Why installments boost e-commerce in Brazil
For a significant part of the Brazilian population, installments are a way to increase their purchasing power, and it's not exclusive of high-ticket items, since they are even used for daily expenses. The practice also extends to credit cards, and 56% of the credit cards users opt to pay them in monthly installments, rather than paying off the full sum. Being that Brazil the most important e-commerce market in Latin America, the companies cannot overlook the fact the same applies to online shopping.
Some facts and figures regarding Brazilian e-shopping
The first approach to understand this habit is to take note of the relevant data from the online shopping outlook:
- The online retail sales were almost USD 18.7 billion in 2017, and it's expected to exceed, by 2022, USD 31 billion.
- In 2017, 64% of consumers used credit cards for purchases made on e-commerce websites.
- In the same year, about 50.2% of e-commerce sales were made in installments.
- 18% of those purchases were made in 2-3 installments and 31.5% were made in 4-12 installments.
- In 2018, 80% of non-face-to-face consumers used credit cards to buy online.
- The projections foresee 166.4 million e-shoppers by 2023.
Apart from the obvious general growth rate, numbers let us perceive a correlation between the increase of conversions and the use of credit cards - especially when installment payments are enabled.
Why installments became so popular in Brazil
The practice began back in the 1950s when "crediários" (personal loans) became popular as a solution the Brazilian retailers found to allow their customers to purchase items and pay them in several installments, each one with a payment due date. Each month, the customer would return to the store to pay an installment, and in the majority of the times, he/she would buy another item.
This method was beneficial, both for merchants and for consumers: these gained a wider purchasing power and hadn't to pay interest, and merchants discovered a new way to engage customers. Its success was so great that installments became imprinted in the culture and Brazil`s DNA.
Why are installments so attractive to stakeholders?
As previously mentioned, installment payments have enlivened the market by conferring more consumption power and increasing purchases. And when it comes to e-commerce, it's essential to offer this payment option associated with credit cards as it favors enormously the visitors' conversion. Consumers, retailers and merchants, they are all beneficiaries:
A reality common across Latin America
Despite the cultural and the linguistic differences of each country, the use of installments is also a reality across the Latin American markets, such as Argentina and Chile. Facing the same challenge of increasing consumption power, they followed the Brazilian solution. However, for the companies interested in entering those markets it's essential that they offer installment payments made with local credit cards.
It's also necessary to take into consideration that many customers preferred alternative payment methods and that only 22% of the credit cards issued in Brazil are enable for international transactions. Therefore, companies must provide their e-commerce with local payment methods. Companies will leverage their investment and reach a wider audience and gain more customers by partnering with a payment aggregator such as BoaCompra to implement their strategy of market expansion.