The sector of electronic payment means is currently at its peak in Brazil. Figures from the main institutions of this segment and recent surveys conducted by the Central Bank of Brazil show that Brazilians choose credit cards as the second most preferred payment method for purchases made in supermarkets, department stores, restaurants, shopping malls and other chains. If the national average is taken into consideration, cash is still the number one choice.
In July alone, according to the Brazilian credit card company and services association (Abecs) a total of 508 million purchases were made using plastic in Brazil, amounting to a total of R$ 31.7 billion. This milestone is second only to that registered last December, when Brazilians made 567 million purchases using plastic and spent R$ 37 billion. However, there is a minor detail: the month of December concentrates all the end-of-year shopping sprees.
While considering this, an issue arises: if, in mid-2008 the results are so close to those registered at the time of year when most purchases are made, the estimates for the end of this year can only improve. The sector works with a total increase of around 21% for 2008, which aligns with the growth of recent years, between 18% and 20%.
This positive sales balance is a reflex of the heated Brazilian economy, which has triggered an increase in number of jobs and workers’ income. These factors, combined with easy availability of credit, have helped to disseminate credit, even more so if considering that, according to the Central Bank of Brazil (Bacen), there is an average of 0.6 credit card and one debit card per person.
At a time when credit pegged to GDP is getting close to 40%, the solution found to move all this money has been to make the most of the widespread use of plastic. There are millions of credit cards that are gradually replacing cash and checks, in particular for purchases made in staggered payments.
The checks post-dated for 30, 60, 90 and 120 days, for example, are steadily losing ground to card transactions. The market share drop of paper money and checks has been confirmed by the latest survey conducted by the Central Bank of Brazil (Bacen). The decline was 35%, considering the total traded over the last five years, while in the same period credit card operations skyrocketed 212%, which confirms the evolution of electronic payment means since the check is just a tool for cash purchases and not a means to granting credit.
But why has plastic been so successful, even more if considering its penetration in lower-income social classes? The reason is that the consumer has a credit limit suited to his or her needs and can stagger the payments for purchases without the interest that was traditionally included in post-dated checks, and does not need to carry a wad of bills or a whole check book, as well as added security, among other advantages.
For the storeowner, plastic cards are also important because they prevent the storeowner’s capital from having to stay in its custody for months, reducing the rate of credit loss. In addition, it ensures that, over that period, the sum referring to the purchase will be added to the cash flow. Another point: the retail sectors that do not offer the credit card as a payment option for consumers end up growing less than the others.
And, as this is a highly profitable business, increasingly more retail chains of all sizes are offering new methods of payment to their customers, including private labels and, more recently, hybrid cards. These hybrid cards, a new trend within the credit card sector, are a combination of the simple private label card and the credit cards that have banners. With this card, it is possible to make the most of the promotions of the banners, the discounts and differentiated installment payments of the shops, as well as consume in accordance with the acceptance policies of the Visa and MasterCard banners.
The hybrid card will revolutionize the market in a positive way, since the retailer will have an effectiveness and loyalty rate that is much higher than that which exists today with the private labels and the customer can concentrate his or her expenses and manage expenses in a single invoice. In addition, the customer does not need to have a bank account. Anyone can go to a supermarket or to any other retail chain and get a card tailored to the consumer’s profile.
Advantages for the storeowner, the issuer and the consumer. This is definitely the age for plastic money.