Key payment challenges for marketplaces in the Brazilian market

The Paypers sat down with Luiz Henrique Didier Jr. of Bexs Bank to discuss the key payment challenges for marketplaces in the Brazilian market

How would you elaborate on the most relevant payments challenges for marketplaces in the current Brazilian market? 

As part of the process of expansion of a cross-border marketplace for Brazil, it is essential to understand the local payments culture that is highly specific and unique in relation to other countries. The payments segment is highly concentrated and just five large banks hold more than an 80% share in the sector, thereby dictating regulations and standards on payment methods, financial settlement periods, and interest, amongst others. Due to the fact that banking services are generally quite expensive, 55 million Brazilians have no ties to these institutions, meaning they have limited access to credit cards and use payment slips (called ‘boletos’ in Portuguese) for the purchase of goods and services. Another local reality that an international company should understand is that only 5% of Brazilians have credit cards that can be used internationally. Therefore, although we have an enormous market, very few people are able to make purchases in foreign currencies. This means that companies should offer a purchasing experience in Brazilian currency, as well as use the most common payment methods, which are mainly domestic credit cards, payments made as lump sums or in instalments, payment slips, and debit cards. Finally, it is worth stressing the high currency fluctuation that Brazil has been experiencing over recent years, this being a critical point in international operations, but one which can be controlled with a partner that offers a smart hedge solution and controls the FX rate. 

How about the main opportunities presented for this type of businesses? What makes Brazil an attractive market for marketplace expansion? 

Brazil has a population of more than 210 million people, and around 100 million of them make online purchases, meaning it is a large consumer market. The ecommerce segment has seen annual double-digit growth and, according to eBit/Nielsen, achieved revenue increase of 16.3% in the last cycle. In April 2020 alone, ecommerce expanded by more than 80%, a trend that is becoming more established amongst Brazilians and still leaves room for cross-border business growth. Furthermore, the Brazilian population is one of the most eager to experiment with new digital technology, representing one of the biggest user bases of Spotify, Waze, Facebook, and TikTok. 

What are some specifications on the Brazilian FX regulations that impact the understanding of local payment methods for a marketplace expanding in this region? What about the Brazilian tax structure? 

The exchange process in Brazil is highly regulated and supervised by the Brazilian Central Bank, meaning strict analysis is necessary to guarantee the compliance of the operation. An international marketplace that expands into Brazil needs a payment gateway that collects the amounts relating to the products or services in local currency. Following this process, it is necessary to pass on the sums resulting from the transactions to the many international merchants operating in the marketplace. This operation is performed by a bank that holds a licence for this type of transaction that involves the exchange of currencies. 

It is important to find a single platform that offers both the payments gateway and the exchange in an integrated and digital form, that speedily takes care of the entire regulatory process, and that also offers a smart hedge solution and takes online control of the FX rate, especially during periods of exchange fluctuation.

How would you describe the popularity of the crossborder sector after the massive disruption caused by 2020 and the COVID-19 pandemic? 

In 2019, the ecommerce cross-border segment’s revenue grew 67% in relation to the previous year, showing that it is increasingly becoming an option for Brazilians searching for new products and competitive prices. The number of Brazilians making purchases on international sites in 2019 rose 18%, and this should become increasingly consolidated following the pandemic that we are currently experiencing. The coronavirus pandemic has drastically altered consumer behaviour, since social distancing has brought the digital universe into people’s lives to a much greater degree. Many people have had their first experiences with ecommerce during this period, and the platforms are expanding enormously. Initially, the items most sought after were those in the health care, well-being, and decoration segments, as well as those in categories focused on enabling home office activities, such as computing and electronics. 

Some of the most important points that international marketplaces should consider to be able to make contact and strengthen ties with this new, post-pandemic consumer profile are: 

• Invest in user experience – the digital market is booming, and many companies are leaving the offline environment. It is therefore extremely important to offer platforms that have extensive experience in online purchasing, with a crucial focus on the payments stage of the customer journey. 

• Cross-media benefits and presence – due to the anticipated high level of competition, it is important to offer advantages to those consumers who are becoming increasingly more experienced and will become more demanding. 

• Invest in logistics – the logistics factor is very important for the cross-border experience, since it could take more time.

What are the most relevant emerging trends for cross-border marketplaces in the region and how would you envision the future of this ecosystem in the coming years? 

In addition to the payment methods that are crucial to the purchasing experience in Brazil, logistics is currently a limiting factor for cross-border ecommerce. This is due to the fact that deliveries take a minimum of 30 days, sometimes arriving much later, which is an important driver in cart abandonment on cross-border sites (a rate of 82% in Brazil), considering that clients cannot or do not want to wait. The Brazilian Government has signalled its intention to privatise the Brazilian Mail and Telegraph Service (ECT) amidst the new coronavirus pandemic. There is speculation that large global companies, including those in the retail sector, have shown an interest in this acquisition, which could have a positive impact on the entire ecommerce sector. 

Another important factor is the migration across devices. Online purchases have been increasingly performed using smartphones. Between 2018 and 2019, this number advanced 10 percentage points, and m-commerce purchases currently account for approximately 42% of the total. On Black Friday in 2019, they surpassed sales via desktops/notebooks. 

Finally, it should be stressed that the payments segment has also been changing a great deal. New players have moved in, including fintechs and digital banks, which offer more ‘friendly’ financial services, making them more popular. All the while not even counting the tech innovation brought along by new trends such as Open Banking, culminating with the national instant payments platform led by the Central Bank, which will develop over the course of 2021.

This editorial was first published in our Cross-Border Payments and Ecommerce Report 2020–2021, which assesses the change of pace that occurred in 2020 and provides a comprehensive overview of the major trends driving growth in this space, being the ultimate source of information for players interested in selling across borders.

About Luiz Henrique Didier Jr. 

With over 25 years of experience at leading financial institutions in Brazil, Didier’s fields of expertise include innovation in payment processing, marketing, product and business development, and Brazilian FX regulations. At Bexs, his challenge is to bring innovation to facilitate, through payment transactions, access to global goods and services. 

About Bexs Bank

Bexs Bank is specialised in international payments processing and FX transactions for global ecommerce, SaaS, and investments. Through a unique API Platform, our solution provides the collection of Brazilian currency via local payment methods, helping big and small companies to connect with customers in the digital world.