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Spotlight on Brazil and Electronic Identity Verification

Next month the eyes of the world will once again be on Brazil, this time for the 2016 Summer Olympics. Despite all its recent turmoil  – the trifecta of political, economic and health issues – I’m optimistic that Brazil will put on a fun and safe show for us all. More importantly, I’m optimistic about the country’s overall prospects.

The turmoil has kept many companies away from Brazil. But over the long run, businesses with ambitions in Latin American will have no choice but invest there. It is, after all, the world’s sixth largest country by population and seventh largest economy by GDP. Ignore it during this short-term instability, and you might lose your chance to participate in the long run.

The big eCommerce marketplaces recognize this. The financial press prints story after story of Alibaba, Rakuten, Amazon, Mercado Libre and others investing heavily in Brazil. Why do this in the face of the country’s current instability? Because competition among them is brutal. If any of them cedes market share today, competitors will be all too happy to take over relationships with their sellers and buyers.

GDC got the chance to see this competition firsthand earlier this year. We launched a Brazil electronic identity verification service to help eCommerce marketplaces onboard sellers quickly.

Verifying the identities of merchants before they can begin selling goods on marketplaces has become common practice in the industry. Without it, bad actors are quick to infiltrate a marketplace with counterfeit goods and other forms of fraud. Using identity verification – asking the seller to provide information proving he is who he says he is – stops fraudsters from registering under false pretenses. They never get access to buyers, so fraud goes down and customer satisfaction goes up.

One of the big eCommerce marketplaces recently started using the Brazil electronic identity verification service. Previously, they had a clunky seller onboarding process. It leaned heavily on a manual workflow, used multiple data reference sources, and required new merchants to provide a lot of personal information. For example, applicants had to scan and submit photo ID’s to a document verification service as part of the process. The whole thing was time-consuming, inconvenient for sellers, and expensive for the client to maintain. Worst yet, they were losing sellers. The friction of onboarding had legitimate merchants abandoning their registrations before they could be approved.

GDC was glad to help. Our Brazil electronic identity verification service consolidated their entire process into a single registration form. When a seller submitted his name, address and national tax ID, a single API call to our platform queried multiple sources of credit, government, commercial and consumer identity reference data from our in-country Brazilian partners. The various sources cover over 95 percent of Brazil’s addressable adult population, and we were able to help our client match and approve nearly 75 percent of all applications within seconds.

We streamlined their process, limited the need for manual intervention in the workflow, and reduced their dependence on document verification and multiple data services. Most importantly, we got rid of the friction that had so many sellers abandon the registration process.

This is what GDC does both in Brazil and in the many other countries integrated into our global electronic identity verification platform. We give you one point of access to instantly verify the identities of customers, partners or counterparties no matter their country of origin. We help you bring in the good customers quickly while weeding out the bad ones.

If your business is expanding into Brazil, and you need help with verifying the identities of your customers, let’s talk. In the meantime, enjoy the Olympic show Brazil has prepared for the world.

Thanks for reading!

Best,

Paul

Paul Dryden
Global Data Consortium
paul@globaldataconsortium.com

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The Patagonian Express- Connecting Latin America Then & Now

I recently reread Paul Theroux’s book The Old Patagonian Express. His book details his journey by train from the suburbs of Boston to the tip end of Argentina by rail. Yes, one can truly travel the length of North, Central and South America by relatively contiguous passenger rail service. The first time I read this book was over 30 years ago when I was in high school. Now rereading it after having traveled extensively and establishing partnerships with companies throughout Latin America I have a greater appreciation for Theroux’s experiences captured in this body of work.

The Americas are full of rich and diverse cultures. In the age of the Internet these cultures have become more connected and accessible. eCommerce platforms such as Linio and Mercado Libre are thriving on the continued growth of consumer access to the Internet. At our company we have seen an intense interest in helping many companies validate and verify consumers and businesses in Mexico, Brazil, Columbia and Argentina. Age Verification to restrict minors from making inappropriate purchases online, Seller Verification to help ecommerce marketplaces ensure the quality of products offered on their platforms and Customer Identity checks for Fintech companies needing to complete AML/Compliance checks. All of these are services needed on a country by country basis.

An example of the robust nature of some of our data is in Mexico where GDC is able to offer coverage for about 96% of the population. What this means is that we cover the people in most of the major cities and population centers. We do not likely have significant coverage in Papaloapan or Tapachula which is located in the southern border region of Mexico. Those regions are slowly but steadily joining the rest of their brothers and sisters with access to the Internet but it will take more time to see them fully represented.

As I read about Theroux’s journey through the jungles of Mexico and the pampas plains of Argentina I marveled at where our paths crossed in the major cities of the Americas. I haven’t traveled by train in Latin America but I have experienced some of the same cultures as he did during his journey. Engaging with business owners in each country served to broaden my understanding of what the challenges are to produce a good ID Check and why the same data inputs captured in the US or Germany would not be the same type of needed data input in Columbia or Ecuador. Understanding that diversity in cultures is what makes my company unique in our community of vendors. More importantly our network of in country data providers understand the diversity of cultures that are resident in their respective countries and regions.

In Identity Verification, one size does not fit all. Different countries allow for the verification of different elements of a consumer and a business’s key details. Knowing the required data inputs to create a good match for a desired output ID is a key function of what we help provide at GDC. Whether it is producing a NAP (Name, Address, Phone) match or doing a CURP or other National ID verification, GDC can help. Helping an eCommerce or Fintech company reduce the amount of paper documentation needed to conduct seller verification is something the GDC Worldview platform can do in a real-time or batch-based process.

Now is Carnival season in the South. Celebrations are being had and people are visiting their lineage homes to celebrate with family and friends. I imagine Theroux’s trains are crowded with passengers taking the journey North and South on the Patagonian Express. I also imagine many of them are using mobile phones to connect with friends and family and to conduct commerce transactions as they roll through the night.

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Info From Brazil Correios About Upcoming CPF Requirement

Overview: Charles Prescott, Executive Director of the Global Address Data Association, wrote the following article and gave us permission to post it here. There has been much uncertainty over Brazil’s new requirement that all incoming parcels carry with them the recipient’s CPF tax ID number. It will affect carriers, postal agencies, eCommerce services and merchants that do not currently collect this information from their customers. After a brief implementation period, any package they send without a CPF will either face a delivery delay, be destroyed or be returned to sender.

There have been no official statements from Brazil about the new requirement or when it goes into effect, so Charles went straight to the Head of International Department for Brazilian Post. See his comments below.

If your business is affected by this change, GDC can help. If you’re not collecting CPF numbers from your Brazilian customers, we can provide those for you. To find out more, contact Paul Dryden at 919-807-1740 or paul@globaldataconsortium.com to find out more.

Shipping to Brazil? Yet one more possible problem….

We were recently alerted of talk in the industry that the Customs in Brazil has started requiring that inbound parcels bear a “CPF” before they can be cleared, including parcels arriving through Correios.

The CPF is somewhat unique. CPF stands for the Cadastro de Pessoa Fisica ( Brazilian Taxpayer Registry). This is a database maintained by the Federal Revenue, ie tax, department. If you fall into one of three categories, you must register and obtain a CPF number. The categories are: Brazilians, foreigners resident in Brazil, and foreigners living abroad but owning assets in Brazil. When registering, you receive a permanent number which is unique to you, like a US Social Security number. This is used in nearly every commercial transaction one conducts in the country.

In short, the average customer in Brazil buying something in the US from Amazon (or anyone else for that matter) will not receive his or her parcel unless the CPF is on it and duties, often very substantial, are paid.

In the past, parcels arriving through the post, or tendered to the post by private couriers, went to the final delivery post office and the customer was contacted to come to pay the duties and collect the parcel. We understand that the authorities, in dire need of more revenue, decided that a more stringent tax collection discipline was required. Hence no parcel leaves Customs or Correios without a CPF on it and taxes paid.

We became alarmed at the prospect of thousands of parcels from foreign websites being piled up in Brazilian Customs or Correios, and so we emailed our friends at Brazilian Post to determine if the rumors were true.

Our friend Alberto de Mello Mattos, Head of the International Department of the Brazilian Post very kindly informed us that, indeed, parcels must contain the CPF before being presented to Customs. The new system will receive parcel‐specific data from couriers, private postal operators and posts which will be provided to Customs for clearance.

Brazilian Post is currently urging its trading partner posts to observe an enhanced parcel‐ specific standard that includes the CPF. This could resolve the problem, but it is a lengthy process to accomplish. Institutions responsible for standards, and their modification, are extremely cautious and thus obtaining modifications can take substantial amounts of time. Imagine how long it will take the USPS to begin to insist on CPF’s on Brazil‐bound parcels, and then how long it will take American businesses to do so. But you better do so, and quick.

To avoid as much trouble as possible, as soon as possible, the industry should do its best to convince shippers to collect the CPF on the website’s order form.

Where the parcel contains the CPF, it will pass through Customs for delivery in normal course. Where it does not, a system is being created to notify the addressee and request the needed CPF through a new dedicated website.

Part of this process to connect CPFs with parcels is ID Correios. ID Correios is a web authentication tool; all customers who interact with Correios must register in this system, which can verify the existence of the CPF claimed, or possibly provide one if it is missing. This system thus engages the addressee in the process. Of course, first‐time online buyers might not be in the system. And any system is capable of breaking down.

Mr. Mello Mattos put it succinctly: “ In conclusion, from the new system onwards we have to provide to Customs the CPF, before submit the item to them or alternatively, before release the item from our warehouse for final delivery.“ So now Correios is most definitely part of the tax collection process.

It is a universal truism that despite the best efforts of participants in a process, things will go wrong. Despite best efforts, Correios’ system will be stressed with parcels lacking a CPF and whose addressees can’t be located, or who are not in the ID Correios system. Any country’s system would be stressed with this.

How many will be returned, and how many will disappear? Who knows? GADA has been trying to find out the volume of “gone‐missing” parcels in the international system for years now, and no one in the posts, any post, will talk about it over coffee, let alone on the record.

If your company or you clients do business with Brazilian consumers, it will definitely be advisable to collect the CPF on check‐out and provide it on the package. Make it easy for the customers and they’ll be back.

See Charles Prescott’s full article on the Global Address Data Association blog, http://www.globaladdress.org/resources/blog/

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Shipping to Brazil? Every Package Must Now Include the CPF

Quick overview: If you ship packages into Brazil, you need to be aware of some important changes that require all labels be clearly marked with a tax ID number called the CPF. If you don’t have your customer’s CPF, the shipments will be returned or destroyed and you’ll be fined by Brazilian Customs. Many eCommerce merchants are not yet collecting CPF from their customers, and the new requirement could disrupt their Brazilian trade. GDC can provide it for you and help you avoid a disruption. Here are the details…

Brazil’s high import taxes caught the attention of financial media last year when Apple’s iPhone – which cost roughly US$600 when purchased in the States – was selling for nearly twice that in Rio de Janeiro.(1) Apple took some heat for marking up a high-demand product almost 50 percent above the monthly wage of Brazil’s average worker. But in reality most of that price bump wasn’t going into Apple’s pocket. It was required to pay the Brazilian tax authority.

Like many governments, Brazil uses duties to encourage the growth of its domestic industries. By levying customs taxes on imports, it creates a price advantage for local businesses to help them compete. Still, Brazilian consumers continue buying brands they can only get through imports, at times paying taxes as high as 100 percent.

Brazil Customs requires any incoming parcels be clearly marked with the recipient’s name, address and tax ID number. For individuals, that’s called the CPF (short for Cadastro de Pessoas Fisicas) and for businesses it’s the CNPJ (Cadastro Nacional da Pessoa Jurídica). Customs uses the numbers to assess the tax, and requires the recipient to make the duty payment before he/she can collect the parcel. Private courier services have become quite efficient at collecting a customer’s CPF and tax obligation before shipping the parcel to Brazil, ensuring it moves through customs quickly.

But when using the Correios for delivery (that’s Brazil’s government-run postal service) merchants and shoppers have found some loopholes to exploit. The Correios would accept a parcel without a CPF, ship it to a local post office near its final destination, and send notice to the buyer to come in to pay the tax and accept the shipment. Correios was supposed to collect duties on behalf of Brazil Customs. But their enforcement was spotty at best, and plenty of people took advantage of that.

No more. Seeing that it was losing a lot of tax revenue, the Brazilian government has mandated that Correios do a better job of collecting duties. Starting this summer, all shipments into Brazil must be clearly labeled with the recipient’s name, address, and CPF to make it past Customs. If it doesn’t have the CPF, the package will either be shipped-back or destroyed, and the sender will be responsible for paying a fine.

The problem is that many eCommerce merchants (and the technology platforms that support them) have not made the necessary changes to their shopping forms to collect the CPF. Things could get complicated for them in the coming months. Fortunately, GDC has a way to help immediately.

We specialize in finding the best in-country sources for identity and address data and integrating them into our Worldview platform. For Brazil, our service has comprehensive coverage (99 percent) of CPF and CNPJ information. We can take a combination of name, address, phone or email and provide back (in real-time) the CPF number for your shipping labels.

Brazil is a key market for many eCommerce companies. If this new requirement puts your trading business there at risk, GDC can help immediately. Feel free to reach out to me directly. Or click here to learn more about the services we offer in Brazil.