"Carriers do not like it; they see it as a threat," said Czerny. "So they put up barriers for PayPal."
PayPal knocked down some of those barriers when it announced a partnership with Brazilian mobile company Vivo in August. The companies created a messaging technology that works without Internet and allows customers to use PayPal on their phones to buy minutes.
More than 80 percent of all Brazilian cell phone users have prepaid phones. Before, when Vivo users wanted more minutes, they had to buy them at a grocery store or corner store. PayPal removes that step.
"We are hugely convenient," said Mario Mello, head of Latin America for PayPal.
Mello said PayPal plans to expand the program to allow Vivo users to shop any of the 50,000 PayPal merchants in Brazil from their phone, without Internet. That technology is at least a year out, though.
The partnership -- PayPal's first with a Brazilian telecommunications company -- is widely considered an innovative move for the San Jose company, but some experts don't have high hopes. The payment system requires a credit card, which 1 out of 4 adults does not have.
That's not to say PayPal hasn't done well in Brazil. With the country's e-commerce boom -- an $11 billion industry that is expected to grow an additional 25 percent this year -- retail websites and e-commerce aggregators have flourished in the past few years, and Brazil has given birth to its own versions of Amazon and Etsy. Many now bear the familiar blue and yellow PayPal logo.
"Anything that e-retailers can do to give the perception of security, and safety and trust, they'll do. That's where PayPal has huge opportunity," said Renata Streit Quintini, a Brazil native and partner at Palo Alto firm Felicis Ventures.
PayPal's fraud detection capabilities and customer service far surpass many Latin American companies, easing fears among Brazilians of getting ripped off. Quintini, who is an e-commerce expert with nonprofit BayBrazil, which fosters business relationships between Silicon Valley and Brazil, said that about one-third of Brazilians who don't shop online say they are afraid of disclosing their bank account information. PayPal, she said, is a reassuring alternative.
But PayPal isn't the only game in town. Czerny said the Brazilian Web payment service PagSeguro is popular, and MercadoPago, which started in Argentina and expanded to Brazil, is another preferred option. Walmart uses MercadoPago for online shoppers in Brazil.
Brazil's thriving startup sector will likely generate more challengers. The lively scene caught the attention of PayPal co-founder Peter Thiel, who recently invested millions in an e-commerce startup.
"PayPal faces a lot of competition worldwide, not just in Brazil, and there are plenty of startups in the payment space," said Colin Sebastian, an analyst with Baird Research.
Or it could be that PayPal is well situated to take a risk. Despite the company shedding about 400 jobs in what's being called a "restructuring," PayPal continues its upswing, posting a 23 percent revenue increase in the third quarter of this year compared to 2011. The strong gain helped eBay beat Wall Street expectations.
PayPal may hang on long enough to ride out the challenges in Brazil. The tech landscape will look completely different in a few years, and PayPal may find its sweet spot. Android phone sales are expected to skyrocket, and some analysts expect eBay Marketplace will soon expand to Brazil.
Said Mello: "It could take two years, it could take four years, but change will come very fast in Brazil."
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