Brazil’s Mobile Payment Revolution Well Underway

July 15, 2020

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Luisa Muneratti

VP – Europe & Latin America

Brazil has one of the world’s most mature mobile payment markets, with almost 5% of over 15s in the country using electronic wallets (eWallets) to fund online purchases. And with a large, Internet-savvy population and a high number of smartphone users, mobile payments are well poised to take a more significant share of the estimated 95% of financial transactions which are still processed using some form of cash payment in the country.

US$15-US$18bn e-commerce market in 2019

As Latin America’s largest economy, it is no surprise that e-commerce activity in Brazil is already well developed. Even so, online sales accounted for less, and 5% of total retail spend in 2019 according to Statista, meaning e-commerce has significant room for further expansion. Brazil’s domestic e-commerce market growth may have also been helped by government policies that favour local merchants. Goods and services brought online from an international website are subject to an additional tax of 6.38%, a measure which the government implemented to grow the Brazilian economy by encouraging consumers to buy from local merchants and retailers.

Popular online purchases revolve around consumer electronics and travel with almost three quarters (72%) of Brazilians aged 16 to 64 use shopping apps, and 47% banking apps. Online marketplace and auction site MercadoLibre was the tenth most visited website by monthly traffic in Brazil according to Similarweb statistics compiled for January 2020. App Annie ranks it seventh by the average number of monthly active users, and ninth by the number of downloads (ahead of online banking app Caixa in tenth).

Statista’s market outlook for January 2020 estimates that total online purchases of consumer goods exceeded US$15bn (with 128m Brazilians contributing an average of US$120 each). PPRO’s payments and e-commerce report put the number slightly higher at US$18bn, up 10% on the previous year, with the average annual spend per business to consumer buyer calculated at US$331.

Of that transaction volume, mobile is estimated to account for 27%. In the third quarter of 2019; however, more people seem to have online purchases via their laptop or desktop computers (50%) rather than mobile devices (38%) estimates GlobalWebIndex. That was driven partly by the widespread availability of high speed fixed broadband connectivity in Brazil’s major cities. Fibre optic networks offered average download speeds of around 49Mbit/s, almost twice as fast as 4G equivalents (25Mbit/s according to Ookla speed tests conducted in January 2020).

The long-term momentum remains firmly behind mobile, with Brazilian mobile network operators (MNOs) including Claro, Vivo and TIM having already laid plans to implement fifth-generation (5G) networks which will bring higher bandwidth (up to 1Gbit/s), lower latency, better coverage and improved reliability to consumer mobile connections.

Banking trends and government impetus

Government-led changes to the e-commerce ecosystem too are on the way. The Central Bank of Brazil is currently developing an instant payment system that will confirm online transactions within a few seconds, expected to launch in 2021. It will also allow Brazilians to pay and receive payments for purchases by scanning a QR code with their smartphones.

For the moment, credit cards still fund most online transactions (71%), with cash accounting for 21%. Boleto Bancário, a domestic payment method regulated by the Central Bank of Brazil, facilitates most cash e-commerce payments, to allow shoppers to print vouchers for online purchases which they take to a bank, ATM or other authorised processors to pay the owed amount in cash.

Most adults in Brazil (70%) have accounts with a financial institution, and many (27%) also have credit cards. But Brazil also has one of the highest penetrations of mobile money accounts in the world, with 4.8% of over 15s using digital or electronic wallets (eWallets) according to World Bank global financial inclusion data compiled in January 2020. Worldpay’s Global payments report estimates that mobile wallets accounted for as much as 13% of e-commerce spend in Brazil in 2017, and 3% of Point of Sale (PoS) transactions by value.

Mature mobile payments market

Certainly, Brazil has evolved to be something of a hub for financial services innovation, with over 400 fintechs and 7m million people estimated to have accounts at digital-only banks. Reports suggest that out of 115 Brazilian companies offering some form of the digital payment platform, 24 of them are focussed on mobile payment solutions alone. By 2022, Frost % Sullivan estimates that registered mobile money and payment users in Brazil will exceed 83m. 

The latest entrant is WhatsApp, which launched digital payments enabled by Facebook Pay in Brazil this month [June 2020] following beta trials in India where regulators have delayed its debut. After linking their account to a Visa or Mastercard credit or debit card provided by local partners such as Banco do Brasil, Nubank and Sicredi, users can send and receive money without leaving the WhatsApp interface. In comparison, the service is also free for the consumer to use, though merchants pay a 4% fee to receive payments. The Central Bank, however, stopped the rollout citing regulatory concerns, while Facebook issued a statement supporting PIX. PIX is the central bank’s own payments service, for which it has secured partnerships with nearly 1,000 industry players. The central bank has said that it plans to launch PIX in November this year.

Facebook is relatively late to the market in Brazil; however, with other players active for many years previously. PagSeguro debuted in 2006 as an online payment platform for parent company UOL, one of Brazil’s most extensive Internet content, digital products and services company. It expanded into POS payments in 2013 then launched digital bank PagBank in 2019. An estimated 107m unique visitors accessed the UOL website in June 2019 according to ComScore analysis.

PayPal’s app allows consumers with linked PayPal or MasterCard accounts to make purchases in-store using a tap-to-pay NFC option, as well as providing an internet-based digital wallet for online shopping. Integration with other eWallet providers in Brazil is at the forefront of PayPal’s strategy – it has agreements in place which let consumers use PayPal through both Google Android Pay and Samsung Pay digital wallets, for example. PayPal also signed a deal with Brazilian telco Claro that allows the latter’s subscribers to make in-app purchases and mobile top-ups through PayPal, which are linked to Claro’s own Claro Pay digital wallet.

Local fintech and payment providers linked to retail

Many digital wallets are attached to retail chains, including MercadoPago, the payment system launched by Argentine online marketplace giant and Amazon/eBay competitor MercadoLibre in 2014 later expanded into eight Latin American countries including Brazil. MercadoPago more than doubled the value of its global payment transactions to US$6.8bn in 2018, helped by merchant deals with gas stations, drug stores and the São Paolo subway in Brazil. Late last year, the digital wallet has announced a PayPal integration that gives its users access to hundreds of thousands of additional merchants. The company is now moving beyond digital wallets into other financial services, having been issued with a license to issue credit cards by Brazil’s Central Bank in March 2020.

Founded in 2010 São Paulo-based RecargaPay reached 10m Android app store download by August 2018, giving users the ability to top up their mobile phones, pay utility bills, transfer money, purchase gift cards, refill transport tickets. Subscribers can either link it to their credit cards or Apple Pay and Google Pay accounts. 

Fintech BPP launched its mobile wallet BBP Pay in January 2019, using token-based contactless payment technology on Android devices. It is supported by Visa Token Service (VTS) technology that replaces sensitive data like 16-digit credit/debit card numbers with a unique digital identifier (or Payment Token) for additional security. The app also supports QR and authenticates transactions via PIN numbers or smartphone embedded biometric security tools (fingerprint or facial recognition). 

PicPay recently collaborated with Brazilian retail management technology developer Linx to deliver additional QR payment options in stores. The app allows users to make fund transfers, bill payments and store money. More recently Brazilian fintech and payments start-up Ebanx began piloting digital wallets for 10,000 consumers at the beginning of 2020, with executives bullish about signing up 1m clients within 18 months.

Telcos and MNOs offering mobile money services

Brazil’s four major telcos also have partnerships with banks and other providers to deliver mobile payment services to their customers going back almost a decade – including Vivo and Mastercard (Zuum); Oi and Banco do Brasil and Cielo; Claro and Bradesco. More recently, TIM and Claro have partnered Cielo to deliver smartphones that double as mobile payment terminals that small retailers can use to accept NFC and QR enabled transactions from customer smartphones.

Brazil’s four MNOs have up to 144m subscribers between them calculates GSMA Intelligence in its Mobile Economy Latin America 2019 report, an attractive pool of potential customers for eWallet providers and merchants that can forge partnerships with operators that facilitate faster and easier mobile payments from smartphones. The key to any successful online retail operation is to offer the best experience possible to keep the customer from shopping elsewhere and return to the site in the future. But the rate of transaction abandonment can be high if the buyer finds that the merchant cannot quickly and easily accommodate their preferred method of payment. That means sellers must be flexible in providing different ways to pay and accepting as payment methods as possible to maximise revenue and repeat business.

One of those is direct carrier billing (DCB), which funds payments for online goods and services from the consumer’s mobile phone account. Not only can DCB deliver a fast, smooth transaction which can be completed a couple of clicks, but it can also be protected by additional smartphone embedded biometric security capabilities. Alongside DCB options from multiple telcos, merchants can also link different eWallets to their platform and use a third party payment platform to co-ordinate, manage and maintain the necessary relationships, integrations and application programming interfaces (APIs) with the various stakeholders involved.

Increasing support and usage of NFC and QR code transactions in Brazil over the next five years is likely to significantly accelerate the value and volume of mobile payment transactions made in the country. But growth at scale will present other challenges to payment providers and e-commerce merchants alike, which may need mobile payment service specialists like DOCOMO Digital to help them avoid being overwhelmed by the surge.

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