2019 J.P. Morgan Global Payment Trends

2019 Global Payments Trends Report - Brazil Country Insights

BRAZIL INSIGHTS REPORT


Brazil’s huge population represents vast potential for international e-commerce merchants. The challenge will be finding ways to reach these youthful, social-media savvy consumers: as card and digital wallet use continues, and new methods emerge to handle import taxes, the country could become a particularly compelling market. To help our clients locate, attract and keep their customers, we have tracked and assessed e-commerce developments in 34 mature and emerging markets around the globe.

Introduction

 

Brazil’s e-commerce market is supported by a broadly positive economic outlook for the country in 2019. Two main factors should support gross domestic product growth going forward. First, the government is expected to offer a more market-friendly agenda to help business sentiment recover, with a return to a more entrepreneurial environment.1 Second, credit growth – boosted by two years of easy monetary policy – will cushion economic activity. Gross domestic product growth is therefore projected to accelerate to 2.3 percent year-on-year.2 The employment rate is expected to recover (unemployment is forecast at 11 percent), albeit at a modest pace, and further gains are expected in income, although proposed reforms could yet affect estimates.3 This scenario of looser financial conditions with improvement in the labor market should support further recovery of private consumption, which will accelerate to 3.2 percent, helping to boost online sales.4

This document is based on projected figures and is subject to change at any time.

 

A double-digit growth market with billions of untapped shoppers

 

As Latin America’s largest economy,15 Brazil has developed into a sizeable e-commerce market, consistently posting double-digit growth rates in the mid-teens between 2015 and 2017.16 Future growth is expected to level out at a more sustainable compound annual growth rate of 10.7 percent to 2021.17 That said, online sales account for just 3.2 percent of total retail spend, meaning e-commerce is still a nascent market with significant room to grow.18

Opportunity lies in the fact that Brazil offers a huge market of potential customers. With a population of 211.4 million,19 Brazil is one of the top 10 most populous countries in the world.20 At present, the country’s youthful population – the average age is 32 21 – opts primarily to use e-commerce for consumer electronics, representing 42.1 percent of total e-commerce value, and travel (29.2 percent).22 In contrast, sectors that traditionally experience strong e-commerce sales in Europe – clothing and apparel, and health and beauty – are yet to become key e-commerce sectors in Brazil, with sales in these categories accounting for just 4.3 percent and 3.4 percent of total e-commerce value, respectively.23 Average annual spend is far lower than other countries in this study, such as fellow emerging e-commerce markets Mexico and India, at $296,24 reflective of e-commerce still being a relatively minor part of the overall retail market.

 

For international merchants, import taxes are a key challenge

 

The most-visited website in Brazil is Mercado Livre, an online marketplace and auction site. In second place is fellow marketplace Cnova, and sales platform B2W is third.25 All are well-known names in the Latin American market, but global players are beginning to move in. International e-commerce merchant Amazon launched a Brazilian first-party sales operation in January 2019.26

Cross-border spending, at 17 percent of total e-commerce value,27 is common, with just under half of online shoppers saying that they have shopped with international sites before.28 The most popular markets are the U.S. (first), China (second) and Hong Kong (third).29 That said, for e-commerce merchants planning to break into the Brazilian market, there are a number of significant tax and regulatory hurdles to clear. With a focus on encouraging domestic sales and businesses, import duties for international products can be prohibitively high: goods with a value of less than $3,000 and delivered via standard postal services incur an import tax of 60 percent, payable by the consumer, plus a BRL15 ($4) customs clearance fee. Orders of books, newspapers and magazines do not incur the fee.30

These import rules have a significant impact on delivery reliability, cost and speed for e-commerce merchants. Packages can take months to arrive to the customer, and there are reports of consumers abandoning parcels or requesting refunds rather than pay the fee to collect them.31 Faster service is made possible by using commercial couriers, but imports via this method incur an even higher import tax of between 85 to 88 percent.32

International e-commerce merchants can consider working with local fulfillment centers and agents in order to streamline processes and reduce the amount of international charges and issues with taxes and returning items cross-border.33 Brazil is also rolling out the ability for consumers to pay the import duties online in advance of their parcel arriving, which should streamline and speed up delivery.34

Mobile users spending hours online are an opportunity

 

Brazilian online shoppers are increasingly opting to shop via mobile, which now represents $7.6 billion of sales and is used for 32 percent of all e-commerce transactions in the country.35 The mobile e-commerce market is expected to grow at a compound annual growth rate of 14.4 percent to 2021,36 where it is projected to reach $13 billion in sales.37

When considering user numbers, Brazil is the largest internet market in Latin America and the fourth-largest internet market in the world.38 Brazilians are enthusiastic internet users, spending an average of 25.7 hours a month online; the Latin American average is 18.6 hours.39 Smartphone penetration is at 37 percent,40 ranking it among the lowest rates in our study. Coupled with the aforementioned appetite for internet use, this suggests there is plenty of room for the mobile e-commerce market to expand.

 

Potential to target shoppers during one-off discounting events

 

Mobile sales are increasing during one-off discounting events. For example, mobile purchases represented 26.5 percent of total e-commerce revenues during Black Friday 2017, compared with just 4.4 percent in 2013.41 Social media channels can be used as effective marketing and sales channels in Brazil; e-commerce merchants could consider using mobile marketing via text and WhatsApp to reach customers. Social media apps such as Facebook Messenger also allow e-commerce merchants to offer instant customer sales support, which is expected to become increasingly important to the Brazilian consumer.42

At present, mobile sales are still largely completed on a browser, with just four out of 10 completed in-app.43 Offering in-app discounts and app-only offers could help migrate consumers over to apps.

 

Cards prevail as digital wallets grow in use

 

Cards are Brazil’s favored online payment method, used in 59 percent of transactions and accounting for $14 billion in sales.44 This method’s market share is expected to decline slightly to take a 46.9 percent market share by 2021,45 as some additional methods grow in prominence.

Offering a solid card payment infrastructure remains essential to success in Brazilian e-commerce. It is worth noting that not all domestic payment cards in Brazil are enabled for foreign currency transactions, which could hamper efforts by international merchants to break into the market.46 Merchants who accept international card providers or offer digital wallet payment platforms that can handle multiple currencies, could win customers. Working with local entities could also help international merchants offer a compelling payment offer to Brazilian consumers.47

 

Card interchange fee regulations are evolving

 

Regulations around card payment fees are evolving to favor the customer. As of October 2018, a cap has been set on debit card fees paid by businesses to card issuers. Interchange fees are capped at 0.8 percent of transaction values and can average no more than 0.5 percent.48 Looking ahead, Brazil is considering cutting them even further in an attempt to enhance consumer protections. Over the past decade, interchange fees had increased from 0.79 percent to 0.82 percent, with total fees paid by retailers ranging from one to three percent of transaction values.49

At present, cash is the second-most used online payment method, at 23 percent or $5.5 billion in sales.50 A third of the population is unbanked,51 which explains why cash use is high, as does the popularity of Boleto Bancário, a domestic payment method regulated by the Central Bank of Brazil. Using this method, shoppers are given a Boleto voucher by the merchant when they purchase something online. This voucher can then be printed, allowing the customer to take it to a bank, ATM, or authorized payment processor, such as a drugstore or post office, and pay the amount owed in cash. Alternatively, the voucher can be settled online by the customer. Payment is usually cleared within two to three days.52

The relatively high use of cash also suggests payment on delivery is still a strong feature of the market – possibly due in part to shoppers having to pay taxes and clearance fees on international purchases in person before their international orders are released from customs.

Whilst cards dominate, other payment methods are catching up. Digital wallets in particular are predicted to be the one of the fastest-growing Brazilian e-commerce payment methods in the years to 2021, expected to grow from their current eight percent share of the online payments market to take a 13.6 percent slice of the e-commerce payments market by 2021.53

 

Card-not-present transactions a new target for fraud

 

Fraudsters have turned their attention to card-not-present fraud online, as physical fraud has become harder with the introduction of chip-and-PIN technology in the country.54 A similar issues is seen in Mexico, which is why these two countries are among the leaders for card-not-present fraud in Latin America. 55

 

Key takeaways

 

Just under half of Brazil’s online consumers say that they have shopped on international sites, with the most popular sites originating from the U.S. and China. However, international merchants should be prepared to overcome a number of significant tax and regulatory hurdles, including high import duties. Goods with a value of less than $3,000 and delivered via standard postal services are subject to an import tax of 60 percent, payable by the consumer, plus a $4 customs clearance fee. These import rules can have a significant impact on delivery reliability, cost and speed for e-commerce merchants. International e-commerce merchants should consider working with local fulfillment centers and agents in order to streamline processes and reduce the amount of international charges and issues with taxes and returning items cross-border. Cards are Brazil’s favored online payment method and are used to complete well over half of all online transactions.

 

Data may vary from historical figures, due to certain categories being re-stated as new information sources have become available.

*J.P. Morgan 2019 Payments Trends – Global Insights Report includes the following countries: Australia, Brazil, Canada, China, Hong Kong, India, Indonesia, Japan, Malaysia, Mexico, New Zealand, Singapore, Thailand, Turkey, U.S., Vietnam.

Global Payments Trends Reports

International e-commerce success can hinge upon understanding the needs, nuances and growth patterns of individual nations. J.P. Morgan’s Global Payments Trends Reports aims to offer merchants the knowledge they need for global success through in-depth, country-by-country analysis.

For more information, please contact:

Your J.P. Morgan Relationship Manager or visit: https://www.jpmorgan.com/country/US/en/merchant-services/payment-insights

 

This presentation was prepared exclusively for the benefit and internal use of the J.P. Morgan client or potential J.P. Morgan client to whom it is directly delivered and/or addressed (including subsidiaries and affiliates, the “Company”) in order to assist the Company in evaluating, on a preliminary basis, the feasibility of a possible transaction or transactions or other business relationship and does not carry any right of publication or disclosure, in whole or in part, to any other party.  This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by J.P. Morgan.  Neither this presentation nor any of its contents may be disclosed or used for any other purpose without the prior written consent of J.P. Morgan. This presentation does not constitute a commitment by any J.P. Morgan entity to extend or arrange credit or to provide any other services to Company.

In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us by or on behalf of the Company or which was otherwise reviewed by us.  The statements, views, and opinions that will be expressed during the presentation are those of the presenters and are not endorsed by, or reflect the views or positions of, J.P. Morgan.  The information herein may not take into account individual client circumstances, objectives or needs and is not necessarily intended as a recommendation of a particular product or strategy to the Company and Company shall make its own independent decision. J.P. Morgan is not liable for decisions made or actions taken in reliance on any of the information covered during the presentation. Furthermore, J.P. Morgan makes no representations as to the actual value which may be received in connection with a transaction or use of the products and services mentioned nor the legal, tax or accounting effects of consummating a transaction.

J.P. Morgan, Chase Paymentech, Chase Merchant Services, JPMorgan and JPMorgan Chase are marketing names for certain businesses of JPMorgan Chase & Co. and its subsidiaries worldwide (collectively, “J.P. Morgan”) and if and as used herein may include as applicable employees or officers of any or all of such entities irrespective of the marketing name used.  Products and services may be provided by commercial bank affiliates, securities affiliates or other J.P. Morgan affiliates or entities.  In particular, securities brokerage services other than those which can be provided by commercial bank affiliates under applicable law will be provided by registered broker/dealer affiliates such as J.P. Morgan Securities LLC, J.P. Morgan Institutional Investments Inc. or by such other affiliates as may be appropriate to provide such services under applicable law.  Such securities are not deposits or other obligations of any such commercial bank, are not guaranteed by any such commercial bank and are not insured by the Federal Deposit Insurance Corporation.  Not all products and services are available in all geographic areas. Eligibility for particular products and services is subject to final determination by J.P. Morgan or its affiliates/subsidiaries.

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© 2019 JPMorgan Chase & Co

1 Economic Research, J.P. Morgan Chase Bank, February 2019.

2 Economic Research, J.P. Morgan Chase Bank, February 2019.

3 Economic Research, J.P. Morgan Chase Bank, February 2019.

4 Economic Research, J.P. Morgan Chase Bank, February 2019.

5 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2018.

6 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via CIA World Factbook, 2018.

7 World Bank Open Data. ‘Brazil.’ Accessed January 2019.

8 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via eMarketer estimates, 2018.

9 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

10 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Ecommerce foundation and TechinBrazil, 2018.

10 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Internet Live Stats (2015 & 2016) and Internet World Stats (2017).

12 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2018.

13 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2018.

14 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Banco Central Do Brasil, 2018.

15 PagBrasil.com, 2017. ‘Brazil, One of the Biggest E-Commerce Opportunities in the World.’ Accessed January 2019.

16 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

17 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

18 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2018.

19 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2018.

20 InternetWorldStats.com, June 2018. ‘The World Population and the Top Ten Countries with the Highest Population.’ Accessed January 2019.

21 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via CIA World Factbook, 2018.

22 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via export.gov and Brazil eCommerce and Brazil Travel & Tourism, 2018.

23 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via export.gov and Brazil eCommerce and Brazil Travel & Tourism, 2018.

24 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

25 Statista.com, 2017. ‘Most popular online retailers in Brazil in January 2017, based on number of unique visitors (in millions).’ Accessed January 2019.

26 Reuters.com, January 2019. ‘Amazon.com starts direct sales of merchandise in Brazil after delays.’ Accessed January 2019.

27 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via PagBrasil, 2018.

28 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Webshoppers Report, 38th Edition, 2018.

29 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Webshoppers Report, 38th Edition, 2018.

30 TechinBrazil.com, June 2018. ‘Imports and Fulfilment of E-commerce from Abroad to Brazil.’ Accessed January 2019.

31 PagBrasil.com, October 2017. ‘Import Taxes Can Now Be Paid Online in Brazil.’ Accessed January 2019.

32 TechinBrazil.com, June 2018. ‘Imports and Fulfilment of E-commerce from Abroad to Brazil.’ Accessed January 2019.

33 TechinBrazil.com, June 2018. ‘Imports and Fulfilment of E-commerce from Abroad to Brazil.’ Accessed January 2019.

34 PagBrasil.com, October 2017. ‘Import Taxes Can Now Be Paid Online in Brazil.’ Accessed January 2019.

35 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Edgar, Dunn & Company via Ecommerce Foundation and TechinBrazil, 2018.

36 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Wirecard AG Market Insights, 2017.

37 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

38 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2018.

39 Statista.com, 2016. ‘Internet usage in Brazil - Statistics & Facts.’ Accessed January 2019.

40 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2018.

41 PagBrasil, December 2017. ‘Top E-commerce Trends for 2018 in Brazil.’ Accessed January 2019.

42 PagBrasil, December 2017. ‘Top E-commerce Trends for 2018 in Brazil.’ Accessed January 2019.

43 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Ecommerce Foundation and TechinBrazil, 2018.

44 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

45 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

46 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

47 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

48 Reuters.com, March 2018. ‘Brazil caps debit card fees, may limit them further.’ Accessed January 2019.

49 Reuters.com, March 2018. ‘Brazil caps debit card fees, may limit them further.’ Accessed January 2019.

50 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

51 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2018.

52 PagBrasil.com, 2019. ‘Boleto Bancário.’ Accessed January 2019.

53 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

54 PagBrasil.com, March 2018. ‘Understanding Online Fraud in Brazil.’ Accessed January 2019.

55 PagBrasil.com, March 2018. ‘Understanding Online Fraud in Brazil.’ Accessed January 2019.

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