Rethink Commerce Blog

Be an eCommerce Star in the Brazil Market with these 5 Payment Best Practices – Part 2

Posted on April 29th, 2014 by

The best strategy for eCommerce success, in what has become the world’s sixth largest economy, is to know the rules of the local online market well – or risk being sidelined. The Brazilian online market is in a league of its own, with very particular legislation and taxation impacting cross-border purchases, capable of posing difficulties to international companies. There’s really no point in attempting to circumvent the local payments rules, regardless of how good your dribbling skills are. Not unless you want to risk punishing and alienating Brazilian shoppers, reducing your revenue to only a fraction of what it could be.

Here’s a short list of the best practices that you need to be aware of when selling in Brazil:

  1. National cards and local currency support (Brazilian Real)
  2. Payments in installments
  3. Taxation
  4. Boleto Bancario
  5. Recurring charges retry logic

 

National cards

national cards brazil
national cards brazil2

The predilection of Brazilian payment methods over international alternatives, driven by local taxes and legislation, is a key aspect of Brazil’s ecommerce market.

  • Brazilian shoppers use credit or debit cards for approximately 70% of online purchases, with e-Bit noting that the number can be as high as 73%.
  • No less than 80% of cards used are issued by local banks and support only the Brazilian Real (R$).
  • Only 20% of cards also support international currencies and can be used for cross-border transactions.

The thing to remember when it comes to cards issued by Brazilian banks is that processing is limited to domestic processors, and a local partnership is vital in opening up the vast Brazilian market to international companies.

Payments in installments – (Parcelamento/Parcelas)

A characteristic of national cards in Brazil, installments – or parcelas – have been deeply rooted in Brazilian commerce long before credit cards were common. Some could say installments are as much a part of the local culture as Samba. In fact, it’s not uncommon in Brazil for a fraction of the total price of products to be advertised, focusing on its single installment value.

  • IMF estimates that the use of installments for the purchase of durables is common across at least 70% of households.
  • According to Financial Times as many as 80% of all retail sales involve installments.

Installments also play a key role for eCommerce transactions, with shoppers taking advantage of parcelamento for 50% of online payments made with credit / debit cards.

  • Some 63% of online card payments involve installments, according to e-Bit, which also offered an overview over how transactions are divided into parcelas / individual payments.

parcelamento

Taxation

Brazilian banks started giving payments in Brazilian Reals an advantage over international currencies in September 2013, by declining Dynamic Currency Conversion transactions (DCC). The measure, imposed on local banks, made card transactions in international currencies virtually impossible, with more than 7 out of every 10 DCC transactions failing. However, some 20 to 30% of local cards continue to support transactions in non-BRL currencies. Such payments are punishing Brazilian shoppers and increasing the value of purchases artificially through the addition of taxes. A tourism exchange rate, of as much as 8%, is applied to converting the value of transactions from international purchases into Brazilian Reals. On top of this, there’s another 6.38% Financial Transaction Tax that also increases the price paid by customers. It’s easy to see why international cards and transactions in non-BRL currencies are not a solution for Brazilian online shoppers.

Boleto Bancario

Extremely secure (since there’s virtually no possibility of fraud) and a safe payment method for international companies because of the lack of chargebacks, Boleto Bancario is a very popular alternative to card payments in Brazil. Popular with both B2C and B2B (the preferred method for business customers where it’s used for 100% of payments), Boleto Bancario can contribute to increasing conversion rates. e-Bit reveals that some 18% of ecommerce transactions in Brazil are done through cash payments in combination with the bank transfer, namely a Boleto Bancario. This payment method does come with lower conversion rates (approximately 50%), since they force customers to make physical payments, but there’s absolutely no risk associated with it. By offering support for Boleto Bancario on top of national cards (with installments) and international cards, you cover over 90% of the payments market in Brazil.

Recurring charges retry logic

Almost 60% of Brazilians are paying installment debt on a monthly basis, according to the Brazilian Institute of Economics. These payments added to additional expenses and combined with low credit card limits, can result in scenarios in which recurring charges are denied because of lack of funds. To increase the conversion rate for subscription renewal payments, you need the possibility to customize and adapt the authorization retry logic to produce the best results. Proper scheduling of recurring payments can make all the difference between a lost customer and a renewed subscription.

Selling like a local ecommerce star

Now that you are aware of some best practices for Brazilian payments, let’s take a look at what a difference it makes to play on the local market following domestic rules. The following graphic summarizes the evolution of conversion rates for three companies that embraced Brazilian national cards over the course of five months. The jump in the conversion rates has secured extra revenue for all companies, increasing it by as much as 200%.

brazilian sales conversion rate

Brazilian sales conversion rate increase following the activation of national cards. Copyright 2014, Avangate.

The jump in conversion rates summarized in the graphic above is the result of applying the best practices detailed throughout this article: providing support for national card with/without installments with payments made in Brazilian Real, avoiding inflating prices artificially through unnecessary taxation, ensuring that Boleto Bancario is a valid payment method, and optimizing the card authorization process.

If you have a presence in Brazil, we’d love to hear your side of the story. Please share your insights in the comments section below.

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Marius Oiaga

Technical Writer

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Comments (6)

  • rasheed says: April 30th, 2014 at 1:56 am

    this explain why our conversion is poor on our Brazillian website can you recommend a local processor for our fragrance site please.

  • Claudia says: April 30th, 2014 at 7:33 pm

    Question: how to offer installment payments? Is there any merchant account with this service in North America?

  • Marius Oiaga says: May 6th, 2014 at 5:27 pm

    Hello Claudia,

    Thank you for your question!

    Unfortunately, I don’t think you can do this with a NA merchant account. The best approach is to work with Avangate for example if you’re selling software / SaaS / online services and we’ll do all the heavy lifting on your behalf. Another option is to work with a Brazilian payment processor.

  • Marius Oiaga says: May 7th, 2014 at 3:44 pm

    Hello Rasheed,

    Thank you for your question.

    Before finding a local payment processor, my advice would be to fix some cart issues that I’m seeing in your site such as missing images and more importantly the expired security certificate.

    Best,
    Marius

  • Enrico says: September 1st, 2014 at 5:50 am

    I want to sell into Brazil.
    Can I use PayPal credit card payment options and will Brazilians be happy paying that way?

  • Marius Oiaga says: September 2nd, 2014 at 4:00 pm

    Hello Enrico,

    At Avangate we believe in offering as much diversity as possible to shoppers in different markets. PayPal is a good extra option to have, however, the focus should be on supporting local Brazilian cards and Boleto Bancário.

    You can find out more details in our whitepaper on Going Beyond Payments: http://www.avangate.com/lp/whitepaper-go-beyond-payments-2014.html or on our website: http://www.avangate.com/products/global-payments/.

    If any other questions, please let me know.