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Brazil's Cielo bolsters physical branch network to attract retailers

Brazil-based Cielo SA will open physical branches across the country that will mainly cater to retail customers, including individual microentrepreneurs and small-sized enterprises, Valor Econômico reported.

The branches will sell point-of-sale devices to the merchants and offer after-sales services, such as answering questions about value reconciliation, adding new services and changing packages, within a context of increased competition in the sector.

The payment processor initially plans to have 11 such branches by the end of 2020. The physical network will include the remodeling of four existing stores that were previously focused on equipment rental for medium-sized and large customers.

"The focus is on entrepreneurs, freelancers and individuals, the latter [of which is] responsible for 75% of the [POS] machines sold," according to Cielo Vice President Mário Casasanta. The company looks to increase the share of this segment in its customer base to 65% from the current 35%.

Cielo's planned physical branch network is akin to the "hubs" of competitor StoneCo Ltd., which are mini-offices that serve specific neighborhoods and are supported by a group of motorcyclists, known as "green angels," that deliver directly to customers. StoneCo has 300 of these branches as of the first half of 2019.

This model will enable StoneCo to achieve a 15% market share in 2023 from 8% last year, Valor quoted UBS analysts as saying.

Cielo had already assembled a team of 1,000 "hunters," agents to conduct door-to-door marketing campaigns, who will now have the support of the physical branch network. A similar strategy was adopted by PagSeguro Digital Ltd., which hired about 500 agents for this particular job, a source told Valor.

Despite the rising digitization trend in the card payment industry, the physical store model "works among small- and medium-sized entrepreneurs, because there is a large ocean of them that is still entering the world of cards," according to Casasanta.

The physical stores will also help Cielo reduce its dependence on partner banks, including shareholders Banco Bradesco SA and Banco do Brasil SA as well as Caixa Econômica Federal, which are adopting further digitization and reducing their brick-and-mortar networks, Casasanta said.