Until 2010, Brazilian merchants were all but required to contract the services of at least two credit card acquirers. As the major networks used in the country, Visa and Mastercard, were tied to specific card acquirers, subscribing to a single service meant the possibility of losing a huge chunk of customers who had cards of only one of these brands available for payment.
Over the last five years, the market for acquirers has changed substantially in Brazil, with established companies still ruling the market-share yet competing with new players and expanding to other segments in order to maintain relevance. Most of these developments are related to a decision by the Banco Central, or the Brazilian Federal Reserve, and the Brazilian Council for Economic defense, which in 2010 deemed the exclusivity of card acquirers for major networks an impediment to the introduction of competing players and had this practice rendered illegal.
Since then, Brazilian merchants have been able to accept payment from major card networks utilizing the service of any acquirer that best suit their business needs. The trend of broadening the acceptance of card networks still holds up in the country, as the previously exclusive Elo and Hiper brands had their compatibility with competing acquirers announced in March 2015.
Most of the country’s market still rests at the hands of the two established leaders, Cielo and Rede, yet both national and foreign players have entered the Brazilian market for payment acquirers over the last few years. The close relationship between the largest Brazilian banks and acquirers can be highlighted as a major factor for the market dominance, and recently introduced brands have invested heavily in the expansion in segments where the big players have not yet secured significant client bases.
Established Brands, New Players and Business Model
Card acquirers Cielo, previously named Visanet and once the exclusive processor of card network Visa, and Rede, previously known as Redecard and once the exclusive processor of card brand Mastercard, retain close to 90% of the Brazilian market for payment acquirers, according to recent statistics. Their closest competitor, Brazilian acquirer GetNet, has a market share of 6%. Aside from Cielo, which is a public trade company, two of the major acquirers in Brazil are controlled by large banks: Itaú in the case of Rede and Santander in the case of GetNet.
The new brands introduced to the Brazilian market include national acquirers Vero, created in 2009 by bank Banrisul and Stone created by banks Pactual and Panamericano in 2014, that have their most relevant client bases concentrated in determinate regions of the country. All these players are competing with North-American acquirers Elavon, which entered the country in 2012, First Data, which launched its payment acquirer brand Bin in 2014, and Global Payments, which started operations in Brazil in 2013.
The business models of acquirers in Brazil, similarly to the solutions offered by each competing company, are mostly similar. A substantial part of their earnings are derived from the rent of Point of Sale machines that capture payment from credit cards in physical stores, equipment that is practically a requirement for the survivability of retailers in the country. Acquirers also charge a fee per transaction, which is higher for credit card payments split across multiple installments and lower for debit card payments.
Another significant source of revenue for these companies are anticipation fees, a business practice that is tied to Brazilian standards for payment operation. When a Brazilian merchant carries out a sale through credit card payments, the purchase value is only received after 31 days following the transaction authorization, or following several months if the payment was split into multiple installments.
For merchants that wish to anticipate the reception of these sums, acquirers offer to deliver the transaction value right away for fees of around 10% per month. In case of payment split across multiple installments, which are highly common for retailers in Brazil, acquirers only allow for the anticipation of payment from several months ahead, a factor that increases the total charges of the anticipation procedure.
Market Trends and Developments
Over the last few years, acquirers in Brazil have incorporated a number of payment solution providers in order to expand their reach, focusing mostly in the sectors of online and mobile payments. Market leader Cielo acquired Brazilian payment gateway Braspag in 2011, and in the following year the company acquired North-American payment solutions platform Merchant e-Solutions, while Rede acquired Brazilian gateway maxiPago! in 2014.
All major acquirers have launched solutions based on mobile devices in an attempt to reach the growing segments of micro and small companies, which are not yet tied to the largest acquirers, by offering cost effective solutions. Analysts predict that the competition in the market for payment capture in Brazil will be intensified in the following years, as the country’s Federal Reserve is likely to implement measures intended to reduce the power of banks who are in charge of acquirers and hamper the growth of new players.