Last updated: 17 November 2015
Payment reconciliation has become an integral part of the operations of e-commerces in Brazil. In this article we will provide an overview of Brazilian payment systems and look at the importance of reconciliation services in Brazil.
Online Payment Systems
As mentioned in our article Payment Gateways in Brazil, online stores can choose between multiple types of payment systems when serving the Brazilian e-commerce public. While small-sized and inexperienced businesses might opt for sub-acquirers to handle purchase transactions, established players with a growing consumer audience and a large amount of monthly transactions are advised to contract payment gateways, which charge lower transaction fees and provide a seamless shopping experience to online consumers.
While payment gateway platforms generally charge less than the service of sub-acquirers, it should be noted that it comes at the cost of merchants having to deal with higher amounts of risks, especially in the shape of fraud, cyber security breaches and transaction missteps. These are just some of the reasons for gateway clients to contract anti-fraud systems and payment reconciliation services, which in some cases can be offered by gateway providers or contracted from third party companies.
While anti-fraud systems can be immediately appealing due to the obvious losses caused by fraudulent transactions, reconciliation services are also highly recommended due to a number of characteristics that are specific to payment systems in Brazil, which in some cases can lead to time consuming issues for the merchant.
Payment Methods in Brazil
In order to better understand the importance of payment reconciliation for online stores in Brazil it is necessary to have a look at some of the most commonly used payment systems in the country. The cases of credit cards and Boletos Bancários are examples of the advantages for online stores to adopt reconciliation services in Brazil since they represent, combined, close to 95% of the payment transactions for e-commerce in the country. The underlying systems of these payment methods can lead to major issues if not properly handled.
Credit card systems should be addressed due to how long it takes in Brazil for purchase sums to reach merchants. In countries like the United States, the delay for merchants to receive payments handled by credit cards is fairly minimal, set at the period of two days. However, in Brazil, credit card processors have established a set delay of 30 days from the payment capture that is unavoidable unless store managers are willing to pay for sizable anticipation fees.
This standardized delay is due to the functioning of Brazilian banks, which take an average of 30 days to issue the payment from the consumers to the card processors. What makes this system particularly cumbersome is that the delay also takes place for credit card transactions split into multiple installments. For example, if a consumer chooses to split their purchase payment into six installments, the merchant will only receive a fraction of the purchase sum following each month, and the purchase payment process will only be completed following a period of 180 days.
The case of credit card transactions split into multiple installments should not be taken lightly, as they have become an integral part of the country’s consumer culture. Recent research suggests that three out of ten online purchases made in Brazil using credit cards are split into multiple installments. There are also situations where the purchases can be split onto multiple credit cards, which has become increasingly common for online stores in Brazil and can create more difficulties in the reconciliation process.
For online stores in Brazil that operate thousands of orders per month, or even per day, reconciliation systems can help to check for cases of unpaid installments and other types of missed transactions in a way that would be virtually impossible to be handled manually.
Boletos Bancários, or the invoice payment method that is highly popular to e-commerce customers in Brazil, can also lead to issues due to its structure. The Brazilian payment system currently allows for the issuing of registered and unregistered Boletos, and the main difference between the two types is that for registered ones it is possible to contact its issuing bank to check information such as its original sum, how it was processed and much more.
In the case of unregistered Boletos, it is especially difficult to trace information regarding if and how they are paid, a major headache for merchants that adopt this payment method. Additionally, unregistered Boletos may have their 48-digit identification tampered with, a practice that allows for customers to pay a different amount than what was intended by the issuer. Reconciliation services can be helpful in this case, providing a comparison between the original sum of Boletos and what was actually paid in order to avoid instances of bad faith or inadvertent behavior by customers.
Payment reconciliation services are recommended for store owners that intend to avoid the issues of payment capture errors, which are relatively rare in Brazil but can still take a toll on the store’s monthly balance. Reports suggest that these types of glitches can lead to a loss of up to 0.2% in a merchant’s monthly cash flow.
Benefits of Integrated Reconciliation Services
One of the main benefits of adopting integrated reconciliation services with payment gateway systems is the influx of detailed information that can be used to optimize the operations of online stores. Integrated reconciliation services are able to feed in-depth information regarding payments directly to ERPs in order for merchants to track sales performance, costs and other key areas that can be optimized.
This sort of information is also valuable during chargeback dispute processes, as details regarding payments are made easily accessible in management systems. With payment reconciliation services integrated with gateways, merchants are provided a seamless solution that automates the influx of payment reports and allows for the optimization of customer interactions in their entire life cycles.