Cielo sees Brazil merchant acquirer market up 16-18 pct in 2014

SAO PAULO Wed Jan 29, 2014 9:47am EST

SAO PAULO Jan 29 (Reuters) - Cielo SA, Brazil's largest card payment processor, expects transaction volumes in the local market to outpace the company's own growth this year, Chief Executive Officer Rômulo Dias said on Wednesday, adding that a potential decline in merchant discount rates could occur.

Brazil's $400 billion-a-year market for card payment transactions is likely to grow between 16 percent and 18 percent in 2014, Dias said, adding that he expects Cielo's transaction volume flows to grow less than that. Merchant discount rates, which Cielo and rivals charge retailers to settle card transactions, could fall after remaining stable last year, he added.

Dias' remarks highlight the risk of heightening competition and a weak business environment in 2014, despite major events such as soccer's World Cup in June. Cielo missed estimates on Tuesday due to a surge in marketing and sales expenses. .

"Four days of what amounts to holidays due to Brazil (national team) World Cup games could have a negative effect worse than the impact of foreigners coming to the country," he said in a conference call with analysts to discuss fourth-quarter earnings.

Cielo will likely see faster growth in the first half of 2014 and a slow-down in the final six months, Dias added.

Cielo sees its marketing expenses up about 4 percent in 2014, Dias said, with the company facing greater competition from rivals Santander Brasil SA and Redecard, owned by lender Itau Unibanco Holding SA.

At 12:34 p.m. (1434 GMT) shares of Cielo were down 1.76 percent to 62.00 reais.

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