The Company
In the current merchant acquiring and payment processing industry model in Brazil, merchant acquirers, like us, are licensed to use the card associations’ brands and are also responsible for the capture, transmission, processing and settlement of transactions.
Between 2006 and 2008, the transaction volume of credit, debit and private label cards in Brazil grew at a compound annual rate of 23.9%, reaching R$375.4 billion in 2008 compared to R$244.7 billion in 2006, according to the ABECS.
This growth is primarily a result of expanded household spending, an increased use of financial services in Brazil, and the growing use of electronic payment methods.
Expanded household spending
From 2000 to 2008, household spending in Brazil increased from R$742.9 billion to R$1,753.4 billion, representing a compound annual growth rate of 11.3%, according to IBGE data as of April 2009, not adjusted for inflation accumulated in the period. During the same period, the use of credit and debit cards as a means of payment increased from 8.8% to 21.4% of the household spending in Brazil, according to the most recent data from the ABECS and the IBGE. This increase was a direct result of economic growth, the increase in employment and in income levels in Brazil in the period, and most importantly, the increased acceptance of credit and debit cards as a means of payment.
Increased use of financial payment services
Economic stability, higher employment rates and an increase in average income for the Brazilian population in recent years have made financial products accessible to a larger portion of the population. Approximately 62.0 million new bank accounts were opened between 2000 and 2008, increasing the total number of accounts from 63.7 million in 2000 to 125.7 million in 2008, representing a compound annual growth rate of 8.9%, according to Central Bank data, which illustrates the public’s increased access to the banking system in Brazil. During the same period, the number of credit and debit cards, including private label cards, increased 20.1%, according to Central Bank data.
Growing use of credit and debit cards as a means of payment
Factors such as improved security, convenience and efficiency in conducting transactions have contributed to the growing use of credit and debit cards in Brazil in the past two years. According to the most recent data from the Central Bank, of a total of 8.5 billion non-cash transactions in 2008, 53.8% were made using credit and debit cards, while 16.1% were made using checks. According to data from the Brazilian Federation of Banks (Federação Brasileira de Bancos), or FEBRABAN, in 2000, electronic capture equipment represented 1.6% of banking transactions, compared to 4.1% in 2007, representing an annual increase of 27.3%. This shows a significant increase in the replacement of checks by credit and debit cards.
Despite the rise in the use of credit and debit cards as a means of payment in Brazil, we believe that, when compared to penetration rates in more developed countries, the merchant acquiring and payment processing industry in Brazil still shows significant growth potential. In the United States, for example, credit and debit cards as means of payment were responsible for 40.0% of private consumption in 2007, according to the Bank for International Settlements and the Bureau of Economic Analysis, compared to 19.4% in the same period in Brazil, according to the ABECS and the IBGE.
