Encouraging Digital Transactions
Introduction to Portugal
An overview of Portugal's currency, population and key statistics.
Portugal's official currency is the euro (€). Banknotes in denominations of €5, €10, €20, €50, €100, €200, and €500 are in circulation, as are coins in denominations of 1 cent, 2 cents, 5 cents, 10 cents, 20 cents, 50 cents, €1, and €2.
The European Central Bank is exploring the possibility of introducing a digital euro. It would be an electronic form of payment similar to regular cash, providing people with an additional way to conduct transactions. An investigation into this matter began in October 2021 and is expected to conclude in October 2023.
Portugal had a population of 10,074,432 people as of January 1, 2023, having declined by 0.45% from a year earlier. Based on a United Nations estimate, the country had a population of 10,247,605 in 2023, down 0.23% from 2022. The country's population has been declining since its peak in 2008.
Portuguese is the primary language spoken in Portugal, but there are also several regional languages, including Mirandese, Barranquenho, Minderico, and Portuguese Sign Language. Various dialects and accents are found throughout the country, from north to south.
Portugal's gross domestic product was a commendable $251.95 billion in 2022, with real GDP growth expected to be a robust 2.5% in 2023. This optimism is reflected in the government's upward revision of its 2023 growth forecast to 1.8% from 1.3%. The year 2022 exhibited a dynamic growth pattern, with GDP surging 2.3% in the second quarter after registering a 1.6% growth in the first. A large portion of this early expansion was driven by burgeoning external demand.
Portugal's vibrant economy is expected to decline slightly in 2023-2024, but growth is predicted to remain above the EU average. The thriving tourism industry contributes significantly to this resilience. However, there are potential headwinds such as political uncertainty, rising interest rates, and a subdued global economic environment, particularly the anticipated slowing of US and global growth. On the brighter side, Portugal's fiscal prudence shines through. The country's general government deficit, which was 0.4% of GDP in 2022, is expected to fall to 0.1% in 2023 and 2024.
Internet & mobile phone trends
Portugal had 8.73 million internet users as of January 2023, accounting for 85.1% of its population. According to Kepios data, there was a 0.2% decrease, or approximately 19,000 users, from 2022 to 2023.
On the mobile front, projections indicate that smartphone usage in Portugal will increase from 2024 to 2028. The number of smartphone users is expected to expand by 0.4 million, representing a 5.41% increase. After increasing for seven years in a row, the number of smartphone users is expected to reach 7.82 million by 2028.
Portugal's e-commerce market, currently ranked 49th globally with earnings of $5.02 billion, is poised for significant growth. Revenue is projected to grow at a compound annual growth rate of 11.2% from 2023 to 2027, reaching an estimated $7.68 billion. In 2023 alone, the sector was expected to grow by 13.3%, contributing to the global growth rate of 9.6%.
Summary of fiscal policy
Portugal must maintain a stable fiscal stance to preserve fiscal space and support monetary policy in 2023. It should also be prepared to adjust if unexpected shocks materialise. The 2023 fiscal plan, equivalent to about 2% of GDP, includes public salary and pension increases, a temporary VAT exemption for essential goods, and housing support measures.
Despite a 2.5% increase in real GDP, the country expects economic challenges in 2023. The Recovery and Resilience Plan aims to boost public investment, but execution delays may persist. External demand will bolster exports, especially in services. However, the government foresees a growth slowdown to 1.3% in 2023, as families face financial strains due to rising energy and food costs, higher interest rates, and decelerating exports.
While Portugal's economic growth is projected to slow between 2023 and 2024, it is still expected to surpass the EU's average, thanks to a thriving tourism industry. Growth may be hampered by political instability, rising interest rates, and a weakened global outlook, especially with the US and global economies cooling down. Positively, Portugal's government deficit is expected to shrink further, from 0.4% of GDP in 2022 to 0.1% in both 2023 and 2024.
How people pay in Portugal
An overview of how people in Portugal choose to make payments.
Traditional payment methods
The primary traditional payment methods used in Portugal
A Visa credit/debit card is a financial payment card issued by banks or financial institutions. It allows users to make purchases, and withdraw cash and can be used online and in person. Visa's processing network can handle over 65,000 transaction messages per second.
Mastercard is a worldwide payment network that links financial institutions, merchants, and individuals, facilitating seamless transactions. This renowned company provides a range of credit and debit cards issued through partner banks. Customers may enjoy supplementary benefits such as rewards programs, cashback offers, and insurance coverage depending on the specific bank.
American Express cards encompass a range of payment cards provided by the multinational financial services corporation, American Express Company. The Amex card portfolio includes diverse options like credit cards, charge cards, and prepaid cards. Renowned for their broad acceptance among merchants, these cards grant cardholders access to various advantages, including perks, rewards programs, travel benefits, and dedicated customer service assistance.
The Single Euro Payments Area (SEPA) is an EU initiative that harmonises direct debit payments across 36 countries in the eurozone. It ensures consistent payment processing for merchants and offers consumers the same level of security and convenience, regardless of the country in which the payment is made. SEPA covers all banks that provide euro-denominated direct debits and uses standardised identifiers like BIC and IBAN for payment transactions. Its goal is to create a unified payment market and promote cross-border trade within the eurozone.
Multibanco is a versatile payment solution that connects over 25 Portuguese banks and offers access to over 12,000 ATMs. Users can buy train tickets, pay taxes, and make other purchases online and in shops.
Alternative payment methods (APMs)
Alternative payment methods
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.
Google Pay is a digital wallet and payment service developed by Google. It allows users to make secure payments using their mobile devices or computers. It supports various payment methods, offers compatibility across different devices, and provides features like loyalty program integration and transit ticketing. Google Pay prioritises security and convenience with tokenisation and biometric authentication. It has expanded to include digital banking services and continues to evolve.
Clearpay is a buy now, pay later (BNPL) service that allows shoppers to purchase products and split the cost into four payments, billed every two weeks. This allows users to obtain items without paying the full price upfront. Clearpay is offered at checkout at many stores to provide more payment flexibility. On-time payments typically have no interest or additional fees, but late payments may incur additional costs.
Klarna, founded in 2005, is a global payment and shopping service that offers flexible payment options, including bank transfers, BNPL, and instalments. Klarna's buyer protection policy ensures consumer protection. The payment options are integrated into the checkout process of partnering merchants. With 90 million active consumers and over 250,000 merchants in 17 countries, Klarna is a trusted and popular choice for convenient and secure payments.
Accepting payments in Portugal
A guide to accepting payments in Portugal
How to accept online payments in Portugal
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 Portugal, the general process for online payments typically involves an acquirer, issuer, retailer, and cardholder in the following steps:
1. The cardholder initiates a payment by presenting their payment card to the retailer to purchase goods or services.
2. 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).
3. The payment scheme sends the payment request to the issuer (such as a bank or licensed issuer) who issued the card to the cardholder.
4. 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.
5. 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 Portugal take?
The payment processing time may vary depending on the method and the recipient's bank. For instance, online money transfers through platforms like PayPal can quickly and conveniently send 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 Portugal 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 Portugal:
Credit and debit cards: Merchant fees for accepting online credit and debit card payments can range according to the transaction amount. It also varies depending on the type of card used and the merchant services provider.
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%age of the transaction amount.
Other fees surrounding online payments in Portugal 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%age 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%age 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 1% to 3% of the total transaction amount.
Security challenges of online payments in Portugal
E-commerce in Portugal, like elsewhere, prioritises online payment security. Here are major security issues tied to online payments:
Fraud: Unauthorised transactions and merchandise loss are common. Crooks might use stolen card details, causing financial harm to companies and shoppers.
Identity Theft: Hackers can snatch personal details to pose as someone else and conduct illegal transactions. This harms financial health and personal image.
Friendly Fraud: Some customers buy, receive the item, and then wrongly contest the charge. This results in chargebacks, a cost to businesses.
Data Safety: With more online transactions, data breach risks grow. Companies must secure client data to keep trust.
Regulations: Digital payments evolve fast, bringing regulatory hurdles. Firms face rules about data safety, anti-money laundering, and customer identification.
Authentication: Online payments need strong authentication. While biometrics improve safety, they raise privacy and user experience issues.
These issues underline the need for strong security and staying current with online payment safety trends and rules.
Portugal has adopted multiple strategies to address online payment security:
Regulation: The Bank of Portugal enforces strict security standards in line with the EU's Revised Payment Services Directive (PSD2), which bolsters online payment safety.
Authentication: Strong Customer Authentication (SCA) is emphasised, requiring multiple verification steps for transactions.
Cybersecurity Initiatives: National programs are in place to protect against cyber threats.
Public Awareness: Campaigns educate the public about online fraud risks and prevention.
Collaboration: Financial entities share information and best practices to combat fraud.
Tech Investments: Institutions are utilising advanced tech like AI to detect fraud in real time.
Data Protection: Following the EU's GDPR, data security measures have been enhanced.
Audits: Regular checks ensure institutions meet security standards.
Training: Employees receive training on up-to-date cybersecurity threats and countermeasures.
Key sectors & industries in Portugal
According to Trading Economics and various other sources, the top 10 industries in Portugal are:
Portugal's food products industry is crucial to its economy, generating $30.85 billion in revenue in 2023 and is expected to grow at an annual rate of 3.06% from 2023 to 2028. Meat dominates the market with $6.32 billion in revenue, and each person contributes an average of $3,050.00 to the industry. While online sales account for only 0.3% of total revenue, the overall market volume is set to grow by 1.4% in 2024. By 2023, individual food consumption is estimated to reach 780.80 kg.
Portugal's petroleum industry is highly dependent on imported energy. Ranked 11th in the EU for energy import dependence, Portugal has seen a decrease from 85% in 2000. This is due to a lack of domestic fossil fuels such as oil, coal, and natural gas. However, by 2030, Portugal's fossil fuel dependence is projected to drop to 65%. In recent decades, Portugal has prioritised renewable energy, particularly wind and solar, reducing its energy import rate to below 80%. Supported by strong incentives and goals, Portugal aims for renewables to account for at least 80% of its electricity by 2030 and envisions carbon neutrality by 2050.
Portugal's automotive sector plays a crucial role in its economy. As of 2023, the industry comprises 32,200 companies, employs 152,000 people, and generates €33.7 billion in revenue. This substantial contribution accounts for 21% of the country's fiscal revenue and 11% of its exports.
Portugal has a leading health sector in the EU and globally with 115 pharmaceutical firms as members of APIFARMA, including notable names such as ATRAL, Tecnifar, and Bia. Pharmaceutical exports increased to €106 million from €92.2 million between April 2020 and April 2021, and pharmaceutical sales increased by 9.06% to €3.2 billion in 2022.
Rubber and Plastic Products
Portugal's rubber and plastic products industry remains crucial to its economy in 2023, despite a 3.51% decline in production value from the previous year. Turnover also decreased by 3.67% in the same period. However, recent years have seen higher production values than earlier periods.
Portugal's paper products industry remains an important part of its economy, despite recent declines. Although the industry's production value fell by €631.3 million, or 14.15%, in the previous year, the past two years still had higher production values than before. The industry's turnover also declined.
Portugal's tourism industry remained a key economic driver in 2023, targeting pre-pandemic 2019 figures depending on upcoming connectivity and mobility trends. It adds $25.5 billion to the country's GDP, supported by 74,000 businesses and 332,000 employees. The forecasted revenue of $10.6 billion is only half of the $21.2 billion achieved in 2019, but there is optimism that the industry can match the 2019 revenue by the year's close.
In 2023, Portugal's basic metallurgy industry contributed 11% to the gross value added, with a production value of 104.80 points by June. However, the industry is grappling with challenges from war disruptions, which are impacting post-pandemic gains and are expected to cause steel consumption to drop by 1.9%. Despite these challenges, 2024 holds promise with a projected modest steel consumption increase of 1.6%, driven by potential industrial recovery.
Valued at $29.3 billion in 2022, the Portuguese construction market is projected to grow by over 1% between 2024 and 2027, driven by initiatives such as the 2030 National Investment Program and environmental plans.
Portugal's healthcare system ranked 25th on Numbeo's 2023 healthcare index. Life expectancy rose to 82.47 years in 2022, a 0.22% increase from 2021. The country has a hybrid healthcare model, with institutions being either public, managed by the Serviço Nacional de Saúde, or private.
Imports & Exports
In May 2023, Portugal's trade landscape revealed some interesting patterns. Imports of vehicles, including cars, tractors, and trucks, along with their parts, led the way with an impressive value of €1.15 billion. Mineral fuels and mineral oils followed closely at €1.03 billion, followed by electrical machinery and electronics at €912 million, and machinery and mechanical appliances at €770 million. Rounding off the top imports was the plastics sector, registering €449 million.
In terms of exports, cars, tractors, trucks, and their parts led the way again, generating €1.01 billion. Electrical machinery and electronics exports came in second at €548 million, followed by machinery and mechanical appliances (€506 million), mineral fuels and mineral oils (€451 million), and plastics and related articles (€351 million). These figures highlight the significant role of machinery, automobiles, and plastics in Portugal's trade dynamics for the month.
Regulation in Portugal
The regulatory environment of Portugal
Summary of the regulatory environment in Portugal
To maintain fairness and operational smoothness in business ventures in Portugal, 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.
Portugal's vibrant business landscape is overseen by specialised regulations and governing bodies. For example, corporate entities must comply with the Commercial Companies Code, and the Portuguese Companies Registry is responsible for registering these companies. The Labour Code, crystallised in Law No. 7/2009, provides guidance on employment matters, and the Authority for Working Conditions ensures compliance.
Decree-Law No. 383/89, which echoes the principles of the Product Liability Directive, is the guiding light for product responsibility. Intellectual treasures, such as copyrights, patents, and trademarks, are protected by codes such as those on copyright and industrial property.
How card payments are regulated in Portugal
Card payments in Portugal operate within a well-structured regulatory framework, underpinned by the Commercial Companies Code. The Portuguese company registry, Registo Nacional de Pessoas Colectivas, oversees the registration of companies that fall under this realm.
While card payments are widely accepted, it's crucial to understand that no merchant is compelled to accept them. The only universally accepted legal tender is the euro, in both banknotes and coins. Intriguingly, EU-based banks outside the eurozone are bound to the same standards. They cannot impose higher charges for euro payments in or to another EU nation than domestic payments in their own currency.
Further, businesses are prohibited from levying additional fees on customers choosing to pay via credit or debit cards. As for the range of card options, Portugal offers a diverse palette. This includes standard debit and credit cards, prepaid cards, and multifunctional cards. Each card variant is governed by its distinct set of regulations and rules.
Do I need a licence?
Yes. In Portugal, various business activities may require specific permits and licences. This can encompass construction, import/export, and environmental impact permits. EU citizens primarily need tax registration and a registration certificate. Non-EU residents must obtain a visa before initiating a business or job hunt. Given the diverse requirements based on business types, consulting with a legal expert or local business advisor is advisable.
Payment solutions in Portugal
An overview of how to accept payments from customers in Portugal
Payment gateways and providers in Portugal
Due to the rapid emergence and evolution of new payment methods, companies must ensure that their customers have a seamless and efficient payment experience. To address this need, payment technology company APEXX has developed a solution that enables merchants to accept payments from multiple providers.
Recognising the importance of catering to the diverse payment methods that customers prefer, businesses need a streamlined and efficient processing solution. With the help of its Payment Orchestration Layer (POL) platform, APEXX provides a central hub that connects various payment methods and banks.
The ability to manage multiple payment methods through a single platform is a key advantage of the POL solution from APEXX. It also offers a variety of features designed to help businesses improve their efficiency.
Intelligent routing is one of the most prominent features of the APEXX POL solution. It uses a methodology that considers various factors, such as cost, risk, and currency, to choose the appropriate payment method for each transaction. This eliminates the possibility of failures and helps companies reduce their transaction fees.
Integrating APEXX POL with existing payment systems is effortless. The platform offers pre-built plugins and various APIs that enable integration with various payment platforms, including e-commerce sites and POS systems. This flexibility enables companies to seamlessly integrate the system, eliminating issues and disruptions.
As a leading payment provider, APEXX helps companies in Portugal and other countries improve their efficiency and manage their payment processing. Through its flexible payment orchestration framework, it enables them to effectively process multiple payment methods and improve their customer satisfaction.
Cheapest payment solutions in Portugal
To reduce fees in their payment stacks, merchants in Portugal 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 Portugal
The BNPL sector in Portugal mirrors the rapid expansion of the broader European market, fuelled by the spike in e-commerce during the pandemic. By 2023, the BNPL market is forecast to reach $309.2 billion and grow at a rate of 25.5% annually.
With such forecasts, Portuguese merchants can use APEXX to integrate different payment systems or providers to provide BNPL options like Klarna to their customers and effectively manage their payment systems.