Payments

Understand the Role of Brazilian Payment Installments

Parcelamentos, or installments, are a way of life in Brazil.

Arianna Aryel Ramos

Marketing Analyst
July 25 2016

Brazil LifeIt powers the economy by encouraging a constant flow of money. Over 80% of all online transactions are via credit card based, interest-free installment plans. For foreign ecommerce merchants, this unused credit can mean trillions in purchasing power. For consumers, it means that buying perfume on an international site is more affordable and they can also split the payment to fit it in their monthly budget.

According to Rio Times, almost 60% of Brazilians spend their monthly income on paying off installments. But why is this good news for merchants if the consumers are already in debt? Because over 70% of them are in short term debt. In an era where more and more people expect immediate gratification, the already popular concept of installments is becoming more beloved. Want to take a vacation this holiday season? Looking to escape to a sunny paradise?

Case Study: How a merchant increased their sales by 114% using installments.

Breaking down costs with installments

With Airbnb, break down your costs in 3 easy installments and only pay BRL 766 per month instead of a whopping BRL 2298! Especially as the holiday season arrives, installments help the average consumer in budgeting their needs while still allowing them to enjoy life’s pleasures - all while supporting the economy.

In fact, when Brazilians consider making a purchase, they look at whether the installment price is within their monthly budget, not the full price of the product. When buying durable goods, around 70% of households pay via installments. Even when buying less expensive items, Brazilians prefer to shop though parcelamento. Financial Times research indicates that around 80% of all retail sales involve installments.

They also play a key role in ecommerce transactions, with shoppers taking advantage of parcelamento in 63% of online payments made with credit cards. The installment price is the deciding factor rather than the full price of the product because most merchants offer interest free installments. This way, merchants eliminate consumer concerns about unaffordable interest rates and fine print by simplify the decision making process for customers. Especially when shopping online, it greatly reduces shopping cart abandonment as customers are induced by the low initial prices.

An economy deeply rooted in the installment system, Brazil is ripe for international merchants to take advantage of this payment method. Global websites seeking to expand their consumer base increase their customers’ purchasing power exponentially by allowing consumers to pay via installments. It instantly maximizes a company’s potential target market and allows the consumers to spend more with less guilt. By following in the footsteps of leading brands like Airbnb and integrating installments, international ecommerce websites can quickly see dramatic growth in their sales in Brazil.

Most relevant payment methods in Brazil

Just one-third of Brazilians have an international credit card. That’s why the best way to reach 100% of consumers in Brazil is by using EBANX solutions. Besides offering cash payment methods and interest-free installments, EBANX significantly increases credit card approval rates by working with local acquirers.

Installments

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