This presentation by CADE Brazil was made during the discussion “Competition and Payment Card Interchange Fees” held at the 19th meeting of the OECD-IDB Latin American and Caribbean Competition Forum on 22 September 2021. More papers and presentations on the topic can be found out at oe.cd/laccf.

1. FOSTERING COMPETITION IN THE PAYMENT CARD INDUSTRY
SESSION III: COMPETITION AND PAYMENT CARD INTERCHANGE FEES
LATIN AMERICAN AND CARIBBEAN COMPETITION FORUM 2021
MARINA HADDAD TOVOLLI
22/09/2021
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2. Brazilian Economic Context
Boost demand for
payment card methods
Consumers’ trust
1990s: inflation control and
economic stability

3. Expansion of Payment Card Industry

4. New challenges
Higher complexity
Expansion of the
payment card industry
New challenges to antitrust
authorities in terms of competition
law enforcement

5. Multi-sided platform
New tools
Three main challenges
Market concentration ratio
Highly concentrated market
Vertical integration
Higher entry barriers
Emergence of anti-competitive practices
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6. Vertical relations in the Brazilian payment card industry

7.  Before 2010: duopoly on the acquirer side:
Breakage of theVisa andVisanet exclusionary agreement
 In 2010: “Cease and Desist Agreements” prohibited the existing exclusionary
agreement between the incumbents, ensuring that other companies could
engage in Visa andVisanet (Cielo) system
 Visanet (Cielo) and Redecard (Rede) dominated the market and hold exclusionary
agreements with the card brands Visa and Mastercard, respectively
 No interoperability between the network service provider
 higher prices and entry barriers

8. HHI of acquirers – debit and credit

9. HHI of card brands – debit and credit

10. Central Bank of Brazil (Bacen)’s intervention
Reduced transactions costs
In 2018: establishment of a
cap on interchange fees
charged on debit card
transactions
Greater transparency in the pricing
dynamics of this market

11. Average interchange fees – debit and credit

12. CADE’s intervention
Opened the market
Breakup of exclusionary
practice
Higher possibility of market entry,
which was very limited due to card
brands’ exclusive access to
incumbent acquirers

13.  High concentration ratio associated with vertically integrated players
 combination benefits incumbent companies since they have more resources to invest in
innovation and advertising
 The need of additional tools for analyzing these markets
Work in progress

14. Current Scenario
Mobile banking
FinTechs
PIX
Open
banking
 Digitalization of financial services has made mobile banking the preferred channel for
financial services in Brazil
 traditional services provided by incumbent banks proved to be much more
expensive than digital options.
 Especially beneficial for the payment and the loan markets: growth of FinTechs
 transparency and customized services
 Nubank, Next, Original, GuiaBolso, Stone, Inter, PagSeguro and BeeTech
 PIX: the new instant payment system
 Open banking
 new business models
 higher transparency

15. Current Scenario
Lower costs
Higher transparency
More competition
Mobile banking
FinTechs
PIX
Open
banking

16. GRACIAS!
MARINA HADDADTOVOLLI
CADE/BRAZIL