Among the various regulations, rules, and guidelines issued by the Ministry of Finance in recent months regarding betting houses in Brazil, some decisions significantly impact the sector and payment technology providers. Camila Lages, Market Intelligence Specialist at WEpayments, reflects on the prohibition of using credit cards as a means used to pay for bets in Brazil, what is behind this decision, and how Pix influences this reality.
Prudential measure and responsible gambling
In April 2024, the government published a statement indicating that betting houses will be prohibited from offering credit cards, cash, and any other payment method that does not allow identifying the origin of the funds.
This statement makes it clear that the intention is to inhibit money laundering practices and, on the other hand, to encourage payment methods that provide fund traceability based on technology.
Cash is therefore excluded, but why the credit card, despite being a digital payment method, was also banned from this statement? The explanation for this is based on another reason that is also a concern of the regulator: strengthening responsible gambling and protecting consumers against indebtedness and abusive practices.
Motivations behind the prohibition of credit cards in Brazil
* Prevention of indebtedness: The use of credit in gambling allows consumers to bet with money they do not yet have, increasing the risk of debt.
* Responsible gambling: The concept of "Responsible Gambling" is central to this decision. It involves the creation of policies that help limit compulsive behaviors and protect the most vulnerable consumers. By restricting the use of credit, the government hopes to reduce the negative impact of gambling addiction.
The complexity of payments in Latin America
This prohibition, on the other hand, does not occur in other countries of LatAm. Credit and debit cards are accepted in the Latin American betting market in many countries, favored by their convenience, speed, and wide acceptance. Along with other local payment methods and bank transfers, they make up the complex payment scenario in Latin America for this industry.
But why is it complex? Because, although relevant, credit cards compete with numerous APMs (Alternative Payment Methods) that vary from country to country.
To better understand the complexity of payment scenarios for betting in Latin America, we need to recognize that each country is addressing (each in its own way) the needs inherent to the industry: speed, traceability, cost, and security in transactions, whether deposits or withdrawals.
High performance in payments
The betting industry is one of the markets that most demands performance from payment technologies because sports betting is linked to real-world events.
The convenience and speed of payment or confirmation of deposit directly impact the bettor's experience. Therefore, payment methods with older and outdated technology, such as those that operate only during business hours (Monday to Friday), do not make sense in this industry.
At WEpayments, operators benefit from a payment 20% faster than other payment processors. More than 60% of transactions are completed in less than 1 minute, and the conversion rate exceeds 90%. Regarding payments to bettors, at WE, they occur on average 20 seconds (!) with a success rate of 98%, and 100% of payments have real-time automatic reconciliation.
Due to the demand of the industry for such performance, digital payment solutions are very popular. E-wallets, for example, are very popular in Latin American countries for the iGaming industry due to their immediacy, but this scenario is not the same in Brazil. Here, Pix is currently the most popular instant digital payment method.
Pix in Brazil
Since its launch, in 2019, Pix in Brazil has been growing in number and volume of transactions. It has had wide adoption among the public, and its intuitive usability, combined with the fact that transactions are free for individuals, contributes to its popularity as an APM in Brazil.
Today, it is the most used payment method in this market because it delivers everything that the betting industry and the regulator (BACEN) most expect from a payment method: speed, cost, security, traceability, and high consumer adoption.
Speed
It allows instant transfers between accounts 24 hours a day, 7 days a week, including weekends and holidays. The process is completed in seconds, regardless of the time or financial institution involved.
Low cost
One of the great attractions of Pix is its low cost. Transactions are usually free for individuals, which encourages widespread use of the system.
For businesses, the cost of transactions is lower compared to traditional methods, such as TED and DOC, Credit Cards, and Boleto, making Pix the most economical and competitive option in the payment market.
Security
The information is encrypted from the point of origin to the destination, using protocols such as TLS (Transport Layer Security) to ensure that the data cannot be intercepted or tampered with by third parties.
The Central Bank manages a centralized infrastructure for Pix, which is highly resilient and designed to support large volumes of transactions with high availability. This infrastructure includes multiple servers and backup systems, ensuring that Pix operates continuously.
All participating institutions need to implement policies and technologies to combat fraud and money laundering. This includes user identity verification, analysis of suspicious behaviors, and compliance with anti-terrorism financing regulations (CFT). These policies are complemented by regular audits and compliance reports.
Traceability
Pix relies on APIs for communication between banks and other financial institutions. These APIs are protected by rigorous security protocols that include mutual authentication between servers, digital certificates, and access control based on permission.
Each transaction made via Pix generates automatic notifications for the involved parties, ensuring transparency, allowing users to verify the success of the operation immediately and reducing the risk of errors or fraud.
High adoption
In July 2024, 158 million Brazilians made at least one transaction via Pix, the equivalent of approximately 90% of the adult population.
Today, Pix is one of the preferred payment methods for a wide variety of transactions, from purchases in commercial establishments to transfers between individuals.
As we have seen, the prohibition of using credit cards for betting in Brazil reflects a combination of regulatory concerns, such as the prevention of indebtedness and the promotion of Responsible Gambling, along with efforts to combat money laundering.
Although this decision may seem restrictive compared to other countries in Latin America, where credit cards are still widely accepted, it highlights Brazil's commitment to protecting consumers and ensuring the integrity of the betting market.
In this context, Pix stands out as the ideal payment method for the Brazilian market, offering speed, security, traceability, and reduced costs.
Camila Lages
Market Intelligence Specialist at WEpayments
