Brazilian Domestic Card Labels Hit 10% Market Share

Brazil’s card market is expanding rapidly and domestic card labels are now growing faster than the established international labels. During the first three months of 2014, the Brazilian card market grew by 17% to a total volume of 223 billion Real (US$ 100 billion). While Visa and MasterCard are still predominant, local card labels such as Elo and Hipercard are gaining market share.

Until July 2010, the card acquirers Cielo (formerly called Visanet) and Rede (formerly called Redecard) could only capture Visa and MasterCard respectively. The Brazilian Central Bank, who regulates the market, ended this exclusivity four years ago in order to stimulate competition. Today, Cielo, Rede and other acquirers that entered the market can all process Visa and MasterCard, but other labels including Elo, Hipercard, American Express (Amex) and Agrocard are still exclusive. These four brands now represent more than 10% of the overall card market, according to Abecs, the Brazilian Association of Credit Card and Service Companies.

The impressive expansion of the domestic labels is being fueled by the largest Brazilian banks, which are the main card issuers. The bank Itaú Unibanco controls Rede and issues Hipercards. Banco do Brasil and Bradesco, control Cielo and issue Elo labeled cards in collaboration with the state-owned bank Caixa. Bradesco also owns Amex in Brazil and Banco do Brasil created Agrocard.

Due to the market position of its three issuing banks, Elo has begun to take on the status of a major national label opposing the international brands Visa and MasterCard. Elo released no official data, but according to Goldman Sachs’ estimation, the label has moved 9.2 billion Brazilian Real in the first quarter of 2014, which represents 4.2% of the overall market and 7.7% of the volume captured by Cielo. Only a year ago, this volume was inferior to 1.5 billion Brazilian Real.

Bradesco as well as Banco do Brasil have been issuing Elo labeled cards to new account holders and at the same time, some cardholders have been migrated to the Elo label, when other cards expire. Itaú, in its turn, has been negotiating with its retail partners the issuance of cards with the Hiper label instead of the international ones.

It is important to highlight that the domestic card labels are limited to purchases within Brazil and in Brazilian Real (BRL). International banks and acquirers cannot process these cards. Multinational e-commerce merchants can therefore maximize the ratio of successful payment transactions in Brazil by taking advantage of the growing trend of domestic credit card labels, by using a local payment processing service, such as provided by PagBrasil.

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