Author: Andy McDonald, Vice President Merchant Payments - Europe, ACI Worldwide
For a US or European merchant looking to gain a foothold in Brazil, there are myriad regulatory and compliance issues to navigate.
But, with eCommerce as a percentage of total retail sales still only around 3%, there is massive untapped growth potential, especially as every link in the chain – from payment enablement to delivery – improves, and smartphone penetration (and therefore mobile shopping) continues to rise. The complexity and nuances of the payments landscape, however, do mean that merchants need to approach the Brazilian market with a carefully-considered payment processing, acquiring, and fraud strategy.
Fraud on the rise
In addition to ensuring that your site can support locally-preferred payment methods (e.g. Boleto Bancário), merchants need to be highly attuned to the fraud landscape.
In ACI Worldwide’s report “Global Consumers: Losing Confidence In The Battle Against Fraud,” it was found that nearly 50% of Brazilian consumers have experienced card fraud in the past five years, and 17% have experienced fraud multiple times over the same timeframe. Tellingly, 14% of Brazilian consumers also lack confidence in their financial institutions to protect them from fraud, and 62% of consumers exhibit risky behaviour with regard to online shopping and payment. The high-level takeaway from these findings is that the Brazilian payments market has significant room for improvement, as well as highlighting the need for better consumer education on fraud prevention.
Although the Rio 2016 games will fade to memories, and while such major international events (and the international crowds they draw) typically create spikes in fraud levels, fraud prevention should still be front of mind for merchants going for gold in the Brazilian eCommerce market, especially given that fraud rates are shown to be three-fold higher for cross-border transactions.
Taking steps to manage fraud in Brazilian eCommerce
Brazil has the second-highest rate of card fraud globally, up 23% from 2014 to 2016. However, the following considerations can help merchants manage their fraud operations when selling cross-border in Brazil.
Effective fraud prevention measures should also intersect with a well-considered payments strategy. For example, 3-D Secure can be implemented to add an additional layer of security, but while it is well-established in markets such as the UK, it is virtually unknown to Brazilian shoppers.
As a consequence, the improper use of 3-D Secure in Brazil can lead to high cart abandonment rates. Cross-border merchants stand to significantly increase conversion rates if they bypass 3-D Secure for cards with Brazilian BIN numbers, but in doing so they need to be particularly vigilant in calibrating their fraud management tools (though 3DS is no failsafe against fraud either – if used it should be supplemented with fraud management tools that reduce losses not captured by 3DS).
While this may seem counter-intuitive, it demonstrates the importance of considering fraud prevention as an integrated part of a broader cross-border payments strategy, especially when getting it right enables merchants to tap into the considerable potential of the Brazilian eCommerce market.