Boleto Bancário, commonly known as Boleto, is a leading payment method in Latin America, especially in Brazil. Established in 1993 as a system for facilitating cash payments, Boleto has since adapted to the rise in online transactions and is now a popular method for online payments.

Boleto is known for its user-friendly features and ability to adapt to different payment scenarios. Using a unique code, businesses can send invoices via email, text or social media that customers can use to pay online within a set period, usually between 3–15 days. Customers have the option of paying in full immediately or in instalments.

Boleto is accepted as a payment method across Brazil. About 60% of the Brazilian population doesn't have credit cards, according to World Bank data, and Boleto is a convenient payment alternative for this demographic. Boleto is popular with businesses for its lack of chargeback risk and reduced fraud risks compared to credit card payments.

We'll cover Boleto's key features, primary users and what businesses need to know about accepting Boleto as a payment method.

What's in this article?

• How does Boleto work?
  
• Where is Boleto used?
  
• Who uses Boleto?
  
• Benefits of accepting Boleto
  
• Boleto security measures
  
• Accepting Boleto as a payment method
  
• Alternatives to Boleto
  

How does Boleto work?

Boleto functions differently from many other electronic payment systems. Here's how it works:

• Boleto vouchers
  When a customer chooses Boleto as their payment method when making a purchase online, the business generates a Boleto voucher for the transaction. This voucher contains essential details such as the payment amount, issuing bank code, customer information and an expiry date. Businesses can issue the voucher in both printed and virtual formats, along with a barcode and serial number for tracking the payment process. Customers can select Boleto as a payment method for direct purchases, and can also use the service to fund digital wallets or prepaid cards.

• Payment terms
  Customers can pay a Boleto, as it's colloquially known, by using the barcode or serial number at any time before the expiry date, which is typically set at 3–15 days from the date of purchase. After this date, payments cannot be processed without incurring a late fee.

• Where to pay
  Customers can pay their Boleto at various locations across Brazil including ATMs, bank branches, post offices, lottery agents and some supermarkets. At in-person locations, the cashier will scan the voucher's barcode at checkout. For online payments, customers can pay via internet banking apps, where they can either scan the barcode or enter the serial number manually.

• Payment confirmation
  After the payment is made, it typically takes about one to three business days for the issuing bank to confirm it, at which point the bank credits the payment to the merchant's account. This delay in confirmation is a notable aspect of the Boleto system compared to instant electronic payment methods.

• Security level
  Boletos are considered secure because they do not require customers or businesses to share sensitive financial information like credit card details online. Boletos also minimise the risk of fraud, as each voucher is specific to a single transaction.

Where is Boleto used?

Boleto is primarily used in Brazil. This bank-slip payment method has become deeply embedded in Brazilian culture and is regulated by the Central Bank of Brazil. Boleto is a versatile option for consumers and businesses, in part because it does not require consumers to have a bank account.

Boleto's popularity in Brazil reflects the country's specific consumer behaviours and business trends. Sixteen per cent of Brazilian adults do not have bank accounts. Many Brazilians are hesitant to share their payment information online. Alternative payment methods like Boleto allow these demographics to bypass traditional banking structures and avoid sharing sensitive data while still engaging in e-commerce.

Customers can pay Boleto vouchers at over 40,000 processing locations across the country, including lottery houses and banks, and they can pay in cash, which makes this an important alternative for the unbanked population. Customers can also use banking apps to pay Boleto vouchers. Boleto's widespread use also reflects the limited penetration of credit cards in Brazil. Only about 40% of Brazilians own a credit card, which makes Boleto an essential payment method for online purchases.

Boleto's services are designed to operate within Brazil's banking structure and consumer preferences, which favour straightforward, transparent payment methods without the complexities and fees often associated with credit card transactions. The Central Bank of Brazil regulates Boleto for compliance with the country's banking norms and consumer protection standards.

While Boleto is firmly established in Brazil, it has recently seen challenges amidst the rise of Pix, a new instant electronic payment method introduced by the Central Bank of Brazil. Pix has many of the same advantages as Boleto and comes with additional benefits like instant payment confirmation and the elimination of physical bank slips. Pix is expected to grow significantly in the coming years, potentially leading to a decrease in Boleto's market share.

Who uses Boleto?

Boleto's diverse user base cuts across different population segments and includes a range of ages and income levels. Older consumers are more likely to choose this payment method for its familiarity and perceived security, while younger consumers, particularly those without bank accounts, rely on Boleto for purchases on international websites.

A wide range of businesses, including many in business sectors like education and e-commerce, accept Boleto for different types of transactions including B2B and B2C. Businesses appreciate the lower risk associated with Boleto payments, as there is no chargeback risk and payments are made up front. While Boleto typically takes several business days to confirm transactions, new features like Boleto Flash speed up this process.

Boleto's enduring popularity in Brazil reflects its ability to adapt to the evolving needs of consumers and businesses and provides a sense of security in transactions, all while serving a large segment of the population, including those without access to traditional banking services.

Boleto's key users and use cases are outlined below:

• Unbanked population
  Brazil's substantial unbanked population often chooses Boleto as their preferred payment method because it enables them to make online purchases without a bank account or credit card.

• E-commerce consumers
  A substantial portion of online shoppers in Brazil choose Boleto as their payment method for its secure and flexible payment structure, including a grace period before payment is due. Businesses will often offer discounts for using Boleto at checkout.

• Safety-conscious users
  Many Brazilians are concerned about internet safety and the risk of credit card fraud and prefer not to share financial information online. The ability to pay for purchases in-person makes Boleto a popular choice for this demographic.

Benefits of accepting Boleto

• Wider customer base
  By accepting Boleto, businesses gain access to the millions of Brazilians who don't have access to traditional banking services, but still want to engage in e-commerce.

• Reduced fraud risk
  The reduced fraud risk associated with Boleto transactions is a notable business advantage. Unlike credit card transactions, which necessitate the transmission of sensitive data, Boleto's format minimises the potential for fraudulent activities. When paid in cash, Boletos are considered to have almost no fraud risk.

• Predictable revenue
  Boleto payments are made up front, creating a more predictable revenue stream in contrast to credit cards, where payment might be delayed or disputed. Boleto provides businesses with a more stable and reliable payment collection method and no chargeback fee.

• Customer trust
  Boleto is a familiar and trusted payment method for many Brazilians, and businesses that accept Boleto can capitalise on this trust to build stronger, more loyal customer relationships.

• Customer satisfaction
  By accepting Boleto alongside other payment methods, businesses can cater to a broader range of customer preferences. This flexibility can lead to higher customer satisfaction, repeat business and referrals.

• Incentivised sales
  There's an established history of businesses offering discounts for Boleto payments, which has added to its popularity as a payment method over the years. Businesses that run these discounts can create a powerful customer incentive and increase sales volumes.

• Easy digital integration
  Boleto's compatibility with current e-commerce platforms and payment gateways simplifies financial operations. This ease of integration means businesses can manage various payment methods more effectively without needing extensive adjustments to their existing systems.

• Access to Brazilian market
  For international businesses, accepting Boleto can be necessary for market penetration in Brazil. Integrating with localised payment methods like Boleto can be an important differentiator, helping these businesses resonate with local consumers.

Boleto security measures

• Encryption
  Boleto transactions employ SSL (Secure Socket Layer) and TLS (Transport Layer Security) encryption. These protocols safeguard data transmission between the payer's device and financial institution's server. SSL and TLS encryption methods use a combination of symmetric and asymmetric encryption to ensure only authorised parties can access the transaction data.

• Voucher system
  Boleto's voucher system creates secure transactions because they require almost no personal information from the payer. Boletos that are paid in-person in cash require no information other than the voucher barcode and purchase amount.

• Unique barcodes
  Each Boleto is generated with a unique barcode and numeric code, which are essential for the transaction's security. This code is algorithmically generated based on factors like the amount due, recipient's bank code and expiry date. Each barcode is unique, which prevents duplication and misuse, and ensures that each payment is attributed and tracked correctly.

• Expiry dates
  Boletos are issued with specific expiry dates, typically within 3 to 15 days. After this date, the Boleto becomes invalid, preventing the accumulation of outdated and potentially insecure debt instruments in the market. This feature also helps financial institutions manage receivables more effectively and reduces the risk of fraud related to outdated payment slips.

• Bank validation
  Upon payment, the issuing bank confirms the Boleto's authenticity by cross-referencing the details with the issuer's records. This step includes verifying the barcode, amount, recipient's account and due date. This validation is necessary to prevent fraudulent transactions and ensure funds are allocated correctly.

• Regulatory and legal compliance
  In Brazil, financial institutions must adhere to regulations set by the Central Bank (Banco Central do Brasil), National Monetary Council (CMN) and Brazilian Federation of Banks (FEBRABAN). These regulations include the General Data Protection Law (LGPD), which governs the use and protection of personal data, as well as transaction reporting, anti-money laundering and cybersecurity guidelines. The Central Bank of Brazil also established relevant legislation in 2020 to expand the minimum Know Your Customer (KYC) data requirements and prevent money laundering.

• Dispute resolution
  In case of unauthorised transactions, customers can contact their banks, which are required to follow specific procedures to investigate and resolve such disputes. This process is governed by consumer protection laws and regulations set by the Central Bank, which ensure a standardised process for handling transaction disputes.

• Compulsory registration
  Since 2017, following a regulation by FEBRABAN, Boletos must be registered by the issuer with the Central Bank of Brazil at the point of creation. This registration provides the Central Bank and Boleto issuers with more information about Boletos in circulation, enhancing security and reducing fraud.

Accepting Boleto as a payment method

Businesses that want to accept Boleto as a payment method should first make sure they understand the specific restrictions and operational features of Boleto payments. Boleto payments cannot be refunded and they adhere to set minimum and maximum transaction limits.

The payment confirmation typically occurs within one business day of the customer completing the payment, and the funds become available for payout after an additional two business days. Businesses must account for this timing in their financial planning and customer communication. In order to work with Boleto, businesses need to integrate a payment system that is capable of processing Boleto payments, like Stripe. Below are the specific steps for setting up Boleto via Stripe, as an example of what this process might entail. The exact setup process for each system will vary.

• Integrating Stripe system
  First, businesses need to integrate Stripe's payment system into their online platforms. They can do this through Stripe's application programming interfaces (APIs), which allow businesses to design a payment experience suited to their needs. Alternatively, Stripe offers customisable user interface components like Stripe Elements or Stripe Checkout. Stripe Elements enables the creation of a unique checkout flow that matches the business's website in look and feel, while Stripe Checkout provides a ready-to-use, Stripe-hosted payment page that simplifies the integration process.

• Adding Boleto as a payment method
  Once the business has integrated Stripe's payment system into their online platforms, they need to activate Boleto as a payment method. They can do this in the Stripe Dashboard, by configuring their payment settings to include Boleto along with other methods. During this process, businesses will specify the types of transactions for which customers can use Boleto and set up any relevant regional or transactional restrictions.

• Customer payment support
  Businesses should make sure customers have clear instructions and support for how to complete Boleto payments before accepting this payment method. Boleto's process of issuing a payment slip that must be paid before its expiry date should be clearly outlined along with information on authorised locations and online payment methods through which the purchase can be completed.

Non-Brazilian businesses that want to accept Boleto payments will need to partner with a local entity in Brazil, as per Brazil's banking regulations. These regulations are designed to control foreign participation in the Brazilian financial market, uphold compliance with local financial laws and standards, and protect the national economy. The requirement of a local presence keeps all financial service providers operating in Brazil on a level playing field and holds them to the same standards on issues like fraud management and tax management.

Here's what partnering with a local entity entails:

• Establishment of local presence
  Companies are not allowed to directly issue or process Boleto payments unless they have a registered business presence in Brazil. To work with Boleto, foreign businesses must either establish a subsidiary in Brazil or form a partnership with an existing local entity.

• Regulatory compliance
  The local entity, whether a subsidiary or partner, must comply with all relevant financial regulations set by the Central Bank of Brazil. Failure to comply can lead to penalties, including hefty fines, legal action and the potential for revocation of the right to operate in Brazil. These regulations include the following categories:

• Anti-Money Laundering (AML) laws
  These laws require businesses to monitor and report any suspicious financial
  activities. Businesses must have systems in place to identify and prevent money laundering activities.

• Know Your Customer (KYC) standards
  Businesses must verify the identity of their customers to prevent fraud. This involves collecting and verifying personal information.

• Tax obligations
  The local entity is responsible for adhering to the Brazilian tax code, which includes declaring and paying taxes on transactions, following local accounting standards and complying with tax reporting requirements.

• Foreign direct investment regulations
  Brazil has specific rules governing foreign investment and capital flow. Any
  foreign investment in a Brazilian entity, including the establishment of a subsidiary or partnership for financial operations, must be registered with the Central Bank of Brazil. This registration is necessary for the repatriation of profits and capital.

• Operational restrictions
  The Brazilian government may impose certain operational restrictions on foreign businesses, such as limits on the percentage of foreign ownership in a Brazilian company or restrictions on certain types of financial transactions.

• Legal representation and liability
  A local Brazilian entity or partner serves as the legal face of the foreign business's operations in Brazil, which means they bear the legal responsibility and liability for financial transactions and adherence to consumer protection laws and payment processing regulations.

Alternatives to Boleto

There are many alternatives to Boleto, both in Latin America and globally. Here are some popular alternatives that businesses can use depending on their location and business needs:

• OXXO: OXXO is a payment service in Mexico that operates in a similar way to Boleto, by allowing customers to make cash payments for online purchases at any of the numerous OXXO shops throughout the country. This method is very popular with people who do not have access to banking services or prefer not to use credit or debit cards online.

• PagoEfectivo: PagoEfectivo is a popular payment system in Peru that offers a similar service to Boleto. Customers can generate a payment code for their online purchases and then pay in cash at authorised payment centres or through online banking.

• SPEI: The Sistema de Pagos Electrónicos Interbancarios (SPEI) is an interbank electronic payment system in Mexico. It enables users to make fast and secure online bank transfers, a common alternative to cash payments like those made through OXXO.

• Multibanco: In Portugal, Multibanco offers a network of ATMs and an online banking system where customers can pay for goods and services like utility bills and online purchases, similar to how Boleto works in Brazil.

• PayU: PayU is a global payment services provider that operates in several emerging markets, including Latin America, Asia and Eastern Europe. It supports different local payment methods, including options similar to Boleto that let customers pay for online purchases through cash payments at local shops or via bank transfer.

• Rapipago and PagoFacil: Rapipago and PagoFacil are Argentinian payment systems that allow customers to pay for online purchases in cash at numerous locations across the country, similar to Boleto in Brazil.

• iDEAL: iDEAL is a popular payment method in the Netherlands that allows customers to pay for goods and services online through direct bank transfers. It's used widely for e-commerce transactions and is a secure way to pay without using a credit card.

• Afterpay: Afterpay is an international payment service that offers customers a buy now, pay later option, typically in four instalments. While it differs from Boleto in its instalment-based structure, Afterpay is a popular alternative for customers who prefer not to pay up front or use traditional credit.