The Latin American Payments Blog
Have you heard of Boleto Bancário? Chances are if you are based in the United States or Europe then you might not have, but since its launch in 1993, it has grown to now account for around 15% of all payments in Brazil. This means there are billions of transactions being made annually by consumers – making it an essential payment option if you are considering operating in Brazil and Latin America.
As of 2018, only 6.5% of Brazilians have an international credit card; that’s 196,350,000 people that have no access to any form of international payment. Another consideration is the large amount of the population, 25% in fact, who are “unbanked” (or desbancarizados in Portuguese), meaning their only method of payment accessible to them is cash, and cash-like products, such as Boleto.
In general, companies that are not able to offer local payment options in Brazil are missing out on a huge pool of potential customers, but even more so if they offer only local credit cards, when 100% of the population have access to Boleto Bancário, a payment option more like a cash slip. By adding Boleto, among your other local payment options, to your payment portfolio, you can truly revolutionize your business by accessing more clients than ever before.
What is Boleto Bancário?
Boleto Bancário is a payment method that is regulated by the Central Bank of Brazil (Banco Central do Brasil – BCB) as part of the Brazilian Payment System (Sistema de Pagamentos Brasileiro – SPB) and works in a similar way to that of a wire transfer or cash payment. Boleto literally means “ticket” in Portuguese, and when it was first introduced in the early 1990s it was primarily used for utility payments and rent and was designed to work solely with cash – however, the rise of technology has reinvigorated it and it is not one of the most popular ways of payment for e-commerce.
Put most simply, a Boleto works like an invoice or ticket that is provided to the end-user and instructs them on the amount due and the date payment is due by. Boletos can either be printed or remain virtual and allow millions of Brazilians to then pay their bills at one of over 40,000 processing locations. These locations vary and include typical financial places such as ATMs, bank branches, lottery stalls and even at some supermarkets. Boletos can also be paid from any online or mobile banking app.
The logistics of Boleto
Alongside the amount and date due, each Boleto contains a unique barcode, serial number, issuing bank code and description as well as customer information. In essence, the Boleto barcode is the DNA of the account, with 48 numbers split as:
- The initial three digits identify the bank
- The fourth digit indicates the currency – 9 for Brazilian Real, 0 for other currencies
- The next 25 digits make up the free field, helping to provide the customer information to the bank
- The check digit identifies the Boleto as a whole and is created from a mathematical formula
- The field verifying digits ensure each field is correct
- The numbers after the check digit inform of the due date
- The final ten digits indicate the value of the document, without discounts.
With nearly 140 million Brazilians not having access to a credit card, Boletos help the majority of citizens manage their finances.
Registered & Unregistered Boletos: what should I know?
Registered Boletos are sent to the bank once they are requested for a verification process, and whoever generates the Boleto (ie. the consumer) is required to pay for it at the time it is issued. Because they require a confirmation from the Bank to be validated, their timeline for delivery can be a bit longer than an unregistered Boleto – usually between 2-6 seconds vs. 1-3 seconds for unregistered ones.
Unregistered Boletos are what they sound like: they haven’t been registered with the Central Bank, and therefore they are only issued when the customer makes the payment. However, as of the end of 2017, these have been phased out, and only registered Boletos are allowed for e-commerce. This rule applies to Boletos of all values and was implemented with the intention to reduce fraud because without being registered, the Boletos are quite hard to trace and therefore can lead to either fraudulent or suspicious activities that merchants have little recourse over.
How does a Boleto Bancario work?
Originally, the Boleto was designed to work almost like an IOU. The customer was given the printed Boleto at the same time when they purchased goods or with their utility bill and they would then have until the designated date to complete the payment. To do so, they would simply need to head to a relevant processing point and pay the amount due in cash to complete the transaction.
The rise of internet banking and the invention of smartphones has transformed this slightly and whilst the cash option is still a viable way, nowadays a consumer can purchase something online with Boleto and then simply enter the number into their online banking system or scan the barcode via their banking app on their smartphones. Many Brazilians prefer this method as it helps to keep their online shopping more secure.
From a retailer’s point of view, when a customer chooses this option to purchase something they will issue the Boleto which will contain the amount, customer information and due date. The customer will then have until the expiration date to pay otherwise the transaction will fail or a late fee will be added.
Why should your business adopt Boleto Bancarios?
If you are looking to expand your business into Brazil and the Latin American markets, then adopting cash-based payment methods, such as Boleto Bancário, is essential if you want to reach the whole consumer base. If you restrict yourself to only accepting international payment methods, then you will be limiting yourself to just 6.5% of the population. To really excel in this market, it is advisable to accept local credit cards (as most credit cards Brazilians use are indeed local, not international) and Boleto.
In 2017, 21% of all online purchases in Brazil were made using Boleto Bancário. Whilst you could accept foreign currency, international companies operating in Brazil are subject to expensive processing fees that are hidden in FX rates, which can often end up being up to 70% more expensive than traditional rates you might be used to.
Nearly every Brazilian uses a Boleto at least once a month so it is an incredibly familiar payment method and by accepting the method for your business, you are adopting a local tradition. By offering the option of using Boleto, you will be welcoming a population of people who would be otherwise unable to make international payments and purchase from your store.
How can your company start offering Boleto Bancario?
Boleto Bancario payment processing can only be handled by a local entity in Brazil, in direct connection with an authorized financial institution. So you could open your own local branch, but this is an incredibly complex process. It would require a lot of paperwork and experience, whilst you would also need the knowledge of a local expert who is able to help you to navigate the various laws and taxation rules. Since Brazil has the second most complex tax system in the world, this is a lengthy process.
A far easier way is to utilize the skills of a company that already lives in Brazil, like us here at epag, who are legally allowed to operate international payments. We are already working with merchants from around the world helping them unlock the potential of Brazil and expand their sales. With epag, you will not need any local entities, bank accounts or registration – we collect the funds locally on your behalf and will then settle them in either EUR or USD; without applying any hidden FX fees. Get in touch with us for a consultation on how we can help you grow your business.
We can also remit them anywhere in the world and our state-of-the-art platform has been specifically built to meet the highest security standards so you can rest assured that you are receiving the very best service possible.
We offer a complete one-stop-shop for our customers and using the latest technology in cross-border payments allows us to maximize your profits. Not only that, but we offer free setup and sign up whilst ensuring no monthly fees; so you will always be able to know what your expected cash flow will be.
What makes epag different from others?
We truly understand the complexity of the region – our team has lived and worked in Brazil and Latin America extensively, so we have a deep understanding of the complex systems. Our aim is to offer a truly local service on a global scale and we understand that there are vastly different requirements between large enterprises and SMEs, so we work closely with each of our clients to offer a personal and tailored solution.
Our all-in-one integrated solution enables you to focus on your e-commerce without having to worry about the transactions. So if you are looking to expand your business into Brazil and take advantage of nearly 200 million potential new customers, get in touch with us today and speak with our experienced team to find out more.