Article

How does Brazil score in financial services?

With more ATMs (118:100K) and plastic than anyone else on the continent, Brazil is a clear winner. But how does it rate internationally?

July 1, 2014

by Nick Tay
senior payments consultant, Alaric

All eyes are on Brazil as the country plays host to the football World Cup. And while the boys in canary yellow are among the favorites to lift the trophy in Rio de Janeiro in July, the country’s payments sector also has a lot to admire.

But can Brazil really mix it with the big boys from North America and Europe for cashless payments? And does it score as well for ATMs as Neymar and company do on the pitch?

Regional giants

Brazil certainly wins every time when compared to its regional rivals. The country is by far the largest economy in South America, and it’s fast becoming one of the world’s biggest, so it’s no surprise its consumers enjoy a range of payment channels.

In terms of debit card ownership as a percentage of the population, Brazil comes top of the group in South America, with almost half of people possessing a debit card, according to a new report from Mercator Advisory Group. Venezuela comes second, followed by Argentina, Chile and Colombia. Ecuador and Uruguay both have a debit card penetration rate that is under 20 per cent. Peru doesn’t get out of the group stages at just over 15 per cent.

Across South America, there are approximately 170 million unbanked or underbanked adults, according to Mercator. This is bad news for the region, but shows just how well Brazil is performing.

Brazil also has more ATMs per person than anywhere else in the region, a separate Mercator report shows.

So compared to the rest of South America, Brazil is certainly the winner for card and cash. More ATMs, more people with access to a bank account. But in a global competition, Brazil is not really looking to compare itself with relative minnows. How does it fare against the major developed economies in the world?

Not quite world champions

As Mercator says, “the branch and ATM are still the major banking channels” in South America. So Brazil is streets ahead of the rest regionally, but what about globally?

“In mature payment markets, where smartphone, tablet, and online penetration have revolutionized customer interaction with FIs consumers have a myriad of options from which to choose,” the firm states in its introduction to its report on ATMs in South America.

Herein lies the main point — if you want to be considered in the big league for payments globally, you need to be offering a lot more than ATMs and debit cards. Although these are crucial, they are just the tip of the iceberg.

Let’s look at mobile payments first. One study last year from Mobi.life-E.life Group for Pagtel revealed that almost half of young Brazilians have carried out a financial transaction by tablet, while a quarter have done so by mobile phone.

Brazil scores 33.4 on the MasterCard Mobile Payments Readiness Index, which places it above Germany (31.6) but below the US (41.5). Brazilians will be pleased to know they are well ahead of Argentina (22.4), the only other South American nation surveyed.

This index shows 14 per cent of Brazilian consumers are familiar with mobile payments and 19 per cent are willing to try them. Certainly Brazil is past the group phase in terms of mobile payments, but it needs to develop further to be classed as a leader.

But mobile is only one side of the equation, and a very broad topic area. For example, we see Kenya scoring very highly in the MasterCard survey because of the success of M-Pesa, exactly because of the lack of a developed financial infrastructure.

The same company’s Cashless Journey offers a far broader indication of where Brazil lies globally. Assuming that a broad move away from cash payments represents ‘progress’, then Brazil is in the third tier of nations.

More than half of all consumer payments are cashless in Brazil — 57 per cent are carried out electronically in some form or other. The leading nations demonstrate a figure closer to 90 per cent. 

But after eliminating large cash payments, Brazil’s pace of change appears to be slowing.

“The cashless journey in Brazil has been slowed by informal economic activity, acceptance challenges and a lack of broad understanding of the benefits of electronic payment among consumers,” says MasterCard. “Accelerating the cashless journey in Brazil will require increased penetration of electronic payment solutions to lower income segments of the population.”

Of course, being the world champion of payments is about much more than just a nation’s capacity for mobile or non-cash payments. It’s far more complex than that. For example, Brazil has more ATMs than anywhere in the world, but a lack of interoperability means many can only be used by customers of the bank that owns the machine.

But on the whole it seems Brazil is making progress, developing a more advanced payments ecosystem. Copa America winners for sure, but not quite world champions.

photo: john fischer