Cross-border credit card spending in Brazil

The instability in the Brazilian economy, Brazilian politics, and the devaluation of the Brazilian Real have caused a decrease in cross-border credit card spending. Although consumers still travel and make international purchases, they’ve reduced the number of transactions and the amount charged for each transaction.

But according to a VPS study based on Visanet Data in 2016, not all customers are affected the same way.

Affluent cardholders are less affected than lower income customers
Online transactions increased relevance in cross-border spending
Travel and entertainment merchant segments (i.e., lodging, auto rentals) are less affected than non-essential segments (i.e., clothing retailers);
Travel destinations have changed from U.S. and Canada to countries in Latin America and Europe

Brazilian Cross-Border Spending from 2009-2015

Brazilian cross-border spending graph
Source: Banco Central de Brazil.

Visa Performance Solutions can help issuers and merchants understand and capture Brazilian consumer cross-border spending by analyzing data and insights and providing solutions that create more opportunities for spending.

The impact of exchange rates on cross-border spending

Based on Brazilian cross-border spending data from 2009-2015 from Banco de Brasil, you can see there is a direct correlation between Brazilian international spending and U.S. dollar exchange rates (demonstrated in the Brazilian Cross-Border Spending from 2009-2015 chart), and this impacts consumer credit card spending across borders. Cross-border card usage is stable when the Real is 3:1. But the Real has been bouncing back and forth between 3.5 to 3.9 Real to the U.S. dollar. When the Real was greater than 3:1 after 2015, Brazilian international spending dropped dramatically. Prior to 2015, conditions were more favorable for international purchases.

The exchange rates took a toll on both spending and payment methods. As shown in Brazilian Cross-Border Payment Methods used from 2013-2015, in December 2015, international transactions on credit cards dropped 4 percent from December 2014 to December 2015—the lowest they have been over the past three years.

Brazilian Cross-Border Payment Methods, 2013-2015

Brazilian cross-border payment methods bar graph
Source: Visanet transactional data for Brazilian credit, debit and prepaid card international transactions from 2013 to 2015.

In 2011, the Brazilian government increased the tax for international transactions for credit cards, and as a result, cardholders started using cash instead of credit according to Brazilian Central Bank statistics.

Yet despite these circumstances, there are hidden opportunities to expand and adapt your portfolio strategy. Visa Performance Solutions can help you realize and create spending opportunities with a variety of approaches and solutions.

Spending patterns and how to change them

You can see that based on the Brazilian Cross-Border Spending from 2009-2015 (from Visanet transactional data) that Brazilians still travel abroad, but they’re buying less when they travel. For example, clothing used to be the top spending category, but clothing purchases dropped in 2015 to the number 3 category. Instead, cardholders began using cards for travel expenses like car rentals and lodging, and they charge less per transaction.

Merchants and issuers can work together on programs to stimulate spending by creating promotional campaigns and offering incentives to spend on their cards at hotels, car rental companies, entertainment venues and beyond.

"Card present" versus "card not present" transactions

"Card present" transactions occur in stores, while online purchases are referred to as “card not present” transactions. Card present versus card not present transaction types reflect different cardholder behaviors and interests.

Brazilian Cross-Border Payment Volume, 2013-2015

Brazilian cross-border payment volume graph
Source: Visanet transactional data for Brazilian credit, debit and prepaid card international transactions from 2013 to 2015.

In 2015, Brazilian "card not present" transactions (online) reached an all-time record of 41 percent of international payment volume. However, Brazilian customers still spend more internationally in stores than online. The U.S. and Canada are by far the most relevant destination for Brazilians, representing 46 percent of "card present" international transactions, and those countries were the most affected by unstable exchange rates.

Issuers should monitor both types of transactions if they want to succeed in the cross-border space. Visa Performance Solutions can help you you stimulate consumer spending by analyzing your portfolio and ensuring that the credit and debit products your business offers work better for consumers who make online purchases.

Solutions

We offer several solutions to help you optimize your product portfolio.

Focus on premium cardholders

Optimize products for cardholders by offering cards with features that appeal to specific segments. By developing a profile for each segment based on specific traits, activities and triggers, we can help you implement an upgrade strategy that anticipates their upcoming needs and behaviors.

We can also help you fine-tune this effort by changing the scores that are used for determining which customers qualify for upgrades. This will help strengthen and develop enduring relationships with millennial customers.

Our Premium Product Optimizer, a self-help, web-based tool, can help you drive these efforts.

Digital Score and Digital DNA

A digital score engagement helps us to identify opportunities to stimulate spending. We’ll evaluate customer transactions and score them based on transaction frequency and type. Since online purchases make up 50 percent of cross-border transactions, we can help you target these customers with special offers and relevant products.

Drive digital spending behavior

Once we’ve created your digital score, we’ll work with you to promote online spending using credit or debit products. We can help you promote the benefits of using card products for digital cross-border spending by designing compelling online campaigns. We can also help issuers and merchants target travelers by driving awareness around the benefits of using cards for travel.

Authorizations and digital assessment

Visa Integrated Marketing Solutions (VIMS) is a full-service campaign execution engine that allows you to quickly and easily execute credit acquisition, credit and debit activation and credit spend stimulation programs. Learn more about VIMS or contact your Visa Account Executive for information.

Disclaimer

The information, recommendations or "best practices" contained herein are provided "AS IS" and intended for informational purposes only and should not be relied upon for business, operational, marketing, financial, legal, technical, tax or other advice. When implementing any new strategy or practice, you should consult with your legal counsel to determine what laws and regulations may apply to your specific circumstances. The actual costs, savings and benefits of any recommendations, programs or "best practices" may vary based upon your specific business needs and program requirements. By their nature, recommendations are not guarantees of future performance or results and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Assumptions were made by us in light of our experience and our perceptions of historical trends, current conditions and expected future developments and other factors that we believe are appropriate under the circumstance. Recommendations are subject to risks and uncertainties, which may cause actual and future results and trends to differ materially from the assumptions or recommendations. Visa is not responsible for your use of the information contained herein (including errors, omissions, inaccuracy or non-timeliness of any kind) or any assumptions or conclusions you might draw from its use. Visa makes no warranty, express or implied, and explicitly disclaims the warranties of merchantability and fitness for a particular purpose, any warranty of non-infringement of any third party's intellectual property rights, any warranty that the information will meet the requirements of a client, or any warranty that the information is updated and will be error free. To the extent permitted by applicable law, Visa shall not be liable to a client or any third party for any damages under any theory of law, including, without limitation, any special, consequential, incidental or punitive damages, nor any damages for loss of business profits, business interruption, loss of business information, or other monetary loss, even if advised of the possibility of such damages.

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