retail payment systems in brazil
TRANSCRIPT
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Retail Payment Systems in Brazil
José Antonio Marciano
Payments Week, June 2005
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SPB Reform - Background
1st stage: Improvement of financial settlement infrastructure
Focus: Safety (systemic risk reduction)
– Legal and regulatory framework
– Technological infrastructure
– Central counterparties
– Real-Time Gross Settlement (reserve and settlement accounts)
2nd Stage: Payment instruments
Focus: Efficiency and modernization (increase the relative importance of electronic payment instruments)
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• International experience and academic studies on a selected group of countries show that:– The cost of an electronic payment is between 1/3
and 1/2 of the cost of a paper-based payment (cash and checks)
– A complete migration to electronic payment instruments would produce an annual cost reduction up to 3% of GDP
• Being electronic payment cheaper, why do market forces not promote a massive migration to electronic payments?
Potential efficiency gains
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• Price mechanism does not work in the allocation of resources, because every bank-customer relationship is priced as a whole (information asymmetry)
• There are market failures on the electronic payment instruments supply that limit development and innovation (infrastructure as a barrier to entering)
Answers
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Retail Payment System
• Retail payment systems features– Large number of transactions– Low value transactions– Goods and services acquisition– Variety of payment instruments
• Payment Instruments– Cash, checks, credit transfers, direct debit, credit and debit cards
• Distribution channels– Automated Teller Machines (ATM) networks, Electronic Funds
Transfers at the Point of Sale (EFTPOS) networks and internet
• Clearing and settlement infrastructure
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How to enhance welfare?
Infrastructure arrangements
Bank Other Banks
Payment Services Market (account transactions and individual instruments)
Interchange fees
Cooperativ
e
Sector
Competitiv
e
Sector
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Diagnosis-Report: Importance and Structure
• Importance:– To serve as a starting point for definition of
policies and guidelines on the subject – Periodical disclosure of information and statistics
about the Brazilian Retail Payment System• Structure:
– Payment Instruments and distribution channels– Clearing and settlement infrastructure– Quantitative analysis– Fundamental issues on Retail Payment Systems
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Diagnosis-Report: Objectives
• To obtain a quantitative and qualitative analysis of the current stage of development
• To analyze the international experience
• To identify obstacles to modernization
• To define necessary actions to further modernization
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Diagnosis-Report: Methodology
• Adaptation of international studies that made it possible to obtain a detailed analysis of the Brazilian case and a comparison with the international experience
• Interviews and questionnaires to banks, payment service providers, real sector economy representatives and bank associations
• Analysis of the international bibliography about the subject: publications from international financial organizations, centralbanks and research institutions
• Technical visits to central banks and to retail payment clearingand settlement systems providers in the countries considered to be at the technological “frontier” and with similar information disclosed
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Clearing and Settlement Infrastructure
CobrançaCobrança
DOCDOC
Sistema de Transferência de Reservas – STRSistema de Transferência de Reservas – STR
CIP – SitrafMultilateral
CIP – SitrafMultilateral TECBAN
Multilateral
TECBANMultilateral VISANET
Multilateral
VISANETMultilateral REDECARD
Multilateral
REDECARDMultilateralCOMPE
Multilateral
COMPEMultilateral
Clearin
g
Paymen
t
Instru
ments
TEDTED
CIP – SilocMultilateral
CIP – SilocMultilateral
D + 0 D + 0
D + 0 / D + 1D + 0 / D + 1
D + 1D + 1
D + 1D + 1
D + 1D + 1
D + 1D + 1
Transferênciade crédito
Transferênciade créditoCheque
Cheque Cartões depagamento
Cartões depagamentoDébito direto
Débito direto
CobrançaElectronic
Bill DOCDOC
Sistema de Transferência de Reservas – STRSistema de Transferência de Reservas – STR
(Central Bank RTGS systems)
CIP – SitrafMultilateral
CIP – SitrafMultilateral TECBAN
Multilateral
TECBANMultilateral VISANET
Multilateral
VISANETMultilateral REDECARD
Multilateral
REDECARDMultilateralCOMPE
Multilateral
COMPEMultilateral
Settlem
ent
TEDTED
CIP – SilocMultilateral
CIP – SilocMultilateral
D + 0 D + 0
D + 0 / D + 1D + 0 / D + 1
D + 1D + 1
D + 1D + 1
D + 1D + 1
D + 1D + 1
Transferênciade crédito
Credit TransferChequeCheck Cartões de
pagamento
PaymentCardsDébito diretoDirect Debit
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Payment Instruments - Volume
Source:Central Bank of Brazil, Compe, banks, and acquires.
1999
Credit card13,4%
Debit card2,6%
Direct debit5,3%
Check63,4%
Interbank credit transfer15,2%
2004
Debit card15,3%
Direct debit11,0%
Check35,4%
Interbank credit transfer17,2%
Credit card21,0%
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Clearing and Settlement Infrastructure –Transactions - 2004
Source:Central Bank of Brazil, Compe, banks, and acquires.
ValueSTR
28,7%
CIP – Sitraf 31,9%
CIP – Siloc1,6%
Redecard0,9%
TecBan0,1%
Visanet1,3%
Compe35,4%
Volume
Compe55,8%
TecBan1,5%
Redecard15,7%
CIP – Siloc1,9%
CIP – Sitraf 0,5%
STR0,2%
Visanet24,5%
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Relative importance of cashless payment instruments
Source: Central Bank of Brazil, banks, credenciadores e administradores de cartões, BIS/CPSS, European Central Bank.
Country
1999 2003 % 1999 2003 % 1999 2003 % 1999 2003 %Belgium 5,8 1,4 -75,9 28,9 32,8 13,5 51,9 46,7 -10,0 10,2 11,2 9,8Brazil 62,5 39,4 -36,9 16,5 32,2 95,7 15,6 16,8 7,8 5,5 11,6 111,3Finland 0,1 ... ... 38,4 40,5 5,5 56,8 54,6 -3,9 4,6 ... ...France 40,1 29,7 -25,9 26,1 27,8 6,5 18,4 17,7 -3,8 15,5 17,8 14,8Germany 3,8 1,0 -73,7 11,0 16,9 53,6 47,2 42,6 -9,7 37,8 39,3 4,0Italy 25,2 15,6 -38,1 18,0 21,2 17,8 38,0 36,6 -3,7 18,8 22,3 18,6Japan 8,2 4,3 -47,6 51,9 58,2 12,1 39,9 35,2 -11,8 ... ... ...Netherlands 1,0 0,0 ... 27,7 29,3 5,8 41,2 40,4 -1,9 29,3 27,8 -5,1Portugal 34,1 ... ... 47,2 50,6 7,2 6,3 7,7 22,2 11,9 ... ...Spain 10,7 ... ... 24,3 22,9 -5,8 14,5 15,2 4,8 50,5 ... ...Sweden 0,3 0,0 ... 22,3 26,7 19,7 69,6 65,4 -6,0 7,4 9,9 33,8Switzerland 0,8 0,4 -50,0 26,0 28,4 9,2 68,4 62,9 -8,0 3,5 5,3 51,4United Kingdom 28,8 18,6 -35,4 34,3 36,6 6,7 18,1 17,8 -1,7 18,8 20,1 6,9USA 61,7 45,3 -26,6 31,4 35,2 12,1 4,5 4,8 6,7 2,4 4,1 70,8
Direct DebitDebit Card/Credit Card
Credit TransferCheck
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ATM – Number of terminals
Source: Central Bank of Brazil, banks and ATM networks
0
20
40
60
80
100
120
140
160
1999 2000 2001 2002 2003 2004
Thousands
Open access Restrict access Total
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Source: Central Bank of Brazil, banks and ATM networks
ATM – Transactions in 2004
Credit Transfer1,6%
Bill Payment3,4%
Deposit11,5%
Balance/Bank statement
41,2%
Cash withdraw31,7%
Others10,6%
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ATM – Interoperability Average of transactions per terminal - 2004
Source: Central Bank of Brazil, banks and ATM networks
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-
10
20
30
40
50
60
70
80
n1 n2 n3 n4 n5 n6 n7 n8 n9 n10
n11
n12
n13
n14
n15
n16
n17
n18
n19
n20
n21
n22
n23
n24
n25
n26
n27
Networks
Thousands
Average per network Average of the system
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Source: Acquirers, Card Associations, BIS/CPSS, European Central Bank
ATM – Number of transactions - 2003
USA
Japan
Italy
SwitzerlandFrance
Belgium
Brazil
UKGermany
Netherlands
Sweden Portugal
Finland
Spain
0
10
20
30
40
50
0 300 600 900 1200 1500Number of terminals per million of inhabitants
Transactions per inhabitant
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Payment Cards: debit and credit
Source: Acquirers, Card Associations
0
20
40
60
80
100
120
140
160
1999 2000 2001 2002 2003 2004
Millions
Credit cards Debits cards
10
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POS - Number of terminals
Source: Acquirers, Card Associations
0
200
400
600
800
1.000
1.200
1.400
1999 2000 2001 2002 2003 2004
Thousands
Debit cards Credit cards
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Debit card transactions International Comparison - 2003
Source: Acquirers, Card Associations, BIS/CPSS, European Central Bank
Spain
FranceSweden
Netherlands Finland
USAUK
Portugal *
Belgium
Switzerland
Italy
Germany
Brazil0
10
20
30
40
50
60
70
80
0 5.000 10.000 15.000 20.000 25.000Terminals per million of inhabitants
Transactions per capita
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Source: Acquirers, Card Associations, BIS/CPSS, European Central Bank
Credit card transactions International Comparison - 2003
Germany
BrazilSweden
JapanPortugal
Finland Spain
UK
USA
0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
0 10.000 20.000 30.000 40.000 50.000 60.000 70.000Terminals per million of inhabitants
Transactionsper capita
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Volume (millions) Value (R$ billions)Transactions 2001 2004 2001 – 2004
(%)2001 2004 2001 – 2004
(%)Total volume: 1.281 3.311 158,5 175 1.881 976
Payment 88 585 566,6 175 1.836 4.511Credit transfer1/ 33 339 927,8 26 1.099 4.116Electronic bills and agreements2/ 55 246 349,0 149 737 395
Non-payment: 1.193 2.725 128,4 ... 45 –Balance and bank statement consultings 733 1.475 101,3 – – –Others 460 1.250 171,6 ... 45 –
Source: Banks.1/ TED, Doc and inter accounts transfers.2/ Taxes, fees, contributions, etc.
Remote Access
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Main Conclusions
• Barriers to the development of electronic payment instruments
– Infrastructure as a competitive factor (barrier to entry) in the payment services supply
– Settlement infrastructure fragmentation
– Low level of interoperability on ATM networks
– Low level of interoperability on POS networks
– Price system does not work in the allocation of resources (indirect pricing and cross-subsidies)
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• Establish guiding principles: policies, guidelines and objectives
• Foster cooperative and market solutions
• Coordinate expectations and investment decisions
• Act as a catalyst among the involved participants and other public authorities
• Regulation, when necessary
The Role of Central Bank
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Central Bank Actions
• Coordinate and act as a catalyst of changes
• Promote business governance cooperation on the ATM network and POS network
• Stimulate system investment costs optimization
• Foster cooperation at upstream network and competition at downstream market
José Antonio Marciano
[email protected]++55 11 414 1340
Payments Week, June 2005