In Payments

Lindsay Lehr

Managing Director


Innovation in the payments industry is moving rapidly toward removing national borders by accelerating cross-border money movement. This is being powered by fintechs, Visa Direct, Mastercard Send, global PSPs and crypto exchanges, for many use cases, including cross-border e-commerce, P2P remittances, remote work, mass payouts and “borderless banking”—multi-currency digital accounts for use across the globe. The trend is hot in Latin America, where cross-border e-commerce, remittance, payouts and B2B payments hit record high levels year after year.

And yet, governments in Latin America have something else in mind. For decades, regional governments have oscillated between the embrace free market capitalism and the backlash against foreign capitalistic forces. Today, most markets find themselves in the latter; Latin America’s six largest economies are ruled by leftist administrations. Pink tide brings various anti-business regulations, but in this round, the payments industry is impacted more than ever, manifesting in three major areas:

1) The implementation of low-cost and public payment rails;

2) Regulation-led Open Banking;

3) Limitations on cross-border money movement.

The first two have been well documented in the recent months, with the development of domestic RTP schemes around the region and the advance of Open Finance in Brazil, Mexico and Colombia. In a sense, these developments represent government protest the decades-old dominance of US-based card networks in their local payment ecosystems. The third area, limitations on cross-border money movement, is not new – Argentina and Brazil have had highly regulated foreign exchange markets for decades—but recent developments show new aggression against international players.

2023 Global Payments Megatrends

2023 Global Payments Megatrends

Seismic shifts in APAC, Europe, the U.S. and other key markets around the world

In mid-April, when Brazil’s tax authority (the Receita Federal) announced it would do away with the tax exemption on imported packages valued at less than USD $50, as a means of thwarting competition from international mega-retailers and marketplaces. The regulators explained that the exemption was never designed for e-commerce but rather for person-to-person packages. However, the exemption has contributed to the rapid growth of cross-border retail purchases, especially from Asian marketplaces with low average tickets such as AliExpress, Shein and Shopee, which (save 2020 and 2021 due to COVID impact) has grown faster than domestic e-commerce over the past several years. In 2022, cross-border retail in Brazil totaled around $6 billion, growing 39% annually.[1]

As Brazil cracks down on both international competition and traditional payment methods, cross-border flows may tend to favor markets such as Peru, Chile and Central America.

Lindsay Lehr

The new enforcement will apply a 60% tax to all imported goods valued under $50, nearly doubling the cost of a cross-border e-commerce purchase at this price point. In past years, this change may not have been as impactful, but with the growing availability of e-commerce and better shipping logistics, and average ticket for e-commerce purchases has steadily fallen year over year. The NielsenQ Ebit Webshoppers 47th edition reports that considering the top five product categories, the average ticket for e-commerce purchases was R$259 (USD $50.15), just cents over this $50 threshold. While cross-border purchases may skew high, this means that a decent portion of them will effectively be impacted by the new rule.

The end of the exemption will have three important implications:

  1. A decline in cross-border retail, especially from low-cost marketplaces. This is unfortunate news for cross-border e-commerce processors like EBANX, dLocal, Boacompra, Nuvei, and others whose business is to facilitate online sales for international merchants selling to Brazilians
  1. It may boost investment from these payment providers in other regional markets, such as Mexico, Colombia, Peru and Chile, less competitive markets where cross-border e-commerce does not face restrictions, as well as their expansion into local e-commerce processing
  1. It could also accelerate the trend of international merchants establishing a local presence in Brazil, something already achieved by AliExpress and Shopee. Brazil is too large a market—online retail exceeding $100 billion in 2023—for global players to ignore and is worth the pain of setting up shop locally for those committed to the market.

This change is a signal that Brazilian regulators are in a protectionist mode, looking to favor local companies over international ones. This comes after the 2022 announcement that the Central Bank would cap interchange on prepaid cards (debit cards attached to many free digital accounts) to 0.7%, and bank-issued debit cards to 0.5%, further impacting issuers’ and card networks’ ability to earn revenue, even as Pix adoption surges and begins to compete with debit cards at the POS. The Central Bank’s explicit reasoning is to incentivize Pix: “According to the central bank, the changes will “increase the efficiency of the payments ecosystem, encourage the use of cheaper payment instruments, enabling the reduction of costs for stores to accept these cards,” as Reuters reports.[2]

Across the region, the total cross-border e-commerce opportunity represents around $53 billion, growing 42% in 2022, compared to 35% for the domestic market. In other regional markets, cross-border e-commerce does not face the same level of restrictions (save Argentina, where international transactions are heavily taxed). In Mexico cross-border represents more than 20% of total volume (compared to Brazil’s 6%). Peru, Chile, and Central America all have attractive cross-border retail markets, in part due to the under-development of the domestic market and to regulatory. As Brazil cracks down on both international competition and traditional payment methods, cross-border flows may tend to favor these other markets.

Research and analysis conducted in 2022. Data will be updated in Q2 2023

The rest of the region looks up to Brazil for its high levels of interoperability, innovation and fintech revolution. Yet, if Brazilian regulators aren’t careful, they may work to reverse some of this progress, by limiting fintechs’ ability to earn payment revenue (capping interchange) and increasing the cost of e-commerce to consumers. While Brazil remains the most attractive region from a volume standpoint, industry players may be wise to look for other fast-growing opportunities in the region, in environments less susceptible to the hand of regulators with the clear intention of promoting their own vision.


[1] PCMI E-commerce Data Library

[2] Reuters, 2022, “Brazil’s central bank caps prepaid card interchange fees; fintech stocks fall.”

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