Payscout, Inc. announced its expansion to Brazil – the eighth-largest national economy in the world – to assist US e-merchants looking to expand in the Brazilian market.
A reported 44 million people in Brazil engage in eCommerce (1), with sales projected to reach $39 billion in 2016 (2) – creating a market rife with opportunity. And middle-class Brazilian consumers want American goods.
But American SMEs wanting to sell to Brazilian consumers must navigate the country’s complicated tax structure, which Payscout documented in a case study of a global ecommerce horror story that profiled Foreclosure.com’s difficulties in selling directly to Brazilian consumers.
Foreclosure.com contacted Payscout for a solution when over 90% of its Brazilian transactions were declined.
Due to Brazil’s closed-loop network policy, American businesses wanting to sell to Brazilian consumers must complete a very difficult sequence of steps to establish a payment presence and to make credit card acceptance a reality.
Payscout’s development into Brazil comes less than 2 years after the company experienced a 20% growth in B2C sales after expanding into 10 new territories in Puerto Rico, Guam, and the Virgin Islands. Payscout’s Brazil branch offers all major online payment methods to Brazilian businesses, allowing eCommerce merchants to ramp up quickly to sell to Brazil.
Payscout Ceo Cleveland Brown shares with Home Business Magazine his insights about Brazil’s growing eCommerce industry and how small businesses can capitalize from reaching overseas sales and consumers.
HBM: Why should U.S. e-merchants look to expand into global markets?
Brown: “International eCommerce market is undergoing explosive growth. According to E-marketer, international eCommerce came in just shy of 1.7 trillion dollars in 2015 compared to 1.3 trillion in 2014. For 2016, it is predicted to surpass 2 trillion. Only ¼ of the this volume is attributed to the US. Hence, the global opportunity cannot be ignored.”
HBM: Why is the Brazilian market vital to e-merchants?
Brown: “Brazil ranks 10th in global eCommerce spending and is the only Latin American company in the top ten just behind Russia. If a merchant wants to demonstrate a presence in Latin America with U.S. goods and services, Brazil is the ideal place to establish brand identity. In addition, the Brazilian consumer expects to pay up to three times the price for American made goods. Hence, increased margins can be achieved.”
HBM: What is the propensity for foreign markets to purchase U.S. goods from small businesses?
Brown: “The global eCommerce market is seeing growth in consumption as socio-economic demographics improve in countries such as China, Brazil and India. These countries look to the U.S. as a superior manufacturer of goods. The foreign consumer looks to “Made in the USA” as a way to demonstrate their upward socioeconomic mobility.”
HBM: What is the biggest difference in global merchant service processing compared to MSP for the US alone?
Brown: “The biggest difference between a GMSP and a MSP, is the successful conversion of a foreign transaction. A foreign transaction originated by a foreign card holder presented to a domestic acquirer through a domestic MSP has a strong chance of being declined due to a number of factors such as:
*Issuer fraud parameters
*Foreign exchange capability
*Acquirer fraud parameters
*Local payment types
A GMSP will provide localized processing for the U.S. merchant in the country of the foreign card holder to improve conversions by avoiding the factors named above. In some instances, merchants can expect over a 90% decline rate when processing through a domestic MSP.
This can make or break a new eCommerce company. The decline rate can eliminate any chance for a new eCommerce company to successfully establish a global presence.”
HBM: How can SMBs take advantage of overseas sales and consumers?
Brown: “Foreign market eCommerce sales are growing at a faster rate than the U.S. By 2018, China alone will account for 1 trillion dollars of eCommerce sales. Foreign consumers are attracted to large marketplaces such as Alibaba, in which U.S. companies can partner to make their goods and services available. Companies like Payscout assist merchants in either establishing a defined marketplace or identifying a foreign marketplace that will give the best yield to a merchant’s goods and/or services. Payscout represents companies like Alibaba, who is on pace to conduct over 400 billion dollars in sales in Q1 of 2016.”
HBM: What risks are existent for SMBs in global payment processing? What do they need to look out for?
Brown: “The major risks are:
- Taxation – Understanding the tax laws for each jurisdiction
- Conversions – Understanding local payment types for each country
- Compliance – Understanding company formation requirements for each country
- Fraud – Identifying reputable GMSP’s such as Payscout to advise on fraud parameters.”
HBM: What emerging markets should merchants be looking into for expansion?
Brown: “China, Brazil, India, and South Africa.”
HBM: What vertical markets are established and good for expansion currently?
Brown: “Fashion and Accessories, Baby/Children Products, Health and Beauty.”
1. Kligin, Sergio. “What Brazilian Consumers Want.” Latin Link. N.p., 18 July 2012. Web. 9 June 2014. latinlink.usmediaconsulting.
2. “Global Acquiring – Part 2.” The Green Sheet. N.p., 9 June 2014. Web. 18 June 2014. greensheet.com/emagazine.php?