KNOWLEDGE HUB ・REGIONAL GUIDES
A guide to payments in LATAM’s biggest ecommerce market.
Before rushing to translate your website into Portuguese, or scouting for office space in São Paulo, it is worth taking the time to consider how your potential Brazilian customers might like to pay for your goods or services.
Card use in Brazil is relatively high and Brazilians rarely pay for anything outright. Most online transactions are paid in installments. Cash-based methods such as Boleto Bancário are popular too, and give businesses access to Brazilians without credit cards.
Restrictions on banks and currency controls mean that, from an outside perspective, entry into Brazil is not always straightforward. This document will walk you through some of the key issues international merchants should consider before entering the market, including local payment legislation and payment methods, based on extensive on-the-ground experience.
Despite recent upheaval, Brazil remains a key market for businesses eyeing Latin America as a region for expansion. It's the largest online market in Latin America, representing over 38% of the region’s ecommerce sales. In 2018 the online retail market reached $53 billion and Google expects the Brazilian ecommerce market to maintain a healthy annual growth of 12.4% right up until 2021. To illustrate the health of the market, Brazilian ecommerce giant Magazine Luiza has seen its sales rise almost 35% in 2019.
While online retail continues to grow, many Brazilians still love shopping in physical stores, and this represents a great opportunity for businesses to get ready for unified commerce.
Internet penetration has been growing steadily in recent years. 70% of the population is now online, up 9% from 2017. This means a massive 126.4 million Brazilians were online in 2017, a figure projected to grow to 148.3 million by 2021, which ranks it seventh in the world in terms of internet usage.
This charge is being led by young city-dwellers. According to Comscore Media Metrix, almost half of online shoppers are aged between 18-34 and are overwhelmingly located in urban zones in the southeast (including São Paulo, Rio de Janeiro, and Belo Horizonte), the northeast (Salvador and Recife) and south (Porto Alegre, Curitiba, Florianópolis).
But while connectivity is on the rise, the inevitable belt-tightening resulting from the economic crisis has made the Brazilian shopper a cautious spender. A McKinsey survey revealed that more than half of respondents are actively looking for the best deals, and a study by SPC Brazil found that 60% are more likely to buy a product online if there is a promotion or loyalty program attached to the purchase.
Another crucial driver of online sales in Brazil is free shipping. A study conducted by SPC Brazil reported that 39% of respondents cited this as a top-influencing factor when deliberating over a purchase. More affluent shoppers have the luxury to be socially conscious, and factors such as a brand’s social commitment to the protection of the environment or sanitary standards are important. International brands are seen as a sign of wealth, and international technology brands and sports retailers can expect to do well within this segment.
Online fraud is a big concern in Brazil, with 78% of respondents of an eMarketer survey saying they were worried about identity theft. So businesses must take care to put shoppers at ease by limiting redirects to unknown sites and clearly displaying security certification. Further, smart risk management systems reduce friction for shoppers by using data to identify and block fraud while letting legitimate customers pay unhindered.
Brazil is famously a hyper-social country, and this trend is just as prevalent online, with The Wall Street Journal crowning it the ‘social media capital of the universe’. Messaging apps are particularly popular and nearly 100% of Brazil’s online population use WhatsApp.
Ecommerce platforms in Brazil are catching onto this trend, with about 60% of companies using social media to drive brand engagement. Therefore, as the lines between ecommerce and social media blur, businesses would do well to keep the Brazilian enthusiasm for social networking in mind.
A late bloomer in terms of smartphone adoption, Brazil is now catching up at an incredible pace, with an average of almost 2 devices per person (around 200 million cell phones in total). Consequently m-commerce is very much on the rise, representing 35% of all ecommerce purchases and 32% of its revenue (R$ 16.7 billion). In-app payments are also popular; a study conducted by National Confederation of Retailers (CNDL) and the Credit Protection Service (SPC Brazil) in 2018 found that 51% of Brazilians who have access to the internet have made in-app purchases.
It is important for businesses to keep mobile payments in mind to fully capitalize on the potential in the market, as Netshoes CFO Leonardo Dib explains: “Having a mobile strategy is crucial for retail companies. For Netshoes, mobile represents more than 50% of the traffic to our website and 30% of conversion. This is why investing in innovation in payment technology is fundamental.”
Back in 2013, in a move to keep ecommerce local and discourage international purchases, the Brazilian government added a 6.38% tax to all cross-border transactions. Additionally, Brazilian acquirers began to refuse cross-border transactions processed in BRL.
Consequently, Adyen recommends investing in a local entity and processing via a local acquiring network. In this way, you can keep your prices low and your authorization rates high. Other benefits:
"We decided to use Adyen's acquiring after extensive market research, and the results are clear: Higher conversion, more in-depth payment data and improved authorization rates. We are very pleased with the service.”
Mateus Bicalho, co-founder, Hotmart
Brazilian consumers are avid users of credit cards, with the overwhelming majority preferring credit cards for their online purchases. Alongside Visa and Mastercard, local card scheme ELO is growing in popularity. 15% prefer cash-based methods such as Boleto Bancário.
In the joint lead for online purchases are Visa and Mastercard. AMEX serves a small segment of high earners while ELO and Hipercard are typically targeted at lower income earners. Around 70% of consumers have cards that are not enabled for cross-border payments. There are four key acquirers in Brazil capable of processing ecommerce transactions: Cielo, Rede, Santander and Adyen’s own local acquiring network.
Adyen has its own acquiring network in Brazil (Adyen Acquiring) for Visa and Mastercard, delivering a robust and reliable connection underpinned by advanced data-driven technology. Additionally Adyen is connected to all major Brazilian acquirers (Cielo, Rede and Santander/GetNet).
Adyen helps merchants to maintain processing stability and optimize approval rates by dynamically routing transactions to ensure the best results for each bank.
Payments in installments are very common in Brazil, accounting for 80% of ecommerce payments for businesses with a typically high average transaction value. These are interest-free for the buyer and are collected month-by-month by the merchant (ranging from two to 12 months).
Businesses have the possibility to anticipate the payment of the full amount but this generates a so-called anticipation fee which is charged by the acquirer.
Anticipation fees may vary depending on the amount of installments to be paid upfront and the volume anticipated.
Global ticketing merchants Eventbrite and ViaGoGo have recognized the importance of accepting payments via installments, and now allow Brazilian customers to stagger their ticket purchases over a few months.
Adyen offers payments in installments to its merchants operating in Brazil, and reconciliation facilities for payments executed via installments.
Boleto Bancário, simply referred to as Boleto (literally meaning ‘ticket’), is a payment method regulated by the Brazilian Federation of Banks. A Boleto can be paid at:
(Once it has expired it can only be paid at the issuer bank facilities.)
Because Boleto payments cannot be disputed or reversed by the consumer, it is a low-risk payment option.
Boleto Bancário represents about 15% of all payments in Brazil and is a must-have option for businesses operating in the market. Solutions like Boleto are very common across LATAM, but the Brazilian Boleto has the advantage that it can be paid at any bank, not just the issuer bank.
Adyen enables the storage of shoppers’ Boleto Bancário payment information using secured tokenization of the data. This is an advantage because it means that, although Boleto Bancário is not automated, Adyen can help merchants speed up the process by pre-filling certain information for repeat customers.
In addition to the key payment methods, Adyen supports multiple local wallets. These wallets have limited reach, meaning they are optional, rather than must-haves.
"To keep up with the latest digital innovation, we take a mobile-first approach. Since launching our app, we’ve been offering one-click purchases, and now the integration with ewallets is an opportunity to provide an even easier checkout for our customers"
Luis Daniel Alegria, Chief Product Officer, Evino
Adyen has a dedicated local team of highly qualified payments experts in Brazil. This team, which includes business knowledge, technical support, and local developers is ideally suited to assisting the growth of large ecommerce businesses in Brazil.
In addition to offering the most stable payments platform in the Brazilian market, Adyen comes with a suite of built-in features unrivaled in any single platform solution.
Dynamic card validation
Dynamically formats card validations as $0 or $1, depending on bank compatibility, dramatically reducing churn.
AVS: Address Verification System
Verifies the shopper by crosschecking the billing address provided by the user with the address held by the card issuer.
Automated chargeback management
Adyen can defend up to 25% of chargebacks automatically, freeing up valuable resources by not dealing with lengthy disputes.
24/7 live reporting
Merchants have the ability to review transactions in real-time from Adyen’s Customer Area.
Merchants can deliver easy payments for returning customers without the burden of PCI. This can be done in combination with installments.
Fully automated refunds
Automating both partial and full refunds from Adyen’s processing platform.
For international merchants looking to gain a foothold in the Brazilian market, it is advised to keep the following key points in mind:
An overwhelming majority of Brazilian consumers use credit cards, but due to currency controls and bank restrictions, the bulk of these can only be used in the local currency. Therefore, international merchants are advised to process payments locally.
Boleto Bancário is a local payments method that accounts for around 15% of online transactions, making it a must-have payment option for international merchants serious about reaching a mass audience in the market.
Due in part to local payment preferences such as paying by installments and using local methods such as Boleto, mcommerce has been slow on the uptake, compared to other emerging markets. However this is changing, and mobile is rapidly becoming a key sales channel in Brazil.
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