Bloomberg News

Redecard Plans ‘Aggressive’ Cost Cuts to Defend Market Share

November 30, 2011

(Updates with closing share price in fifth paragraph.)

Nov. 17 (Bloomberg) -- Redecard SA, Brazil’s second-largest card-payment processor by market value, plans to defend its market share by cutting costs to reduce prices, according to Carlos Zanvettor, executive director of retail and marketing.

“The way we can protect market share is by becoming aggressive,” Zanvettor said in a Nov. 16 interview in London. “We’re gaining efficiency, we’re updating technology and we’re transferring all these gains to the price.”

Redecard expects to lower its cost per transaction to 30 centavos (17 cents) to 35 centavos in the next two months from 38 centavos in the first quarter, as it eliminates jobs and reduces spending on logistics, according to Zanvettor. The expense will fall further in 2012, he said. The company cut headcount by about 350 people from July to September, he said.

Redecard needs to fight harder for business after a July 2010 ruling removed exclusive rights for companies to process certain transactions. Redecard, which had 41 percent of the card payment-processing market at the end of March, and Cielo SA, with 54 percent, may lose 18 percent market share to new entrants by 2015, Credit Suisse AG analysts wrote in a June 21 report. Such competitors include Spain’s Banco Santander SA.

Redecard’s shares fell 3.4 percent to 29.75 reais after the close of Sao Paulo trading. The stock has gained 41.3 percent this year, the second-best performance among the 68 members of the Bovespa benchmark index. Its main competitor, Cielo, fell 3.6 percent to 47.11 reais and has gained 40 percent so far this year, the third best performance of the Bovespa.

Lower Spending

Brazil’s central bank last week loosened restrictions on consumer lending it had imposed last December, in order to shore up growth and protect the country’s economy from Europe’s debt crisis. Brazil’s economy is forecast to grow 3.7 percent this year, compared with 1.6 percent growth in the Eurozone, according to Bloomberg data.

Spending on personnel fell 12 percent in the third quarter from the previous quarter, helping Redecard’s net income rise 6 percent to 343.6 million reais, its first increase in profit since the second quarter of 2010.

Redecard cut about 500 administration jobs in the period, according to Zanvettor. The company doesn’t plan to fire more workers and will reduce expenses over the next few quarters by lowering costs in its supply chain, he said. Meanwhile, Redecard is hiring more than 150 people in customer service and sales, a process that will probably be completed by the end of January, Zanvettor said.

Higher Volume

Redecard’s volume of transactions is likely to grow 28 percent to 30 percent this year, compared with 23 percent to 24 percent growth for the industry as a whole, according to Zanvettor. The company has approached American Express Co. and Banco Bradesco SA, with which Amex currently has an exclusivity agreement, to seek a deal to offer the Amex brand, he said. Redecard hasn’t yet received a response, he said.

Redecard is also seeking to buy a stake in electronic toll payment operator STP - Servicos & Tecnologia de Pagamentos SA, Zanvettor said, without commenting on the size of the stake on offer or the amount Redecard would be willing to pay.

“The auto, vehicle and transportation sector is important for us in order to drive this growth even faster,” said Zanvettor. “That’s the reason why we’re looking at STP.”

Redecard expects the card-payment industry in Brazil to double by 2015, as consumers increasingly turn to credit and debit cards instead of using cash or cheques and the 2014 World Cup and 2016 Olympic Games boost the country’s economy.

Credit and debit card transactions currently account for about 26 percent of family spending in Brazil, compared with nearly 50 percent in the U.K. and U.S., Zanvettor said.

“If the industry doubles within four years and we have these major events that attract touristic activities, that leaves our industry with a lot of opportunities,” he said.

--Editors: Jon Menon, Keith Campbell

To contact the reporter on this story: Karen Eeuwens in London at

To contact the editor responsible for this story: Helder Marinho at

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