instrumentos de pagamento de varejo: cartões de crédito – questionário cooperation versus...
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Instrumentos de Pagamento de Varejo: Cartões de Crédito – Questionário
Cooperation versus Competition Cooperation versus Competition The Brazilian CaseThe Brazilian Case
World BankWorld Bank
Washington, D.C. May - 2007
• The Brazilian Retail Payments System – main features
• The Banco Central do Brasil – BC´s Policy and Role
• The main actions of the BC
• The main reaction of the Market
• Next steps
Outline
Funds Transfer Systems – Clearing and Settlement Infrastruture
STR – Central Bank RTGS STR – Central Bank RTGS
“bloqueto de cobrança”
“bloqueto de cobrança” DOCDOC TEDTED
Credit transferCredit transfer
CIP – SitrafHybrid
D+0
CIP – SitrafHybrid
D+0
CIP – SilocMultilateral
D+1
CIP – SilocMultilateral
D+1
CompeMultilateral
D+1
CompeMultilateral
D+1
TecbanMultilateral
D+0/D+1
TecbanMultilateral
D+0/D+1
ChequeCheque Payment card and Direct debit
Payment card and Direct debit
CreditCredit
Payment cardPayment card
DebitDebit
• Payment Card Societies Visa (53%)
Mastercard (37%)
Others (10%)
• Issuers 5 issuing banks hold 88% of the market share
45 banks (40 conglomerates) issue Visa
55 banks (36 conglomerates) issue Mastercard
3 banks issue Amex
• Acquirers: Visanet – Visa (53%)
Redecard – Mastercard and Diners Club (38%)
Payment Cards Industry in Brazil – StructurePayment Cards Industry in Brazil – Structure
Payment Cards Industry in Brazil – main featuresPayment Cards Industry in Brazil – main features
• Acquirers
Only one acquirer per card brand
Acquirers are bank-owned but are not banks
Vertically integrated industry: acquirers provide infrastructure services and authorize merchants
Lack of cooperation on infrastructure: networks are not shared (ex. POS terminal)
Large array of products and services: network is used for other products (cash-back, prepaid mobile phone recharge, “correspondente bancário”)
ATM Market – Number of terminals ATM Market – Number of terminals
Data source: Banco Central do Brasil, Banks and ATM networks
0
20
40
60
80
100
120
140
160
1999 2000 2001 2002 2003 2004 2005
Thousand
Open access Restricted access Total
2003(%)
2005(%)
Transactions in shared ATM´s 1,0 7,4Transactions in private ATM´s 99,0 92,6
QuantityATM sharing
Average number of transactions per ATM – 2005Average number of transactions per ATM – 2005
Data Source: Banco Central do Brasil, Banks and ATM networks
46
-
10
20
30
40
50
60
70
80
Netw orks
Thousand
Netw ork average System average
ATM Market – main featuresATM Market – main features
• Low usage of installed capacity, raising fixed costs per transaction
• Low interoperability, geographical overlapping
• High costs of networks logistics, development and maintenance
• Insufficient standardization of communication protocols, systems, methods and processes
• Network infrastructure perceived as a competitive advantage in offering payment services
Brazilian Retail Payment System – 2004 DiagnosisBrazilian Retail Payment System – 2004 Diagnosis
• Points of inefficiency
Infrastructure for clearing and settlement of retail payments is fragmented
Low infrastructure interoperability among payment instruments distribution channels
Few innovations in products and services
Retail Payments – Scenarios and trends BC Opinion
Usage of electronic instruments and Integration of retail systems and networks
DemandDemand
More options
More quality
STP to business
Lower costs
SupplySupplyTechnological advance
Transactions increase
Opportunities for economies of scale and scope
Processing of increasing volumes, handling distinct products and offering new services in an efficient, safe and reliable way
Market failureMarket failure
• Demand side
the price mechanism does not work out on the resource allocation, as all bank-customer relationship is priced together (information asymmetry) – bundling
• Supply side
does not encompass network effect (positive externality) governance – moral hazard infrastructure as an entrance barrier
• Focus of the Banco Central do Brasil (BC)
Promote economic efficiency in currency’s usage
• Objectives
Increase relative share of electronic instruments vis-à-vis paper-based instruments
Economic efficiency and a higher social welfare
Retail Payment System – BC PolicyRetail Payment System – BC Policy
• To indicate policies, directives and objectives
• To foster private and cooperative solutions
• To coordinate investment decisions and expectations
• To act as a catalyst for the relationship between relevant
parties and public authorities interested in the subject
• Regulation, when needed
Banco Central do Brasil’s roleBanco Central do Brasil’s role
• 2002 – BC began talking about interoperability and the use of electronic payment instruments
• May 2005
Report on the Brazilian Retail Payment System
• May 2006
Included an Annex on Statistics in the Diagnosis
Directive 1/2006 (May 4th, 2006)
• July 2006
Agreement BC – Competition Authorities
• September 2006
Cards industry data collection
Main actions of the BCMain actions of the BC
Non-cash instruments - Total volume in millionsNon-cash instruments - Total volume in millions
0
500
1,000
1,500
2,000
2,500
3,000
1999 2000 2001 2002 2003 2004 2005
Cheque Debit card Credit card Direct debit Credit transferintrabank
Main reactions of the Market Main reactions of the Market
• ATM Network
Sharing agreements are expected to increase – four of the largest banks have already begun
Two bilateral agreements between three major banks
Between one large bank and an open-access ATM network
• New services and products
Board of Directors of the largest ACH and of the Brazilian Federation of Banks announced:
Centralize services currently performed individually by the banks
Standardization of business models
Less overlapping
Safer and better quality services
Payments portal – e-commerce
Main reactions of the Market – 2006/2007Main reactions of the Market – 2006/2007
• Card Industry
Issuing banks (88%); Payment Card Societies (100%); Acquirers (100%):
Showed huge interest in the results of the Report
Merchant (main commercial associations):
Showed interest in reducing their final costs
Complained about infrastructure, fees etc
Main reactions of the Market – 2006/2007Main reactions of the Market – 2006/2007
• Publish report on payment card industry:
Interchange, merchant discount, and customer fees; Concentration; Profitability; and Governance
• Induce another round of talks among main retail market players
Regarding the fragmented infrastructure, the payments card industry and new services and products, in order to keep the BC in the center of the discussions
• Publish new directives focusing on the retail payment system efficiency
Transparency in BC policy
• Continue to monitor
Keep following market evolution, acting as catalyst for conflict resolution
Regulate if necessary
Next Steps – 2007/2008Next Steps – 2007/2008
ContactContact
Mardilson Fernandes QueirozMardilson Fernandes [email protected]@bcb.gov.br
+55 (61) 3414-1629+55 (61) 3414-1629