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Brazilian payment card landscape set for change

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18 December 2013, LONDON: The Brazilian payment cards market is undergoing significant change as domestic scheme Elo Participações continues to challenge the traditional domination of Visa and MasterCard in the market, according to a new report by London-based Lafferty Research.

The Brazilian payment card landscape is likely to change on a steady basis over the next five years: Elo Participações (Elo), the new Brazilian domestic cards network, is on the rise, already boasting three percent of credit card market share. Lafferty forecasts Elo taking four percent by 2015, while the estimate for Visa and MasterCard sees a reduced market share of 83 percent by 2015, down from 89 percent in 2010.

In April 2010, Banco do Brasil and Bradesco announced the relaunch of the extinct national card brand, Elo, with the joint venture between these banking giants open to the migration of private-label cards to the new brand. In August 2010, Elo announced the incorporation of Caixa Econômica Federal as a shareholder. Offering credit, debit and prepaid cards, the scheme started to issue cards in Q1 2011 with the aim of attracting a 15 percent market share over the next five years. According to Observador Brasil 2012, a report developed by Cetelem in conjunction with IPSOS, 2.7 million low-income Brazilians joined the middle class between 2010 and 2011. Elo has specific characteristics to attract this segment including lower or zero annual fees. As the scheme does not pay network-branded royalties, it can pass on this saving to the consumer.

According to Lafferty Group research on 69 cards markets worldwide, the global recession in many developed markets — particularly in the US — resulted in Brazil becoming the largest global credit cards market in terms of pre-tax profits in 2010. Brazil has slipped from the number one position as the global economy rebounds, but there are still huge opportunities apparent in the market with this shift away from the domination of the global duopoly.

The market offers 48 percent and 38 percent of the adult population who are without a debit card and credit card respectively. Payment cards are relatively well embedded among Brazilian consumers. While statistics indicate that debit cards have gone beyond the theoretical saturation point — where there are approximately 1.9 debit cards per adult on average — the reality is that only 62 percent of adults hold debit cards and 52 percent a bank-issued credit card: many hold multiple cards.

This reflects a real opportunity of 75 million adults without a debit card and 60 million adults who do not have a credit card. The culture of domination by the biggest players in the world is being challenged and this trend seems set to continue as the likes of Elo find a way to win business.

Brazil's market is characterised by very high interest rates, large interest spreads, and relatively high merchant fees. The country represents a highly profitable and attractive developing credit cards market with profit before tax estimated at $8.8 billion for 2013, equivalent to a profit per card of $40.

Notes for editors

Lafferty Group provides advanced knowledge services to the financial industry worldwide, including research reports, management reports, peer group councils, research databases and publications.

For further information contact:

Ronan Lynch
Director, Global Knowledge Centre
Email: ronan.lynch@lafferty.com
Tel: +44 (0) 20 3008 8415
or
news@lafferty.com

 

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