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Published Date: July 2015

The Cards and Payments Industry in Brazil: Emerging Trends and Opportunities to 2019

Executive Summary

Timetric’s 'The Cards and Payments Industry in Brazil: Emerging Trends and Opportunities to 2019' report

provides detailed analysis of market trends in Brazil's cards and payments industry. It provides values and

volumes for a number of key performance indicators in the industry, including check payments, credit

transfers, direct debits, payment cards and cash transactions during the review period (2010–2014).

The report also analyzes various payment card markets operating in the industry and provides detailed

information on the number of cards in circulation, and transaction values and volumes during the review

period and over the forecast period (2015–2019). It also offers information on the country's competitive

landscape, including market shares of issuers and schemes.

The report brings together Timetric’s research, modeling, and analysis expertise to allow banks and card

issuers to identify segment dynamics and competitive advantages. The report also covers detailed regulatory

policies, recent changes in regulatory structure, card fraud statistics, and profiles of card issuers operating in

the country.

Synopsis

Timetric’s 'The Cards and Payments Industry in Brazil: Emerging Trends and Opportunities to 2019' report

provides top-level market analysis, information and insights into Brazil's cards and payments industry,

including:

Current and forecast values for each market in Brazil’s cards and payments industry, including debit

cards, credit and charge cards. It also includes detailed analysis of the prepaid cards market.

Detailed insights into payment instruments including check payments, credit transfers, direct debits,

payment cards and cash transactions. It also, includes an overview of the country's key alternative

payment instruments.

Analysis of various market drivers and regulations governing Brazil's cards and payments industry.

Detailed analysis of strategies adopted by banks and other institutions to market debit, credit and

charge cards.

Comprehensive analysis of consumer attitudes and buying preferences for cards.

The competitive landscape of Brazil's cards and payments industry.

Reasons to buy

Make strategic business decisions, using top-level historic and forecast market data, related to

Brazil's cards and payments industry and each market within it.

Understand the key market trends and growth opportunities in Brazil's cards and payments industry.

Assess the competitive dynamics in Brazil's cards and payments industry.

Gain insights into marketing strategies used for various card types in Brazil.

Gain insights into key regulations governing Brazil's cards and payments industry.

1 Payment Instruments

1.1 Current Payments Environment

Figure 1: Brazil – Payment Instrument Shares by Transaction Value (%), 2010 and 2014

* Payment cards include transactions made at POS terminals only Note: Please refer to the Appendix for detailed information on the above data points Source: Central Bank of Brazil and Timetric analysis © Timetric

Figure 2: Brazil – Payment Instrument Shares by Transaction Volume (%), 2010 and 2014

* Payment cards include transactions made at POS terminals only Note: Please refer to the Appendix for detailed information on the above data points Source: Central Bank of Brazil and Timetric analysis © Timetric

2010

Credit transfers Direct debit Checks

Cash Payment cards

2014

Credit transfers Direct debit Checks

Cash Payment cards

2010

Payment cards Credit transfers Direct debit Checks

2014

Payment cards Credit transfers Direct debit Checks

2 Payment Cards

2.1 Payment Cards Analysis

Figure 3: Brazil – Growth in Payment Cards Transaction Value and Number of Cards in Circulation by

Type, 2010–2019

Note: Bubble size represents the card transaction value Note: Please refer to the Appendix for detailed information on the above data points Source: Association of Brazilian Credit Cards and Services Companies and Timetric analysis © Timetric

0%

3%

6%

9%

12%

15%

18%

0% 5% 10% 15% 20%

CA

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(2015–2019)

CAGR (2010–2014)

2010 2014 2019

Paym

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ard

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Debit Cards Credit Cards Charge Cards

2.1.1 Volume and value of payment card transactions by type

Figure 4: Brazil – Volume and Value of Payment Card Transactions by Type (%), 2010–2019

Note: Please refer to the Appendix for detailed information on the above data points Source: Timetric analysis © Timetric

2010 2014 2019

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Debit Cards Credit Cards Charge Cards

2010 2014 2019T

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Debit Cards Credit Cards Charge Cards

2.2 Methodology

All Timetric cards and payments reports are created by following a comprehensive, four-stage methodology.

This includes market study, research, analysis and quality control.

Timetric’s dedicated research and analysis teams consist of experienced professionals with background in

research, consulting, statistics and economics.

Timetric adheres to the Codes of Practice of the Market Research Society (www.mrs.org.uk) and the Society

of Competitive Intelligence Professionals (www.scip.org).

1) Research

A. Sources

Collection of the latest market-specific data from a wide variety of industry sources:

­ Central bank statistics

­ Supranational organizations

­ Payment associations

­ Payment schemes/networks

­ Company filings

­ Banking associations

­ Payment regulatory bodies

B. Expert opinion

Insights from leading experts in the payments industry

Analysis of third-party opinion and forecasts:

­ Industry reports

­ central banks and regulators

­ Specialized industry publications

C. Data consolidation and verification

Consolidation of data and opinion to create historical datasets

Creation of models to benchmark data across sectors and regions

2) Analysis

A. Market forecasts

Feeding forecast data into market models:

­ Macroeconomic indicators

­ Payment industry-specific drivers

Analysis of payment industry database to identify trends:

­ Latest trends in cards and payments

­ Key drivers of the insurance industry

B. Report writing

Analysis of market data and forecasts

Identify trends, drivers and challenges in the industry

Benchmark key products and companies in the against their competitors

3) Quality Control

A. Templates

Detailed process manuals

Standardized report templates and accompanying style guides

Use of in-house developed model for forecasting key payment indicators

Multi-layer quality-control procedures

B. Quality-control process

Peer review

Senior-level QC

Cross-checks for data integrity

Data verification and normalization through comparison of data from multiple sources

4) Exchange Rate

Table 1: Annual Average Exchange Rate

2010 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

BRL per US$ 0.568 0.598 0.512 0.464 0.438 0.369 0.357 0.345 0.344 0.342

Source: Timetric analysis © Timetric

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TABLE OF CONTENTS

1 Definitions and Methodology ............................................................................................................... 7

1.1 Definitions ................................................................................................................................................ 7

1.2 Methodology ............................................................................................................................................ 8

2 Key Facts and Events ......................................................................................................................... 10 3 Executive Summary ............................................................................................................................ 12 4 Payment Instruments .......................................................................................................................... 13

4.1 Current Payment Environment .............................................................................................................. 13

4.2 Alternative Payment Instruments ........................................................................................................... 15

4.2.1 Boleto Bancario ..................................................................................................................................... 15

4.2.2 Oi Paggo ................................................................................................................................................ 15

4.2.3 MercadoPago ........................................................................................................................................ 15

4.2.4 Ukash ..................................................................................................................................................... 15

4.2.5 PayPal ................................................................................................................................................... 15

4.2.6 MasterPass ............................................................................................................................................ 16

5 Regulations in the Cards and Payments Industry ........................................................................... 17

5.1 Regulatory Framework .......................................................................................................................... 17

5.2 Anti-Money Laundering (AML) ............................................................................................................... 18

5.3 Foreign Direct Investment (FDI) Regulations ........................................................................................ 18

6 Analysis of Cards and Payments Industry Drivers .......................................................................... 19

6.1 Demographic Drivers ............................................................................................................................. 19

6.2 Economic Drivers................................................................................................................................... 21

6.3 Infrastructure Drivers ............................................................................................................................. 22

6.4 Business Drivers .................................................................................................................................... 23

7 Market Segmentation and New Product Launches .......................................................................... 26

7.1 Market Segmentation and Targeting ..................................................................................................... 26

7.1.1 Consumer cards .................................................................................................................................... 27

7.1.2 Commercial cards .................................................................................................................................. 32

7.2 New Product Launches ......................................................................................................................... 33

8 Payment Cards..................................................................................................................................... 34

8.1 Payment Cards Analysis ....................................................................................................................... 34

8.1.1 Volume and value of payment card transactions by type ...................................................................... 35

8.1.2 Personal vs commercial cards ............................................................................................................... 36

9 Debit Cards ........................................................................................................................................... 37

9.1 Debit Card Market Analysis ................................................................................................................... 37

9.1.1 Debit card transaction volumes and values by channel ........................................................................ 39

9.1.2 Debit card scheme shares in terms of number of cards in circulation and transaction value ............... 40

9.1.3 Debit cards issuers’ market shares ....................................................................................................... 41

9.1.4 Debit card comparison ........................................................................................................................... 42

10 Credit Cards ......................................................................................................................................... 43

10.1 Credit Card Market Analysis .................................................................................................................. 43

10.1.1 Credit card transaction volumes and values by channel ....................................................................... 45

10.1.2 Credit card scheme shares in terms of number of cards in circulation and transaction value .............. 46

10.1.3 Credit cards issuers’ market shares ...................................................................................................... 47

10.1.4 Credit card comparison ......................................................................................................................... 49

11 Charge Cards ....................................................................................................................................... 51

11.1 Charge Card Market Analysis ................................................................................................................ 51

11.1.1 Charge card transaction volumes and values by channel ..................................................................... 52

11.1.2 Charge card scheme shares in terms of number of cards in circulation and transaction value ............ 53

11.1.3 Charge card comparison ....................................................................................................................... 53

12 Commercial Cards ............................................................................................................................... 54

12.1 Commercial Card Market Analysis ........................................................................................................ 54

12.1.1 Commercial card comparison ................................................................................................................ 55

13 Card Fraud Statistics .......................................................................................................................... 56

13.1 Card Fraud Analysis .............................................................................................................................. 56

14 Card Issuers ......................................................................................................................................... 58

14.1 Banco Bradesco .................................................................................................................................... 58

14.2 Itaú UniBanco ........................................................................................................................................ 59

14.3 Caixa Econômica Federal ..................................................................................................................... 59

14.4 Banco do Brasil...................................................................................................................................... 60

14.5 Banco Santander Brasil ......................................................................................................................... 61

15 Prepaid Cards ...................................................................................................................................... 62

15.1 Prepaid Card Market Analysis ............................................................................................................... 62

15.1.1 Prepaid card comparison ....................................................................................................................... 63

16 Merchant Acquiring ............................................................................................................................. 64

16.1 Merchant Acquiring Market Analysis ..................................................................................................... 64

17 Appendix .............................................................................................................................................. 67

17.1 Tables .................................................................................................................................................... 67

17.2 Contact Timetric..................................................................................................................................... 80

17.3 About Timetric ........................................................................................................................................ 80

17.4 Timetric’s Services................................................................................................................................. 80

17.5 Disclaimer .............................................................................................................................................. 81

LIST OF FIGURES

Figure 1: Brazil – Payment Instrument Shares by Transaction Value (%), 2010 and 2014 ......................................................................... 13 Figure 2: Brazil – Payment Instrument Shares by Transaction Volume (%), 2010 and 2014 ...................................................................... 14 Figure 3: Brazil – Total Population and Structure, 2014 ............................................................................................................................. 19 Figure 4: Brazil – Internet and Mobile Penetration (Users per 100 Inhabitants), 2010–2019 ...................................................................... 20 Figure 5: Brazil – Economic Indicators, 2010–2019 ................................................................................................................................... 21 Figure 6: Brazil – Number of ATMs, POS Terminals and Commercial Bank Branches, 2010–2019 ........................................................... 22 Figure 7: Brazil – Household Final Consumption Expenditure and Retail Sales, 2010–2014 ...................................................................... 23 Figure 8: Brazil – E-Commerce Value (US$ Billion), 2010–2019 ................................................................................................................ 24 Figure 9: Brazil – Outbound and Inbound Trips Volume and Spending, 2010–2019 ................................................................................... 25 Figure 10: Brazil – Cards and Payments Industry Segmentation by Card Type, 2015 ................................................................................ 26 Figure 11: Brazil – Growth in Payment Cards Transaction Value and Number of Cards in Circulation by Type, 2010–2019 ...................... 34 Figure 12: Brazil – Volume and Value of Payment Card Transactions by Type (%), 2010–2019 ................................................................ 35 Figure 13: Brazil – Personal and Commercial Cards, Transaction Volume and Value (%), 2010–2019 ...................................................... 36 Figure 14: Brazil – Growth in Debit Card Transaction Values and Number of Cards in Circulation, 2010–2019 ......................................... 37 Figure 15: Brazil – Debit Card Transaction Volumes and Values by Channel, 2010–2019 ......................................................................... 39 Figure 16: Brazil – Debit Card Scheme Shares in Terms of Number of Cards in Circulation and Transaction Value (%), 2014 .................. 40 Figure 17: Brazil – Debit Cards Issuers’ Market Shares in Terms of Transaction Value (%), 2014 ............................................................. 41 Figure 18: Brazil – Growth in Credit Card Transaction Values and Number of Credit Cards in Circulation, 2010–2019 .............................. 43 Figure 19: Brazil – Credit Card Transaction Volumes and Values by Channel, 2010–2019 ........................................................................ 45 Figure 20: Brazil – Credit Card Scheme Shares in Terms of Number of Cards in Circulation and Transaction Value (%), 2014 ................. 46 Figure 21: Brazil – Credit Cards Issuers’ Market Shares of Transaction Value (%), 2014 .......................................................................... 47 Figure 22: Brazil – Credit Cards Issuers’ Market Shares of Outstanding Balance (%), 2014 ...................................................................... 48 Figure 23: Brazil – Growth in Charge Card Transaction Values and Number of Charge Cards in Circulation, 2010–2019 ......................... 51 Figure 24: Brazil – Charge Card Transaction Volumes and Values by Channel, 2010–2019 ...................................................................... 52 Figure 25: Brazil – Charge Card Scheme Shares in Terms of Number of Cards in Circulation and Transaction Value (%), 2014 ............... 53 Figure 26: Brazil – Number of Commercial Cards in Circulation and Transaction Value, 2010–2019 ......................................................... 54 Figure 27: Brazil – Shares of Various Types of Card Fraud in Terms of Transaction Value (%), 2010 and 2014 ........................................ 56 Figure 28: Brazil – Number of Prepaid Cards in Circulation and Transaction Value, 2010–2019 ................................................................ 62 Figure 29: Brazil – Merchant Acquiring Transaction Volume and Value, 2010–2019 .................................................................................. 64 Figure 30: Brazil – Merchant Acquirers’ Market Share in Terms of Transaction Volume and Value %, 2014 .............................................. 65 Figure 31: Brazil – Number of Retail Outlets and Total Merchant Accounts (Million), 2010–2019 ............................................................... 66

LIST OF TABLES

Table 1: Key Definitions ............................................................................................................................................................................... 7 Table 2: Annual Average Exchange Rate .................................................................................................................................................... 9 Table 3: Brazil – Key Facts, 2014 .............................................................................................................................................................. 10 Table 4: Regional Benchmarking of Brazilian Payment Cards, 2014 .......................................................................................................... 10 Table 5: Brazil – Mode of Entry of Foreign Banks ...................................................................................................................................... 18 Table 6: Cards for High-Income Consumers, 2015 .................................................................................................................................... 27 Table 7: Cards for Travelers, 2015 ............................................................................................................................................................ 28 Table 8: Cards for Vehicle Owners, 2015 .................................................................................................................................................. 29 Table 9: Cards for Shoppers, 2015 ............................................................................................................................................................ 30 Table 10: Cards for Students and Youth Population, 2015 ......................................................................................................................... 31 Table 11: Commercial Cards Comparison and Key Features, 2015 ........................................................................................................... 32 Table 12: Brazil – New Product Launches ................................................................................................................................................. 33 Table 13: Brazil – Pay Now, Average Interchange Fees: Intra-Network Transactions (%), 2010–2014 ...................................................... 37 Table 14: Brazil – Pay Now, Average Merchant Service Charge: Domestic Transactions (%), 2010–2019 ................................................ 37 Table 15: Brazil – Debit Card Comparisons and Key Features, 2014 ......................................................................................................... 42 Table 16: Brazil – Pay Later, Average Interchange Fees: Intra-Network Transactions (%), 2010–2014 ..................................................... 43 Table 17: Brazil – Pay Later, Average Merchant Service Charge: Domestic Transactions (%), 2010–2019 ............................................... 43 Table 18: Brazil – Gold Credit Card Comparison and Key Features, 2015 ................................................................................................. 49 Table 19: Brazil – Premium Credit Card Comparison and Key Features, 2015 .......................................................................................... 50 Table 20: Brazil – Charge Card Comparison and Key Features, 2015 ....................................................................................................... 53 Table 21: Brazil – Commercial Card Comparison and Key Features, 2015 ................................................................................................ 55 Table 22: Brazil – Prepaid Card Comparison and Key Features, 2015 ....................................................................................................... 63 Table 23: Brazil – Payment Instrument Transaction Values (BRL Million), 2010–2014............................................................................... 67 Table 24: Brazil – Payment Instrument Transaction Values (US$ Million), 2010–2014............................................................................... 67 Table 25: Brazil – Payment Instrument Transaction Volumes (Million), 2010–2014 ................................................................................... 67 Table 26: Brazil – Number of Payment Cards in Circulation by Type (Million), 2010–2019......................................................................... 67 Table 27: Brazil – Volume of Payment Card Transactions by Type (Million), 2010–2019 ........................................................................... 68 Table 28: Brazil – Value of Payment Card Transactions by Type (BRL Billion), 2010–2019 ....................................................................... 68 Table 29: Brazil – Value of Payment Card Transactions by Type (US$ Billion), 2010–2019 ....................................................................... 68 Table 30: Brazil – Personal and Commercial Card Transaction Volumes (Million), 2010–2019 .................................................................. 68 Table 31: Brazil – Personal and Commercial Card Transaction Values (BRL Billion), 2010–2019 .............................................................. 68 Table 32: Brazil – Personal and Commercial Card Transaction Values (US$ Billion), 2010–2019 .............................................................. 69 Table 33: Brazil – Number of Debit Cards in Circulation (Million), 2010–2019 ............................................................................................ 69 Table 34: Brazil – Debit Card Transaction Volumes and Frequency by Channel, 2010–2019 .................................................................... 69 Table 35: Brazil – Debit Card Total and Average Transaction Values by Channel, 2010–2019 .................................................................. 69 Table 36: Brazil – Debit Card Total and Average Transaction Values by Channel, 2010–2019 .................................................................. 70 Table 37: Brazil – Number of Debit Cards in Circulation by Scheme (Million), 2010–2014 ......................................................................... 70 Table 38: Brazil – Debit Card Transaction Values by Scheme (BRL Billion), 2010–2014 ........................................................................... 70 Table 39: Brazil – Debit Card Transaction Values by Scheme (US$ Billion), 2010–2014 ........................................................................... 70 Table 40: Brazil – Debit Card Transaction Values by Issuer (BRL Billion), 2010–2014 ............................................................................... 71 Table 41: Brazil – Debit Card Transaction Values by Issuer (US$ Billion), 2010–2014 ............................................................................... 71 Table 42: Brazil – Number of Credit Cards in Circulation (Million), 2010–2019 .......................................................................................... 71 Table 43: Brazil – Credit Card Transaction Volumes and Frequency by Channel, 2010–2019 ................................................................... 71 Table 44: Brazil – Credit Card Total and Average Transaction Values by Channel, 2010–2019 ................................................................. 72 Table 45: Brazil – Credit Card Total and Average Transaction Values by Channel, 2010–2019 ................................................................. 72 Table 46: Brazil – Number of Credit Cards in Circulation by Scheme (Million), 2010–2014 ........................................................................ 72 Table 47: Brazil – Credit Card Transaction Values by Scheme (BRL Billion), 2010–2014 .......................................................................... 73 Table 48: Brazil – Credit Card Transaction Values by Scheme (US$ Billion), 2010–2014 .......................................................................... 73 Table 49: Brazil – Credit Card Transaction Values by Issuer (BRL Billion), 2010–2014 ............................................................................. 73 Table 50: Brazil – Credit Card Transaction Values by Issuer (US$ Billion), 2010–2014 ............................................................................. 74 Table 51: Brazil – Credit Card Balances Outstanding by Issuer (BRL Billion), 2010–2014 ......................................................................... 74 Table 52: Brazil – Credit Card Balances Outstanding by Issuer (US$ Billion), 2010–2014 ......................................................................... 74 Table 53: Brazil – Number of Charge Cards in Circulation (Thousand), 2010–2019 ................................................................................... 74 Table 54: Brazil – Charge Card Transaction Volumes and Frequency by Channel, 2010–2019 ................................................................. 75 Table 55: Brazil – Charge Card Total and Average Transaction Values by Channel, 2010–2019 ............................................................... 75 Table 56: Brazil – Charge Card Total and Average Transaction Values by Channel, 2010–2019 ............................................................... 75 Table 57: Brazil – Number of Charge Cards in Circulation by Scheme (Thousand), 2010–2014 ................................................................ 75 Table 58: Brazil – Charge Card Transaction Values by Scheme (BRL Million), 2010–2014 ....................................................................... 76 Table 59: Brazil – Charge Card Transaction Values by Scheme (US$ Million), 2010–2014 ....................................................................... 76 Table 60: Brazil – Number of Commercial Cards in Circulation (Thousand), 2010–2019 ........................................................................... 76 Table 61: Brazil – Commercial Card Transaction Values (BRL Billion), 2010–2019 ................................................................................... 76 Table 62: Brazil – Commercial Card Transaction Values (US$ Billion), 2010–2019 ................................................................................... 76 Table 63: Brazil – Card Fraud (BRL Million), 2010–2014 ........................................................................................................................... 76

Table 64: Brazil – Card Fraud (US$ Million), 2010–2014 ........................................................................................................................... 77 Table 65: Brazil – Number of Prepaid Cards in Circulation (Million), 2010–2019 ........................................................................................ 77 Table 66: Brazil – Prepaid Card Transaction Values (BRL Million), 2010–2019 ......................................................................................... 77 Table 67: Brazil – Prepaid Card Transaction Values (US$ Million), 2010–2019 ......................................................................................... 77 Table 68: Brazil – Merchant Acquiring Transaction Volume by Card Type (Billion), 2010–2019 ................................................................. 77 Table 69: Brazil – Merchant Acquiring Total Transaction Value (BRL Billion), 2010–2019 ......................................................................... 77 Table 70: Brazil – Merchant Acquiring Total Transaction Value (US$ Billion), 2010–2019 ......................................................................... 78 Table 71: Brazil – Acquirers’ Transaction Volume (Million), 2010–2014 ..................................................................................................... 78 Table 72: Brazil – Acquirers’ Transaction Value (BRL Billion), 2010–2014 ................................................................................................. 78 Table 73: Brazil – Acquirers’ Transaction Value (US$ Billion), 2010–2014 ................................................................................................. 78 Table 74: Brazil – Retail Outlets and Total Merchant Accounts (Million), 2010–2019 ................................................................................. 79