May 20, 2019 / 2:16 PM / 4 months ago

Brazilian card processor Cielo increases market share in Q1

SAO PAULO, May 20 (Reuters) - Brazil's largest card processor Cielo said on Monday it had increased its market share in the first quarter for the first time since mid-2017, a sign of its progress in the country's fiercely competitive electronic payments space.

Cielo's market share rose to 41.8% in the first quarter, a gain of 0.6 percentage point from the previous quarter, the company said in figures confirmed by analysts.

The quarterly market share figures made Cielo "the big winner among peers," according to analysts at Banco Santander SA.

The calculations take into consideration financial volumes from the country's largest card processors: Cielo, Itaú Unibanco Holding SA's card processor Rede, Banco Santander Brasil SA's GetNet, PagSeguro Digital Ltd, StoneCo Ltd and Banrisul's Vero.

Cielo Chief Executive Paulo Caffarelli said in a phone interview that the first-quarter gains were a consequence of the company's new business model, which takes direct aim at small- and mid-sized merchants.

Cielo's financial volume from transactions reached roughly 156 billion reais ($38.04 billion), with 65% consisting of large merchants. Under the company's new strategy, Caffarelli said Cielo seeks to have the same percentage stemming from smaller clients in the future.

"Despite the current price war, small merchants are still more profitable than the large ones," Caffarelli said. He declined to say when the card processor plans to reach that goal.

Cielo's total number of card reader machines grew by 8 percent from the previous quarter, as it added new small entrepreneurs like street vendors as clients.

Still, as the company previously reported, its first-quarter profit dropped 45% to 548.5 million reais amid price cuts to fight back competitors. "Margins are lower than they used to be, but Cielo aims to keep its leadership position," Caffarelli said.

Besides lower prices, Cielo increased its salesforce focused on small entrepreneurs to 1,700 people in January from 700, Caffarelli said. The move has yielded significant results, such as an additional 1,600 new clients per day, a figure the company hopes to push to 2,000.

Cielo's largest competitors, Rede and GetNet, lost market share in the first quarter, while PagSeguro and StoneCo gained.

Rede said in a statement it is adjusting its portfolio. GetNet did not comment on the matter.

Analysts at BTG Pactual said in a note to clients they expect Rede and GetNet to fight back, having launched more aggressive offers in April.

$1 = 4.1010 reais Reporting by Carolina Mandl; additional reporting by Paula Laier; Editing by Christian Plumb and Paul Simao

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