerce, to comprehend the risks they are exposed to.
Brazilian banks and financial institutions can address those online payment security challenges by enhancing their security infrastructure, educating customers, collaborating with law enforcement agencies, conducting regular security audits, promoting strong password habits, deploying fraud detection technologies, and ensuring regulatory compliance.
Key sectors & industries in Brazil
An overview of Brazil's market.
Brazil's top 10 industries by revenue
According to the US International Trade Administration and various other sources, the top 10 industries in Brazil are:
Energy: According to Brazil's Energy Expansion Plan for 2019-2029, renewable sources will be a priority, aiming for 48% of the energy mix by 2029. Nuclear energy will grow with the Angra 3 power plant, while oil and gas will continue to be necessary. As of 2022, renewable sources contributed 82.96% of the authorised power capacity, with wind parks at 11.41% and solar energy at 2.53%.
Agriculture: Brazil is a significant player in global agriculture, accounting for 7.3% of global exports. It is the largest agricultural net exporter, with abundant arable land. Agriculture contributes 14% to Brazil's GDP and employs 18 million people. The country has transformed from an exporter of tropical products to a major global supplier of commodities such as soybeans, sugarcane, potato, onion, cotton, ethanol, meat, and grains, including rice, corn and sorghum.
Construction: The Brazilian construction industry faces increased international competition due to the "Operation Car Wash" corruption scandal. But that has created opportunities for medium-sized firms and foreign players. As a result, construction technology is booming, with startups investing in field management, equipment/material marketplaces, mobile/cloud technologies, robotics, and software for construction.
Chemicals: Brazil's chemical imports have surged by over 1,200% over the past 30 years. The country's chemical industry is receptive to imports, and both importers and distributors actively seek new suppliers. Chemicals are crucial to the economy, particularly in agribusiness, where 85% of fertiliser needs are imported annually.
Aviation: The aviation sector in Brazil is one of the most important in the Southern Hemisphere. The country is part of an exclusive group of six nations globally involved in commercial jet manufacturing. Additionally, it has consistently ranked as one of the top 10 countries for US aerospace exports for an extended period.
Infrastructure: The infrastructure industry in Brazil includes railways, ports, highways, airports, water resource management, wastewater, sanitation, and solid waste. The government has implemented an extensive privatisation initiative to address the significant funding gap in Latin America's infrastructure. This involves organising concession auctions and implementing regulatory changes to attract investment and financial support.
IT: Based on a report by the Brazilian Software Association (ABES), the country's IT market, which is currently worth $46.2 billion, was projected to grow by 8.2% in 2022. Brazil is the world's 10th largest IT market and accounts for 40% of the Latin American market.
Healthcare: Brazil is Latin America's biggest healthcare market, accounting for 9.1% of its GDP. Around 63% of the country's 6,642 hospitals are privately owned. Brazil's Unified Healthcare System is the main source of healthcare for at least 70% of its population.
Education: Brazil maintains its position as the leading market for higher education in Latin America. In 2021, educational expenses in Brazil amounted to around $25 billion, and the country's basic education system accommodated 46.7 million students.
Finance: Brazil has emerged as the leading fintech market in Latin America and ranks fifth globally, boasting 1,289 startup companies. Investments in Brazilian fintech firms have surged to nearly $4.5 billion by 2022 from a mere $52 million in 2015.
Brazil has a robust export sector, specialising in various products such as beef, poultry, meat, tobacco, wood, ethanol, and iron ore. The country also excels in advanced industries, including automotive, oil, food and beverage, chemical production, and cement.
China is the top importer of Brazilian goods, accounting for 31.3% of the total, while the United States is in second place with 11.1%.
Regulations in Brazil
The regulatory environment of Brazil.
Summary of the regulatory environment in Brazil
To maintain fairness and operational smoothness in business ventures in Brazil, entrepreneurs are required to comply with a range of laws and regulations, which include:
Company law: This includes regulations governing companies' establishment, operations, and dissolution.
Employment law: This includes regulations governing employment contracts, working conditions, and employee rights.
Product liability law: This includes regulations governing the legal liabilities and responsibilities of manufacturers, sellers, distributors, and other parties involved in the production and sale of goods.
Intellectual property law: This includes regulations governing copyrights, patents, and trademarks.
Competition law: This includes regulations governing competition and antitrust matters to promote fair competition.
Consumer protection law: This includes regulations governing the rights of consumers, product safety, and advertising standards.
Data protection law: This includes regulations concerning the collection, use, and storage of personal data.
Several government agencies oversee various aspects of the law related to businesses and consumer rights in Brazil. For example, the Brazilian Civil Code governs the establishment practices of companies while the Ministry of Labour and Employment and its regional offices oversee compliance with employment law by businesses.
How card payments are regulated in Brazil
The Central Bank of Brazil oversees card payments through a set of rules and procedures. These schemes regulate the provision of specific payment services to the public and are accepted by multiple recipients.
Payment institutions are authorised entities that comply with one or more payment schemes and can offer services like managing payment accounts, issuing payment instruments, acquiring payment instruments, and providing cash-in and cash-out services for funds held in payment accounts.
The legal and regulatory frameworks surrounding payment schemes and payment institutions aim to promote financial inclusion and enhance the safety and efficiency of payment systems. However, specific payment schemes, such as private label cards, payments for public utilities, transportation, and meal prepaid cards, are not subject to supervision by the central bank.
Do I need a licence to do business in the UK?
Yes. In Brazil, obtaining a business license to initiate a business venture is necessary. Depending on the nature of your business, you may need to acquire additional permits and licenses.
Payment solutions in Brazil
An overview of how to accept payments from customers in Brazil.
Payment gateways and providers in Brazil
In today's fast-paced business environment, providing customers with a seamless payment experience is crucial for success. Recognising this need, APEXX, a prominent payment technology company headquartered in London, offers an all-encompassing solution for merchants in Brazil who wish to accept payments from multiple providers.
By understanding the importance of accommodating diverse payment methods to cater to customer preferences and enhance their overall experience, businesses require a streamlined and efficient payment processing solution.
APEXX's Payment Orchestration Layer (POL) platform is the answer to this demand, serving as a centralised hub that connects various payment providers, including banks, acquirers, and alternative payment methods.
With APEXX POL, businesses can effortlessly manage multiple payment options through a single platform, simplifying their payment processing operations. This powerful platform offers an array of features designed to optimise payment efficiency.
One of its standout capabilities is intelligent routing, which automatically selects the optimal payment provider for each transaction based on factors such as cost, currency, and risk assessment. By doing so, APEXX POL helps businesses save on transaction fees and minimises the risk of failed payments.
Integration of APEXX POL into existing payment systems is seamless and hassle-free. The platform offers a range of APIs and pre-built plugins, making integrating with various e-commerce websites and point-of-sale systems easy. This flexibility allows businesses to smoothly incorporate APEXX POL into their infrastructure, eliminating disruptions or complications.
APEXX is a trusted payment provider committed to delivering innovative solutions that meet the evolving needs of businesses in Brazil and beyond. With its comprehensive payment orchestration capabilities, APEXX empowers businesses to effectively manage multiple payment options, optimise payment processing, and ultimately enhance customer satisfaction.
Cheapest payment solutions in Brazil
To reduce fees in their payment stacks, merchants in Brazil can implement the following strategies:
Negotiate fees: Merchants should negotiate with their payment providers for better rates, which can include transaction fees, interchange fees, and monthly fees.
Choose a suitable payment provider: Merchants should research and compare different payment providers to select the one that offers competitive rates and low fees.
Use alternative payment methods: Merchants can reduce fees by using alternative payment methods such as e-wallets or bank transfers instead of traditional card payments.
Prevent chargebacks: To avoid chargebacks and additional fees, merchants can offer clear product descriptions, prompt customer complaint resolution, and refunds when necessary.
Implement fraud prevention measures: Merchants should adopt fraud prevention measures to prevent fraudulent transactions, which can lead to chargebacks and additional fees.
Monitor payment processing fees: Merchants should keep a close eye on their payment processing fees and use payment analytics tools to track their expenses and identify areas where they can reduce costs.
Merchants can also consider using payment aggregators such as APEXX, which allow them to accept multiple payment methods through a single platform, reducing the need for multiple payment providers and lowering costs.
BNPL in Brazil
BNPL has witnessed significant growth in South America, with Brazil emerging as the largest market in the region. Brazil's status as the largest economy in South America makes it an unsurprising leader in the BNPL market.
The roots of BNPL in Brazil can be traced back to the 1950s when retail companies introduced paper payment slips, allowing customers to make monthly instalments. This payment method quickly became ingrained in Brazilian consumer culture.
In Brazil, regulatory measures led by the central bank have paved the way for increased competition, transforming the financial ecosystem and challenging traditional incumbents. As a result, the number of fintech companies in the country has surged to over 1,200 currently from around 550 in 2019. These fintech companies offer a diverse range of services to cater to customer needs and preferences in the market.
To provide BNPL options to their customers and manage their payment systems effectively, merchants in Brazil can integrate different BNPL providers, such as Ame Digital and Upnid, using APEXX.