Competition among card payment processing companies in Brazil is set to intensify in coming months as exclusivity agreements between merchant acquirers and card brands end, analysts at Grupo BTG Pactual led by Eduardo Rosman said in a client note late on Tuesday. The end of exclusivity agreements will still happen this year and be run by the VAN flat-free model in principle, Rosman and his team wrote in the note, citing Marcelo Noronha, the president of payment processing industry group Abecs.
A system where flexible pricing in merchant discount rates, instead of a flat fee per transaction cleared, will likely prevail, Rosman and his team said, based on remarks made by central bank director Aldo Mendes at an industry seminar on Tuesday. Shares in Cielo SA, Brazil’s sole listed payment processing company, could suffer as the perception that there are still some unresolved issues in the industry lingers, generating uncertainty.
“In our view, a fiercer rivalry will likely translate into a steeper decline in MDRs for the main players, though we don’t expect competition to become overly aggressive,” the note said. “We don’t foresee major market share shifts either,” adding that the analysts believe that the industry’s main players will remain Cielo and Itaú Unibanco Holding SA’s Rede.