Key Considerations for Expanding E-Commerce Into Brazil: Payments, Fraud and Taxation
Brazilian e-commerce is growing at a rapid pace. In 2011, online sales reached a volume of $11 billion, which was up 26 percent from the previous year, and in 2012, Brazilian online merchants generated $17 billion in revenue. According to some projections, the Brazilian e-commerce market will be worth $29 billion by the end of 2017, and Brazil should continue to lead growth in Latin America. Given the promise it holds, how can retailers break into this market and be successful selling online?
While there are many things to take into account when it comes to expanding e-commerce operations internationally, let's take a look at three key considerations for Brazil specifically around transactions: payment methods, fraud and taxes.
One of the most popular online payment methods in Brazil is credit cards, and around 75 percent of online purchases that are paid by credit cards are financed through installment options. Retail prices are often given as a combination of installment rates and the number of installments instead of the total price. The installment standard makes card payments more expensive (up to 15 percent merchant discount rate based on the duration of the installments), but by adding the installment plan consumers are more likely to make a purchase. Merchants receive the total payment immediately, but the credit card is charged multiple times with the acquiring bank giving that "credit" to the consumer. This is often called a "cash-in solution."
It's important to note that the majority of domestically issued credit cards aren't enabled for cross-border acquiring. This also applies to most of the internationally branded cards such as Visa, MasterCard and Amex. Only 36 percent of Brazilians own an internationally branded credit card that can be used for global payments. Therefore, merchants need local card acquiring contracts in order to accept domestic Brazilian credit cards and ensure a good conversion rate. For merchants without a legal entity in Brazil, money can be settled to existing international accounts in major currencies like U.S. dollars, GBP and Euros.