Slow Growth of Charge Cards in Brazil- Ken Research

Charge cards emerged as a slowest growth in Brazil in 2016. Brazilians faced challenges in 2016 due to the country’s economic recession. This factor led to restrict the growth of one of the main drivers of card payment transactions and consumer spending.

With high annual percentage rates for credit cards, the possibility of paying for a purchase in several instalments with no interest charged contributed to Brazilians’ understanding of charge cards and credit cards as a complement to their monthly income. The economic crisis made the consumers think carefully when making a high-priced purchase using credit cards, which helped debit cards increase their share in the total card payment transactions during the recession period.

High interest rates for charge cards and credit cards also contribute to Brazilians considering carefully when using their credit cards. Consumers are using charge cards and credit cards for making larger payments, therefore, debit cards were considered when paying for a lower-priced item.

The digital world in Brazil contributed to the rapid growth of online and mobile channels in the country’s payments industry. Banks and card operators invested more in m-commerce solutions to attract digital consumers. The charge cards market grew at a healthier pace in terms of value and volume upto the year 2014.

Charge card banks implement various marketing strategies and rewards to attract consumers. There was strong competition among banks to encourage card usage and spending. The frequency of charge card use declined during 2012-2014 and this frequency is expected to reduce by 2020.

Card payment transactions are expected to recover starting in 2017. The increase in urbanization may lead to increase in card usage. The total urban population is expected to grow further over the anticipated period.

In 2015 Brazil proved that the credit card sector is not impacted by poor economic conditions as numerous households became cardholders and default rates did not increase. The below average classes which are new cardholders were an interesting market to target.

The credit card is the preferred means of transaction in Brazil. Brazilians are currently more digitally inclined. The premium card market is increasing in Brazil and the interchange revenue and annual fees are greater for this product and a better market in terms of profit for banks.

The President of Brazil, Michel Temer announced few changes in the credit card payment system. The government has allowed decreased interest rates to be charged in 2017 for the first quarter. The financial institutions can only offer a maximum of 30 days under the revolving payment mechanism and automatically turning the operation into an instalment loan under this scheme.

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