Credit as a revenue enhancer for Brazilian e-commerce

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In Brazil’s rapidly evolving e-commerce ecosystem, credit is becoming an indispensable tool for online sellers, especially those serving small and medium-sized businesses (SMBs).

Brazil has 19 million SMEs and 36 million microentrepreneurs, making up 35% of the country’s GDP and issuing $2.7 trillion in receivables annually. Yet, 70% of these SMEs struggle to get financing and face average bank interest rates of around 200% in products like overdraft and credit card revolving fees. In Brazil, only 1% of the BRL 2.4 trillion B2B market occurs online, even though 14% of global B2B transactions occur digitally. While B2C e-commerce has gained significant traction in the past years, B2B e-commerce is just beginning to catch up.

This piece examines why extending credit, particularly through Buy Now, Pay Later (BNPL), is not just a value-added service but a critical revenue enabler for e-commerce businesses targeting the SMB segment.

Credit plays a pivotal role in the e-commerce ecosystem by addressing two fundamental challenges faced by SMBs: cash flow and access to capital. Credit cards are restricted to only a select few, and banks usually charge predatory rates for loans in the region. These challenges often restrict their ability to make larger purchases or stock up on inventory, limiting their growth potential and, by extension, the sales volume of e-commerce platforms.

BNPL offers solutions to those challenges, enabling SMBs to grow in an online-first world. This facilitation increases the revenue streams of e-commerce platforms through several key mechanisms:

• Increased Average Order Value (AOV): By offering credit, e-commerce platforms empower SMBs to make bigger purchases than they could with payment at checkout, directly increasing the platform’s AOV. A study conducted by E-Commerce Brasil shows increases in AOV of 30% — 50%.
• Higher conversion rates: With credit, the buyer is significantly more likely to actually make the purchase and not leave the cart unfinished. According to the study above, a 25% — 40% increase in conversion can be expected.
• Expanded customer base: Credit solutions make e-commerce platforms more attractive to a broader range of businesses, including those previously limited by upfront costs. Considering that only a few Brazilian SMBs have access to credit cards, the “pix a prazo” becomes one of the more sought-after payment methods.
• Enhanced customer loyalty and retention: Flexible payment terms improve the purchasing experience, fostering long-term relationships and repeat business.
• Boosted Gross Merchandise Volume (GMV): With more significant purchasing power, SMBs contribute to a higher overall sales volume, enhancing the platform’s GMV and revenue.

Credit is not just a financial instrument; it’s a strategic enabler that propels e-commerce platforms and their SMB clients toward mutual growth. As the Brazilian SMB e-commerce sector evolves, integrating flexible, inclusive credit solutions will be key to unlocking this market’s full potential. Now is the time for e-commerce leaders to embrace these opportunities, transforming challenges into growth and innovation.

At Credix, we deeply understand the unique landscape of Brazilian e-commerce and the specific needs of SMBs. This understanding, combined with our deep credit expertise, led us to explore opportunities in the embedded lending space. Are you an e-commerce, wholesaler, or marketplace that operates in the B2B space? Do you agree on the value of credit for your and your client’s businesses?