More News from the Brazilian Market
The Brazilian market continues to make the news. In the January 2014 Navigator, we reported on recent regulatory actions taken by the Brazilian government with the aim of opening up the market to increased competition. Today, we report on the progress of several new players in the market and a new acquiring alliance formed in Brazil.
Last year, the Central Bank of Brazil ended the Brazilian card industry’s self-regulation system and appointed itself as regulator. In November, the Central Bank issued the regulatory framework for the industry. The regulatory framework’s main objectives are to promote financial inclusion, competition, innovation, reliability of the system, and the interoperability of payment networks.
In July 2013, Santander Brasil, the Brazilian unit of Spain’s Santander Bank, reached an agreement to acquire Brazilian card payment processor GetNet. Santander previously owned 50% of GetNet. The final deal was announced on April 7, 2014 through security filings. The announcement listed the value of the transaction at 1.1 billion Reais (approximately $493 million USD). As a result of the transaction, GetNet will now be owned by Santander Brasil’s local card processing unit, giving Santander Brasil an indirect stake of 88.5% in GetNet.
Founded in 2003, GetNet specializes in the development, implementation, and management of solutions for capturing and processing electronic transactions. GetNet’s services currently include, among others: POS and mobile card processing services, sales of prepaid mobile telephone credit services, merchant loyalty programs, billing services, funds transfers, and corresponding banking services. The Santander/GetNet partnership is making steady progress in capturing market share at the expense of the largest players, Redecard and Cielo, who still hold a combined market share over 90%. At the end of October 2013, Santander/GetNet’s market share was estimated at 6%. This is slightly lower than Banco Santander’s banking market share in Brazil, which stood at 7.5% (when measured by total assets) as of December 2013.
Early this year we saw more signs of an increasing competitive environment in Brazil. In January, First Data announced that it has formed an alliance with Bancoob (Banco Cooperativo do Brasil S.A.) to enter the Brazilian merchant acquiring market. Bancoob, a privately owned bank, supports Brazil’s largest credit union – Sicoob. The alliance provides First Data with access to Sicoob’s client base, which includes approximately 300,000 merchants in 23 Brazilian states through a network of more than 2,200 branches. On August 15th, First Data announced the launching of “Bin,” First Data’s acquiring solution specifically developed for the Brazilian market. According to the press release, First Data invested more than $150 million to build and launch the Bin solution, including investments in the development of logistics and support operations, the hiring of over 200 employees, and the opening of a new office in Sao Paulo.
Also in January, Global Payments announced during its fourth quarter earnings call (second quarter of Global’s 2014 fiscal year) that it had launched its previously-disclosed Brazilian joint venture with Spanish financial institution CaixaBank. Global Payments’ CEO Jeff Sloan stated that the JV currently has 2,000 merchants live on its platform in Brazil.
These developments are occurring in a market where the market leaders, Cielo and Redecard, continue to perform exceptionally well when compared to U.S. and European acquirers. For example, Cielo, which processed 449 billion Reais (approximately $201 billion USD) in 2013, grew volume and revenue 22.5% and 19.3% respectively in the first quarter of 2014 over the same quarter in 2013.
We expect 2014 will be an interesting year in the Brazilian acquiring market. International acquirers will continue to be attracted to Brazil because of the positive characteristics in the market. New players will continue to capture market share at the expense of the incumbent Brazilian acquirers, while there is no doubt that Redecard and Cielo will implement strategies designed to protect their dominant positions in an increasingly competitive landscape. Stay tuned.
For more information, please contact Janinne Dall’Orto, Senior Manager, specializing in Merchant Acquiring, firstname.lastname@example.org.
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