This article will give you an overview of the main payment methods in Brazil, focusing on their presence in the country and the reasons why some of them are more successful than the others.
With the offer of “easy credit” to the lower classes and the spread of Internet, as well as of new technologies, Brazilians now find themselves able to choose from different payment options.
Pushed by this demand, entrepreneurs have to adapt to this new scenario if they want to keep their customers. As one thing leads to another, some paying methods tend to disappear, some others tend to keep growing and, surprisingly, some of them keep their strength even with all the competition.
Credit and Debit Cards
Banks and financial institutions have made the acquisition of a credit card a lot easier. Out of 10 new accounts, at least four come along with a credit card. Over the last five years, the use of debit cards has grown 247%.
Even though the number of Brazilians with a bank account has increased and there had been a significant growth of debit card use, only 32% of the transactions in Brazil are paid through this method.
Despite having the option of paying their bills through online banking, a lot of people do not trust the Internet for banking transactions and some others do not know how to use the web or an ATM.
Also, many Brazilians still believe that banking transactions performed by real people are more reliable than those performed by a machine.
Credit cards correspond to 38% of the monetary transactions in Brazil. This payment method used to be more common among classes A and B, but with the rise of the lower classes, the penetration of credit cards among the poorest ones has grown significantly, corresponding to 62% of all the credit cards issued in the country.
The main players in the Brazilian market are Visa and Mastercard, followed by Hipercard (owned by Itaú), Diners Club and American Express, even though the last three are still concentrated in some areas of the country, such as Southeast and Central-West.
Practically eliminated in some countries, checks are still used in Brazil, even though not as often as credit cards. Only 14% of the population still use checks in Brazil. When it comes to paying bills, only 7% rely on the checkbook.
Whereas credit and debit cards are used in most situations, checks are more common when buying something relatively expensive, such as a appliances and electronics.
Just like observed in countries such as Finland and Germany, the issuance of checks fell 7%. Besides the competition with other paying methods, such as credit and debit cards, checks also face a discouragement from the government.
In 2010, there were 70 million bounced checks, what caused a loss of BRL 83 billion. As an attempt to promote safety to both customers and entrepreneurs, earlier this year the National Monetary Council demanded the banks to be more strict regarding check issuance. The purpose is to avoid fraud and to prevent the use of the checks by a third party.
Cash is still pointed out as the preference of the Brazilian population. Even though the number of people that have a bank account has increased over the years, 55% of the population still receive their salaries in cash, especially those who perform low-paid jobs such as housekeeping and construction workers.
Most Brazilians claim that they always have at least 10BRL in their pockets and the reason is the belief that they might come across an emergency in which that amount of money would be necessary, such as paying for public transportation or buying a snack.
There are several factors that encourage the use of cash, such as:
- Some establishments – especially the smaller ones – that do not accept all credit cards, especially checks
- Most people do not keep track of their credit cards transactions, so they are never sure of how much credit they have left
- As it is relatively expensive to have a credit card machine, many stores establish that the customer has to spend a certain amount of money to be eligible of paying with credit or debit card, even though such practice is illegal
- Some stores give a discount for those customers who pay their installments in cash, even though not encouraged by the Consumer Protection Agency
- When paying their bills with cash, customers have a variety of banks and other establishments (such as grocery stores, newsstands, post offices, etc) where they can go, whereas the use of the debit card is restricted to the bank who issued it
- Brazilians often shop at informal markets that rarely accept plastic money
Other Payment Methods
Besides credit cards such as Visa and Matercard, co-branded cards have experienced a significant growth in Brazil. They are issued by department stores (C&A, Renner, Marisa, Pernambucanas, etc), grocery stores (Carrefour, Pão de Açúcar, Extra), drugstores and others. These cards offer some advantages for its users, such as discounts and installment options.
Also, it is very common for Brazilians to use their benefit cards - such as the card they are given by the employer to pay for their meals - for non-professional purposes, such as at the grocery store. There are even gas stations that take public transportation tickets as a payment option.
As new technologies arise, mobile payments are growing in Brazil. An example is Oi Paggo, a mobile payment system that allows its customers to perform payments using mobile credits. The measure offers all the convenience of a credit card plus the flexibility of mobile transactions.