Despite fewer merchants adopting point-of-sale terminals to process transactions and a rapidly expanding ATM network, Brazil's consumers are embracing cashless payments at an ever-increasing rate. Businesses operating in Brazil would be well advised to embrace the latest payment technology to exploit both its popularity and added security.
After a period of rapid growth, the number of point-of-sale (POS) terminals in Brazil rose at its lowest level in five years in 2010, with just 2.3% more terminals in use than there were in 2009. In contrast ATM installation since 2007 has accelerated, with further strong growth almost a certainty following a recent announcement that 30,000 more ATMs are to be installed by NCR on behalf of Banco Bradesco by 2016. Recent consumer behavior, however, suggests that Brazil is rapidly following the lead of more established payment card markets, with significant increases in the popularity of making payments via POS terminals.
The total value of payments at POS terminals in Brazil rose by a phenomenal 30% between 2009 and 2010, on top of an already strong growth rate in the preceding years. This equates to an average of $120 more being spent on every payment card in Brazil at POS terminals in just a single year. While the strong rate of inflation, which fluctuated around the 5% mark for most of 2010, may account for some of this increase, there was an impressive 23% underlying increase in the total number of transactions occurring at POS terminals during 2010. In comparison there was just a 6.8% rise in the number of cash withdrawals from ATMs in the same year, a measure of cash-based consumer expenditure.
Rapid growth in the credit card market in Brazil puts further weight behind the idea that Brazilian consumers are likely to carry on favoring POS transactions, given that 96% of credit card transactions currently occur at POS terminals. The trend of increased use of POS terminals is not exclusive to pay-later cards, however, with even higher growth rates in the number and value of transactions by debit cards at POS terminals than those seen with credit cards.
Since mid-2010 there have been a range of developments in payment systems in Brazil, which have significantly enhanced the ease of use and security of POS transactions. Banco Santander for example has recently announced that it is rolling out a contactless card in Brazil, targeting university students in particular, to make the most of younger consumers' willingness to take advantage of the latest technology.
One area that has seen particular interest is that of payments via mobile phones, both at POS terminals and person-to-person (P2P). A recent example is the Android app launched by Cielo in June 2011 that effectively converts Android smartphones and tablets into mobile POS terminals, offering new possibilities both for businesses and individuals. The app is able to handle American Express, MasterCard, Visa, Elo, and Aura transactions. This is in addition to an existing payment solution app for iPhones and iPads that was launched by Cielo in November 2010.
While the recent Mobile Acision de VAS Movel survey has shown that merchants in Brazil are currently cautious about mobile payments, it is an area that is certain to boom given the increasing popularity of cashless payments among Brazil's consumers. Given the number of unbanked consumers in Brazil and payment system infrastructure that is still a long way from offering full nationwide coverage, P2P mobile technology also has great potential to tap a huge market for cashless payments.
For further information about this consumer trend, please consult Datamonitor's Global Payment Card Analyzer.