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Case study

allpago: the ultimate guide for local and cross-border payment processing in Brazil

Wednesday 20 January 2016 | 12:45 PM CET

allpago is determined to provide transparency by sharing local insights

The population of Latin America is dramatically changing the way they shop. The last 20 years have witnessed a transformation as consumers switch from shopping in physical stores, to buying online. Ecommerce is growing at an incredibly fast pace.

But, says Philipp Bock, for those global, non-native merchants looking to take advantage of such exciting markets as Brazil, the area is fraught with difficulty. The age of the snake-oil salesman has long since passed, but Bock reckons that for every provider out there, there is a different story on how best to keep control of costs, ensure security and develop a successful business. This misleading information causes confusion and frustration both for the merchant and the provider. allpago is determined to provide transparency by sharing local insights.

           

Therefore, allpago has developed the ultimate guide for merchants and providers, both local and international, on the payment landscape in Brazil. The guide, which can be downloaded HERE, covers the following topics:

Payment Methods: Boleto Bancário, international and national cards are the main methods of payment in Brazil. The market share for these varies depending on the target consumer groups and the type of products and services in question. Generally speaking the share of international cards is 20%, national cards that only work in local currency is 70%, Boleto 25%.

Issuers and Acquirers: The market is dominated by two bank consortiums, Banco do Brasil and Bradesco, that own CIELO, and ITAU, that owns REDE. Together they issue and acquire more than 80% of the entire card volume in Brazil (see figure 1 & 2). These are also the only banks that issue AMEX, ELO and Hipercards. Only CIELO processes AMEX and ELO cards and only Rede processes Hipercards. Altogether the three schemes make up around 15% of the entire online payment processing volume.

• Installments: Installment payments are very popular in Brazil, especially for higher ticket items, for example over 100 BRL (around $25 USD) and upwards. The downside is the higher interchange due to the default risk of card holders and the costly anticipation of the cash flow.

Cross-border withholding taxes: Even global merchants and providers often do not comply with local laws and regulations due to a lack of understanding. One of the biggest myths is that there are no taxes on digital goods or on physical goods. allpago breaks down the tax categories and explains why digital and physical goods can be taxed differently.

Effect of Forex on merchants: In Brazil there are two exchange rates, the Commercial and Tourism Rate. The latter is 8-12% more expensive and was created many years ago by the banks and therefore there is no official rate published by the Central Bank. Generally speaking, all providers offering cross-border payments use the Commercial Exchange Rate but often merchants are charged the Tourism one generating a hidden spread for the provider.

Brazilian Central Bank: The Brazilian Central Bank does not license, or directly regulate any payment service provider. It focusses only on schemes, Issuers, acquirers and issuers of electronic currency (wallets). However, the central bank does set the anti-money laundering rules.

Cross-Border Regulation: The same rules apply as everywhere in the world. Alternative payment methods can be processed for merchants without a legal entity through third parties. When it comes to the major schemes all merchants need to comply with their autoregulation which says that they have to have a legal entity in the country. allpago provides these services, and many others, for international merchants, in addition to offering all relevant local payment methods.

                

About Philipp Bock

Philipp Bock is the Chief Executive Officer & Founder of allpago. Before founding allpago, Philipp was Managing Director and responsible for the turn-around of the Brazilian subsidiary of arvato services (Bertelsmann AG) in São Paulo, after managing the go-live and roll-out of the global online marketing platform for Microsoft’s Channel partners at arvato. Prior to joining Bertelsmann, Philipp worked as the Executive Assistant to the CEO of Infineon Technologies in Munich and Paris. In addition, he worked at The World Bank Group in Paris, Arthur D. Little in Madrid, eVentures in Hamburg and Schroder Salomon Smith Barney in London.

About allpago

allpago is the leading payment provider for the LATAM region. allpago provides the relevant local payment methods through one API and one single platform. allpago offers the best conversion rates ensuring state-of-the-art technology and legal advice necessary for a successful e-Commerce operation in LATAM.

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