In addition to the Brazil country survey,
Charles Marc Abbey and Joel Van Arsdale
US payment consultancy First Annapolis outline the
unique situation regarding the acquiring market in Brazil.

According to recently updated research on
the world’s largest acquiring markets, there are five markets which
continue to represent slightly more than half of the global net

Remarkably, however, Brazil has, in the
last couple of years, eclipsed the UK as the second-largest
acquiring market by revenue, measured in dollars or euros.

Because the measurement of the size of the
markets is in dollars and euros in this case, exchange rates
matter, and both UK sterling and the Brazilian real have
depreciated against the dollar and euro over the past year.
Sterling has fallen somewhat more than the real which impacts the

More fundamentally, however, Brazil has
been growing at stratospheric rates of growth on the order of 30
percent to 40 percent per year, whereas credit volume in the UK
market has been relatively flat for several years and price
competition has created substantial top line pressure. In addition,
the UK is also suffering from mix-related margin erosion that
results from low-margin debit growing much faster than stagnant,
high-margin credit. The UK market is among the most competitive in
the world.

Brazil’s unique

Brazil is a market with very high revenues
by international standards. Merchant discounts are high by
international standards, and terminal economics are attractive by
Latin American standards. In addition, Brazil enjoys a lucrative
revenue stream that results from factoring settlement receivables
for merchants, receivables that would otherwise be settled to
merchants on a 28-day cycle, an artefact of the inflationary

In Brazil, the acquirers also offer a
POS-driven instalment lending product unique to the country that
also results in improved revenue streams to the acquirers.

The acquiring market structure in Brazil
features two brand-aligned acquirers, in a non-dual market.
Redecard is the sole MasterCard acquirer and VisaNet is the sole
Visa acquirer. Therefore, though there likely is greater
competition between brands than in other markets, there is
decidedly less competition on the acquiring level which impacts the
revenue streams the acquirers can generate.

It is growth and these very high revenue
streams rather than volume that results in Brazil’s ranking. UK
volume is quite literally five to six times larger than Brazilian
volume, yet Brazil generates twice the revenues.

Marc Abbey is a Baltimore-based
managing partner of First Annapolis. Joel Van Arsdale lives in
Amsterdam and is a principal and co-manager of First Annapolis’s
European practice.