Brazilian Laws Help Drive Prepaid Card Use

by Terry X Xie 0

Brazilian consumers have a long history usingprepaid cards. Two key factors drive prepaid card use in Brazil andother Latin American markets.

First, the cost of using banking services in Brazil is expensive.The World Bank estimates the average cost of basic financialservices such as checking, savings, and loan services in LatinAmerica is 5% to 10% of minimum monthly wages.

The other factor is the government’s push to replace paperpayments such as cash, checks, and paper vouchers with electronicpayment methods. Brazilian law requires employers to provide foodand meal benefits to their employees. CBSS, Edenred Ticket andSodexho VR are the three companies that dominate the market. Inrecent years, prepaid cards have increasingly replaced papervouchers. In addition, Brazilian transport firms also are requiredby law to pay their truck drivers electronically through eitherbank transfer or prepaid cards instead of paper vouchers.

At the same time, Brazil also has Latin America’s largestcard-based social benefits program, Bolsa Failia, which is operatedby the state-owned CEF. Some 12 million households enrolled in theprogram can use their Bolsa Failia prepaid cards to withdraw cashfrom CEF’s network of locations. In the future, the cards canpotentially be enabled for POS payment transactions as well.

Mercator Advisory Group will cover the Brazilian prepaid market inmore depth later this year.