1. 1 JOINT ECB-MNB CONFERENCE Moving away from a cash-based payment system to a “less cash” society Budapest November 2012

2. 2 Agenda Background of the Brazilian payment system Usage of means of payment Banking access channels The Central Bank’s involvement in the retail payment system Moving towards a “less cash” society

3. 3 Background 2002 - Brazilian payment system reform Objective: Mitigation of systemic risk and credit risk 2005 - Report: Brazilian retail payment system diagnosis Objective: To map the retail payment system: −Payment instruments’ usage −Banking service channels −Clearing and settlement infrastructure −Innovation in payment systems −International experience 2010 - Report: Payment card industry Objective: To conduct analysis and studies on competition in the payment card industry.

4. 4 The market of electronic means of payment High correlation between electronic payment instruments and bank accounts Percentage of the population that disposes of electronic means of payment has increased in the last years to 72.4% in 2011 −Debit Cards –> 60% −Credit Cards –> 53% −Retailer Cards –> 28% Use of electronic means of payment: −Monthly spending among the population –> 42% −Monthly spending among the owners of electronic means –> 52% Survey conducted by the Brazilian Association of Credit Card and Service Companies - ABECS

5. 5 Means of payment User’s behavior

6. 6 Usage of access channels Volume of transactions billion Access channel 2006 2007 2008 2009 2010 2011 2006– 2011 (%) Internet banking 5.1 6.4 7.3 8.4 10.6 12.8 151 ATM 7.2 7.6 8.2 8.1 8.6 9.3 29 Branches 5.4 5.6 5.8 6.5 7.5 8.7 61 Banking agents 1.8 2.2 2.3 2.6 2.9 3.2 76 Call center 1.2 1.7 1.6 1.4 9 Wireless (cell phone, PDA) (million) 48 37 65 96 61 196 308

7. 7 ATM terminals ATM terminals International scenarios International scenarios – 2010 Country Number of terminals per million inhabitants Number of transactions per terminal Finland 533 60.140 Netherlands 475 54.967 United Kingdom n.a. 44.152 France 870 28.501 Portugal 1.645 25.968 Belgium 1.409 24.888 Germany 1.058 23.586 Switzerland 811 18.1332011 Brazil 917 16.786 904 18.023 Spain 1.286 15.992 Italy 855 13.789

8. 8 POS terminals POS terminals International scenarios International scenarios – 2010 Country Number of terminals per million inhabitants Number of transactions per terminal Sweden 21.571 8.858 Belgium 12.663 7.714 United Kingdom 20.208 6.754 Flinland 37.476 5.174 Portugal 26.175 4.195 Germany 8.295 3.900 Switzerland 19.293 3.699 2011 Brazil 17.925 1.828 18.275 2.404 Spain 30.149 1.626 Italy 24.920 1.228

9. 9 Cost of payments in terms of percentage of GDP 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% Actual costCost with total migration to electronic payments Comparison of cost electronic payment instruments x paper based instruments Comparison of cost electronic payment instruments x paper based instruments

10. 10 Brazilian retail payment system Central Bank objectives: −public confidence in the currency and in the payment system −financial stability −use and interoperability of infrastructure −competition among payment services −financial inclusion

11. 11 The role of the Central Bank: −Overseer of payment systems and FMI’s −Supervisor of financial institutions −Owner and operator of the RTGS payment system −Provider of reserve bank accounts and settlement accounts −Responsible for assessing the efficiency of payment systems and payment instruments Brazilian retail payment system

12. 12 From a cash-based to a less cash society 40% of the population does not have a bank account insufficient financial literacy high banking concentration prevalence of competition in infrastructure instead of in products lack of interoperability in ATM and POS networks legal and regulatory risks for new entrants geographical dimensions and demographic distribution Challenges

13. 13 From a cash-based to a less cash society From a cash-based to a less cash society social mobility costs of IT and CT new main banks’ revenue source number of mobile phone service subscribers access to internet direct government access to the payment system new entrants foreign investment financial crisis / financial stability Drivers

14. 14 From a cash-based to a less cash society moral suasion innovation catalyst −Participation in forums −Public manifestation −Remain in the center of discussion as a neutral entity −Evaluate the initiatives presented by the market −Listen to stakeholders self-regulation coordination with other government authorities competitive environment What can the Central Bank do

15. 15 From a cash-based to a less cash society since 1993, interbank exchange of information related to credit orders occur only through electronic means since 2010 there’s no physical exchange of cheques between banks reduced requirements for individuals opening simplified deposit accounts creation of banking agents that extended the banking capillarity to 100% of Brazilian municipalities (5.564 cities) What has the Central Bank done

16. 16 From a cash-based to a less cash society performed a stocktaking exercise on the Brazilian retail payment system (World Bank) widespread direct access to Central Bank money (settlement accounts) by entities other than financial institutions since 2011 interoperability of POS machines new law on payments schemes – Central Bank mandate What has the Central Bank done (cont.)

17. 17 From a cash-based to a less cash society achieve financial inclusion reduce social costs / banking costs reduce “shadow economy” activities avoid tax evasion reduce crimes related to the high use of paper currency increase e-commerce business keep up with innovations

18. 18 Daso M. Coimbra Department of Banking Operations and Payments System daso@bcb.gov.br +55 (61) 3414-1340 Daso M. Coimbra Department of Banking Operations and Payments System daso@bcb.gov.br +55 (61) 3414-1340