In Brazil, ecommerce transactions surged in 2020 and while the pandemic accelerated this ongoing trend, underlying market developments and consumer behaviour support the country is primed for extended growth. We spoke with our Executive Managing Director Latin America, Daniel Passarelli, for his insight into the factors that will continue Brazil’s growth pattern.
Can you tell us about your background and role?
Prior to Worldline, I held a range of product and leadership roles across various companies. These ranged from a card scheme Cartão Elo, to a local acquirer Cielo, and MoneyGuru, a fintech startup.
This gave me extensive insider knowledge of the specific trends transforming Latin America. I’m currently the Managing Director for Worldline’s Latin America ecommerce arm, managing a part of the business that I believe has sustained growth potential.
The Brazilian ecommerce market has been showing promising growth in recent years. Can you explain what makes it different from other regions?
Brazil is the largest ecommerce market in Latin America and the 13th largest worldwide. In 2019, the country registered 12.5 billion EUR in total ecommerce sales, up 16% year-on-year and last year we saw higher growth (18%) as more consumers shifted to online shopping during the coronavirus pandemic. Among the key market characteristics, Brazil’s internet penetration is still low at 61%, as compared to other countries, like the US for example (88%). Also, Brazil has a unique domestic ecommerce ecosystem, where half of the population is unbanked and, therefore, does not have access to basic banking services. This means there is still room for extended growth in ecommerce.
In terms of industry market players and their share, the local market has also diversified. Competition among banks in Brazil was low until a few years ago, with a small number of institutions dominating the market. In order to address the market need for innovation and diversity Brazil has attracted significant fintech investment. In fact, in 2019 alone, the fintech industry secured $2.5 billion in venture capital funding and there are now over 700 new fintechs, many stepping up to address the needs of the local, unbanked population.
The advent of challenger banks, including nubank, N26 and Banco Original has also boosted industry competition levels. Through their offering, these players aim to reach the unbanked, opening up access to global ecommerce and gradually creating a more inclusive financial system for various consumer groups.
Another key characteristic of Brazilian ecommerce is local consumer behavior. In recent years, we’ve witnessed an increase in popularity for local payment methods, these play an important role with a market share of 36%. In addition, 60% of ecommerce purchases are made by using at least two instalments and only 38% of adults hold a credit card. To operate successfully in Brazil, you need to cater to these local preferences.
However, while the opportunities are vast, local taxation, regulation and higher fraud present challenges which may affect the process of starting and operating a business at a country level. All of this makes our ecommerce market very local, demanding a deep understanding of the financial ecosystem and specific solutions tailored to Brazilian preferences.
Since the start of COVID-19 there are 1 million new online shoppers in Brazil
COVID-19 has accelerated many digital trends. What shifts in the ecommerce landscape are you seeing in the region?
‘Invisible’ payments are a key trend that we are witnessing in Brazil. As more consumers are using digital platforms and subscription services in the region, such as Uber, Spotify and Netflix, these brands have made payments much easier, with the entire process taking place in the background without any effort required from consumers.
Meanwhile QR code payments show huge potential to replace physical wallets, offering consumers improved speed and security. In fact, a study in 2019 (Novos Meios de Pagamento) found that 17% of those consumers surveyed are now using QR code for payments in retail stores – up from 0% the year before. We have also seen some innovative local start-ups offering QR code technology grow rapidly into successful businesses.
Finally, the Central Bank in Brazil is also playing a very important role in coordinating the market’s fast payment solution, PIX, as well as the overall Open Banking agenda. It is through PIX that all wallets that use QR Codes will be interoperable, meaning transfers and payments will be allowed from one e-wallet to another in real-time, 24/7.
These trends are proof that Brazil is rapidly moving towards a digital payments landscape similar to China. As consumers are becoming increasingly tech-savvy and APMs are the norm, players are seeking to unlock the unbanked and introduce them to the digital marketplace.
São Paulo is Brazil's financial center with one-third of the country's banks
How do these developments impact Worldline’s approach to Brazil?
Recent developments have reinforced our vision and strategy. Since our main goal is to help businesses grow exponentially and navigate the complexities of local and cross-border payment acceptance, our platform in Brazil has never been more relevant. We will continue to expand our offering and team in the region, with some exciting announcements to come in the near future.
Currently, we have two main offerings in this region. Our Gateway platform simplifies payment activity locally and globally by connecting and integrating retailers with major acquirers. Meanwhile, our Money Remittance solution enables businesses to trade cross-border, retaining all the benefits of domestic processing by connecting to relevant local acquirers via a single interface.
As you mentioned Brazil is one of the strategic high growth markets for Worldline. What are the opportunities and challenges for businesses in this market?
In my opinion so-called ‘emerging markets’ such as Brazil have actually transitioned to ‘high growth or high potential markets’, still in their developing stage but with great potential. Internet growth is outpacing the US and connectivity is at an all-time high for the region, bringing many opportunities for ecommerce.
However, these businesses must understand the nuances of the market, where local payment methods and consumer behavior play an important role. That is why adopting a localized approach and selecting a strong local partner with the right connections, knowledge and expertise of the market is fundamental when formulating strategies for the region.
In my opinion online businesses can no longer ignore Brazil’s opportunities. It is a dynamic and vibrant market with growing spending power, great potential and lower competition, providing businesses with plenty of opportunities to grow and thrive. In order to succeed they need to be aware of the local differences and ensure they are meeting the specific needs of all their customers, unbanked or otherwise.