Due to the pandemic, e-commerce has taken centre stage in retail, and more and more merchants are selling online to meet the growing online demand for their products and services. Geographical barriers do not constrain e-commerce, and many merchants selling online are moving towards a “borderless commerce” model providing services irrespective of the buyer’s location. Payments are a key enabler for “borderless commerce,” and EDC has seen several merchants looking to expand internationally and target large, fast-growing markets such as Brazil.

Brazil is the largest country in Latin America and a regional e-commerce giant. Despite an economic crisis and the Covid-19 pandemic during 2020, the country “turned sour lemons into lemonade”, so to speak, finishing 2020 with an online shopping spend of BRL 126.3 billion ($22 billion), more than twice the amount from two years ago.

Brazil is a vibrant market and though it has one of the highest income gaps across its population, the country boasts a culture of high consumer spending.

Overview of Brazilian e-commerce

As indicated above, despite economic uncertainty, the country’s online market is growing and the average annual e-commerce expenditure per user grew from BRL 1,787 ($356) in 2017 to BRL 2,618 ($462) in 2020. According to Virtual Capitalist, the country is in the top 10 of the world’s fastest-growing e-commerce markets globally in 2020, with a 35% increase in online sales compared to 2019.

Brazilians spend online mainly on food, electronics, clothing, personal care, and cosmetics. The e-commerce market in Brazil is expected to maintain the momentum, grow by 40% in 2022 and sustain rapid growth over the next four years.

The five fastest-growing categories online are:

1. Logistic and supply-chain – delivery services, mobility, and distribution
2. Pet-related products and services
3. Home furnishing, construction, and decoration
4. Food and beverage
5. Health and medicine

When it comes to market trends, the constantly changing online market will bet on competitive and innovative trends such as:

Voice assistant usage: Many online businesses from different countries are following the voice assistant trend. A few years ago, what looked like a futuristic sci-fi movie idea is now set to become the next e-commerce sales channel. From using voice assistance like Alexa to product research on Google, Brazilians are getting more comfortable about voicing their wishes.

Sales through social media: Social media platforms have a strong presence in Brazil. People from all income and wealth demographics are spending long hours daily on Instagram, Facebook, and WhatsApp. Brazil is the 5 country in terms of smartphone users globally and Brazilians spend an average of over 10 hours per day over the internet!

As merchants make social media channels part of a cohesive sales channel strategy, their turnover is likely to increase significantly.

Diversified and fast payment methods: Instant payments are an essential aspect of income growth for online shoppers, due to their innumerable benefits to both merchants and the final consumer. Payment methods in Brazil are different from those in North America and Europe. The most common payment methods in the country are Boleto Bancário, installments on credit cards, and the latest payment option, Pix.

That said, it is crucial to offer Brazilian consumers a wide range of options with quick payment confirmations to avoid cart abandonment and to increase conversions.

Omnichannel sales: The customer’s journey does not occur linearly, many online and offline interactions, research and contemplation take place before a customer decides to buy something. PagBrasil’s CEO and co-founder, Ralf Germer, explained that offering diverse omnichannel payment options increases conversion significantly, and, consequently, boosts revenue.

The Challenges of the Brazilian Market

Brazil is the only country in Latin America whose native language isn’t Spanish and English is not widely spoken. English speakers represent around 5% of the population only. It is imperative for merchants entering the Brazilian market to consider a bilingual Portuguese-English website. Nearly 60% of the consumers in the country prefer to purchase goods on websites in their mother tongue. 70% will search for support in Portuguese, and they won’t think twice to switch brands for it!

It’s also essential to bear in mind that Brazilians insist on getting the most value out of their money. That means they avoid purchasing goods and services in foreign currencies due to high taxation and currency conversion markups. Furthermore, most credit cards issued in Brazil are not enabled for international purchases, meaning a large number of consumers are unable to purchase online from cross-border e-commerce websites.

Brazilians who hold credit cards enabled for international purchases pay 6.38% of IOF (Imposto sobre Operações Financeiras) tax charged to their credit card bill, plus the currency exchange (FX) markup, which varies from 3% to 7%. Offering local pricing and payment processing is the way to go.

The other challenge goes beyond currency and language barriers. The delivery process can be slow and bureaucratic. Packets arriving from other countries may be retained by Brazilian customs, which means the package may not be delivered on time or not delivered at all.

To be prepared for this challenge, merchants should have a good understanding of how the country’s shipping and delivery process works.

Payment Strategies to Succeed in Brazil

Over 60% of Brazilian consumers purchase their goods or services online with a credit card, 15% with Boleto Bancário, 13% with a digital wallet, 8% with Pix, and 2% with other methods. The reasons behind one’s choice of payment may vary; however, as we have already mentioned, diversity is the key.

For instance, with most credit card purchases, consumers often pay in installments — a common practice in Brazil for decades. In contrast, European and American buyers are used to one-off payments.

Boleto bancário, another traditional payment method in the country, gives unbanked people, representing 10% of the adult population, an option to pay online.

Pix, an instant payment method created by the Central Bank of Brazil, is now one of Brazilians’ favourites and has been recently considered one of the most ground-breaking payment solutions in real-time payments. It recently won a payments innovation award at the Fintech & RegTech Global 2021 Awards.

Local and traditional payment methods still have their spot in the heart of Brazilian consumers, so don’t discard them just yet. EDC asked PagBrasil, a payment service provider headquartered in Brazil, with over 20 years of experience in the market, which payment methods would be essential for a cross-border merchant aiming to enter Brazilian territory. PagBrasil highlighted five essential online payment methods:

• Boleto Flash®: The unique Boleto Flash® is a fast and innovative method that enhances the traditional Boleto Bancário. It has one of the lowest online conversion rates among all the payment methods in Brazil as it does not generate an automatic charge and requires the buyer to take action to complete the payment. Boleto Flash® provides accelerated payment confirmation for boletos, maximizing online sales, and payment is confirmed in less than an hour. It caters to the unbanked population, allows automated refunds, and provides many other benefits. The conversion rate for merchants accepting this method is up to 80%.
• Débito Flash™: This payment method offers the best payment experience for the country’s 160 million active debit cards. The traditional payment with debit cards can be inconvenient. Débito Flash™ allows customers to pay quickly and intuitively without redirects or complexities.
• PagBrasil Pix: In a survey, 58.9% of Brazilians advised they have given up an online purchase because of the lack of payment options. Pix is helping to reduce that number. PagBrasil Pix can be easily integrated into online stores via APIs. In addition, PagBrasil Pix is also available as a ready-to-go integration for Shopify, VTEX, and WooCommerce.
• Credit Card: Consumers take advantage of installment payments for 75% of all online card transactions when given a choice. Credit cards issued in Brazil are often restricted to national purchases in local currency. PagBrasil allows payments acceptance in Brazilian Real and enables instalment payments.

If you are a merchant interested to know more about payments in Latin America, do not hesitate to contact us at contact@edgardunn.com

PagBrasil

PagBrasil is a leading Brazilian fintech company processing payments in Brazil for e-commerce businesses around the globe. PagBrasil aims to stand out with innovations creating the best possible online payment infrastructure for the Brazilian market.

Its proprietary online payment gateway and collection platform is designed specifically for the Brazilian market. Local and international merchants gain access to the broadest set of domestic payment methods that will help to boost their sales within Brazil immediately.

If you want more information about PagBrasil, get in touch.

Written by Camila Santiago: International Content Marketing Analyst at PagBrasil, and she specializes in writing content on FinTechs and digital payment topics focused on the Brazilian market.

Edited by Paula Martins: Content Marketing Analyst at PagBrasil specializing in SEO content writing focused on digital payments in Brazil.

The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).

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