There is no disputing the card payments industry is on the rise in Brazil.
Already the largest card market in Latin American, issuance is expected to reach 595 million by 2018. E-commerce and online payments are increasing rapidly as well, with 68% of online shoppers using credit cards for purchases in 2013, according to the Online Payments Database, and at a rate of 25% growth Brazil is surpassing that of the US (15.8% growth).
However, with the increase in card usage comes higher rates in fraud. Reports for 2013 show 33% of credit card users claimed to be a victim of fraud, resulting in losses of BRL 1.5 billion ($465 million USD). This situation is exacerbated by financial regulations not keeping pace with industry growth and consumers’ apathetic attitudes toward taking steps to secure their own personal data, often leaving fraud management to banks and other issuers through processing over 3D Secure networks, embedding EMV chips on cards, and a variety of encryption and tokenization schemes.
In order to mitigate fraud, especially for card-not-present transactions, innovative financial institutions like Banco Daycoval are looking at security expertise from the global financial technology industry. With the goal of becoming one of the top private banks in Brazil, Banco Daycoval is bringing new banking services to the market focused on customers. Digital technology and fraud prevention in card payment processing is a key part in supporting their growth strategy; for this reason as of February 2016 the Bank has instituted 3D Secure e-commerce transactions for all card holders.
“We were looking for a reliable software provider and TAS Group brought not only 30-years of reputable experience but also a strong 3D Secure solution combined with their datacenter to manage transaction processing. By utilizing the TAS processing resources, we can remain more flexible and focused on our customers,” stated John Kiesel, Product Manager of Banco Daycoval.
Regulations and restitution from fraud strongly favor consumers in Brazil often translating into losses for merchants as they must provide refunds to the customer for fraud claims, even after shipping merchandise. Despite payments liability residing with merchants, they have been reluctant to upgrade POS to security measures fearing possible inconveniences to one-click customer preferences will incur even greater amounts in lost sales revenue.
TASamericas COO Massimiliano Quattrocchi explained, “3D Secure adoption has been fought against for many years by merchants, who claimed the added security step also added barriers for customers and contributed to cart abandonment. However, we at TAS Group have worked hard to reduce issuer, merchant and consumer pains along two lines. On one hand, we have simplified the buyer’s payment experience, both before and during the card authorization process, by adding dynamic tokenization; on the other, we have drastically reduced Issuers’ upfront 3Dsecure adoption costs by offering the overall solution “as a service.”
Although the consumer banking sector in Brazil has been consolidated amongst a few large players, emerging competition like Banco Daycoval are realizing market potential through advanced technology and adaptable solutions that provide better security for all parties while expanding convenience in their digital banking offerings. As Brazil’s estimated BRL 144 billion (36 billion USD) in on-line commerce card purchases continues to grow, the evolution of payment technology and fraud prevention will become increasingly important for consumers, merchants and institutions alike.