Postal Banking - Financial Services and Post Offices
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Transcript of Postal Banking - Financial Services and Post Offices
Financial Services and Post OfficesFinancial Services and Post Offices
Inter American Development Bank,
Washington D.C.,
Brown Bag Lunch,
11 September 2003
Hans Boon
PostalPostalBankingBanking
AgendaAgenda
Origin and History
International Overview
“Best Practice” profile
Rationale
Development Scenarios
Partnership Models
Stakeholders’ Approach and Financing issues
Origin and HistoryOrigin and History
1800 1860 1880 1980 2002
Postal
Money Orders
Postal Savings
Postal Giro & Cheques
Postal banking
Reform and Revival
OriginOrigin
Government motives to establish postal savings and giro institutions:
to provide secure and solid deposit and money transfer instruments widely and easily accessible to the public, government agencies and companies
to mobilize and pool national financial resources and utilize the resources for economic development
OriginOrigin
Typical product features
State Guarantee on Deposits
Tax exempt
Low minimum deposit requirement
Available at all post offices
Limited fragmented product approach
Typical operational features
Owned by Ministry of Finance or specific fund
Operated and managed by Posts
Not supervised by Central Bank
Resources invested in State Treasury / Gilt-edged titles
Bypassing Capital and
Money markets
Europe in evolutionEurope in evolution
As a phase in the transformation,Swiss and Italian Posts have
established alliances for specificproduct lines (mutual funds,
insurance)
Transformation ofFinancial Services into a
bank or an alliance with abank is being considered
Creation of alliancewith banks in
consideration orpreparatory stage
Postbank is asubsidiary of the
Posts
Post Offices are 50%owned by Postbank (ING)
Partnership Post- Bank PFS Division of Posts
PFS Subsidiary Company with >50% ownership by Posts
Originally organized within the Post
Trend towards ‘partnership’ between Post and (Post) bank
–Alliance/ Contract/JV
–Subsidiary
Significant market share in payments and savings
Europe in evolutionEurope in evolution
Co u n tr ie sP FS
Di vi si o nPF S
SubsidiaryP FS
P a rtn e r
PaymentsAcccounts/C a
rdsS a vi n g s
Co n su m e rCre d i t
M u tu a lFu n d s
In su ra n ce In te rn e t
Au str ia
Be lg iu m
D en mark
F in lan d
F ra n ce
G e rma n y
G re ece
Ice la n d
Ire la n d
Ita ly
L u xe mb u rg
Ne th e r la n d s
No rwa y
Po rtu g a l
Sp a in
Swe d e n
Switze r la n d
Un ited K in g do m
Postal Financial Se rv ices in the European Union/Weste rn Europe
Central and Eastern Europethe leap forwardCentral and Eastern Europethe leap forward
Postal Financial Services Overview in The Central and Eastern Europe
Bosnia & Hercegovina
Postbank in Restructuring; Raiffeisen Zentralbank acquired Hrvatska poštanska banka- Mostar
BulgariaBulgarian Postbank (Alico+ EFG-Eurobank) has been privatised
CroatiaHrvatska Poštanska Banka (in rehabiltation process)
Czech RepublicPoštovni Sporitelna (a division owned by CSOB-KBC)
EstoniaPostipank operated as brand allliance between Eesti Post and Eesti Uhis Pank (Sampo-Finland)
HungaryPostabank in privatisation process; bids have been submitted
LatviaPostal Giro Accounting Centre (PNC) as a part of Latvia Posts and partnership with Hansabank
LithuaniaContracts with various banks for a limited scope of services
MacedoniaPoštenska Stedelnica (limited banking license, majority privately owned )
Poland Bank Pocztowy (66% owned by the Post)
Romania Banc Post (70% private, EFG-Eurobank)
Slovak RepublicPoštova Banka (11% owned by the Post, share of State Consolidation Fund for sale)
SloveniaPoštna Banka (45% owned by the Post and 55% by a State Fund, earmraked for sale to NKBM
YugoslaviaPoštenska Stedionica- recently licensed as a full-fledged bank
Central and Eastern Europethe leap forward (Continued)Central and Eastern Europethe leap forward (Continued)
Countires PostBank Cash PaymentsPayments Accounts/
CardsSavings
Consumer Credit
Mutual Funds
InsurancePension
PlansInternet
Albania no postbank
Bosnia & Hercegovina
Bulgaria
Croatia HPB
Czech Republic
Estonia
Hungary
Latvia no postbank
Lithuania no postbank
MacedoniaPostenska Stedelnica
Poland
Romania
Slovak Republic
Slovenia
Yugoslavia
Bank Branches in CEECs provide 30% of the level of access compared to EUBank Branches in CEECs provide 30% of the level of access compared to EU
Source: Statistical data from: ECB years: 2000 for EU countries and 2001 for CEE countries, UPU year 2000, BIS year 2000; and ING own research year 2000
In Central and Eastern Europe Bank Branches provide an infrastructure for access to the financial system that compares with 30% of the physical points of access into the financial system in EU countries. IN EU Countries 30% of the infrastructure is provided by post offices.
Points of Access for Financial ServicesBank Branches- Post offices
71%
29%
CEE Countries EU Countries
Region
% Points of Access - Post Offices
% Points of Access - Bank Branches
4298
1309Avg. N of People per Point
Access to Financial Services through Post Offices would bridge the gap in the financial infrastructure in CEECs considerably
Access to Financial Services through Post Offices would bridge the gap in the financial infrastructure in CEECs considerably
Source: Statistical data from: ECB years: 2000 for EU countries and 2001 for CEE countries, UPU year 2000, BIS year 2000; and ING own research year 2000
In the cash economies of Central and Eastern European Countries In the cash economies of Central and Eastern European Countries the Post Offices could constitute more than 50% of the physical the Post Offices could constitute more than 50% of the physical infrastructure for access to the financial sectorinfrastructure for access to the financial sector
Points of AccessBank Branches- Post Offices
45%71%
55%
29%
CEE Countries EU Countries
Region
% Points of Access - Post Offices% Points of Access - Bank Branches
1309
1922
Avg. N of People Served by 1 Point of Service
CIS; reform issues ahead CIS; reform issues ahead
Posts: revenues strongly dependent on cash payments services
State Savings Bank still dominant position and pursuing network reduction
Large amount of cash under the mattress
“Postbank” concept would trigger reform for the Post and Communication and the Financial Sector. Lead products:
–international remittances
–savings mobilization
–mail order credit
Africa; reform initiatedAfrica; reform initiated
For many Africans, Post Office only accessible point of entry into communications and financial services
Postal savings and remittance service have strong social role
Modernization of postal financial services and reform efforts need to be continued
Cross-border cooperation ?
PFS in partnership with Postal (Savings) Bank orNational Savings Bank
3 Post(Savings) bankshave established analliance for further
development
PFS or POSB structured and (de facto) managed within thePost
Africa: postal savingsAfrica: postal savings
Postal savings banks tend to develop ‘dual’ channel policy; branches and post offices
Synergy opportunities may be missed
Postal ICT programs, Telecenters and reform, privatization of Posts and Postal Banks underway
Asia, different modelsAsia, different modelsModel/Typology Countries
Bureau of the Ministry of Posts andTelecommunications
State Postal Bureau
Japan (Privatisation in 2007 ?)
Korea
China (IPO under preparation ?)
Post Office Savings Bank (as agency of theMinistry of Finance), operated by the Posts
India, Pakistan
Jordan (Post incorporated in 2003)
Taiwan (Post incorporated in 2003,privatisation under preparation)
Agent of the National Savings Bank and other Sri Lanka; Malaysia (Privatised postaloperator)
Postbank, as a licensed bank andsubsidiary/partner of the Post
Philippines, Iran, New Zealand, Mongolia
Postal Giro and Money order service (as part ofthe Post)
Turkey (Per 1 Sept 2003 Postbank JV withCitibank)
Postal Money Orders and other cash basedservices
Thailand (Partnership with a bank underpreparation)
Lao PDR,
Bangla Desh
Sales of (account-based) financial products andtransaction (processing/routing) agent for manyor all banks
Australia
Overview of Latin American Postal OperatorsAlthough postal markets feature strong private players,
private sector participation in public postal operators is very limited.
Colombia
• Administration Postal National (National Postal Administration) (ADPOSTAL)
• 100% Govt. owned
• Reform options being considered
Ecuador
• Empresa Nacional de Correos
• 100% Govt. owned - Domestic Monopoly
• Privatisation plans stalled
Guyana
• Domestic Monopoly
• 100% Govt. owned
Venezuela
• Instituto Postal Telegrafico (IPOSTEL)
• 100% Govt. owned
Brasil
• Empresa Brasileira de Correios e Telégrafos
• 100% Govt. owned
• public enterprise connected to the Ministry of Communications; incorporation proposed
Uruguay
• Administración Nacional de Correos
• a decentralized commercial service
• 100% Govt. owned; reform underway
Argentina
• Correo Argentino S.A. is a fully privatized company
• concession holder Grupo Itrón S.A (GI)
• Ownership: – GI 86%; employees 14%.
Paraguay
• Domestic Monopoly
• 100% Govt. owned
• No privatisation plans
Chile
• Empresa de Correos de Chile (Postal Corporation of Chile)
• 100% Govt. owned
• Incorporated, privatisation under consideration
Bolivia
• Domestic Monopoly
• 100% Govt. owned
• Privatisation plans stalled
Surinam
• Domestic Monopoly
• 100% Govt. owned
• Commercialisation underway
Peru
• Domestic Monopoly
• 100% Govt. owned
• No privatisation plans
L im ited P ay m en t S er v ic es s tr u c tu r ed w ith in th e P o s t
A s p a rt o f t h e 'B a n c o P o s ta l'p ro g ra mme , a p a rtn e rs h ip w ith a lo c a l
b a n k h a s b e e n c o n c lu d e d fo r p a y me n t sa n d s a v in g s
P ay m en ts s e r v ic es a r e o p er a ted b y th e C o r r eoAr g en tin o w h ile ad d it io n a l f in an c ia l s e r v ic es a r e
s ep ar a te ly s o ld b y Ban c o d e G alic ia( c o - s h ar eh o ld er in th e Ar g en tin e P o s t C o m p an y )
P F S p ar tn er s h ip w ith a lo c a l Ban k
Administration % of revenues from letter mail
% of revenues from parcels and logistics
% of revenues from financial services
% of income from other services
Brazil 44.0 23.0 5.0 28.0Mexico 95.9 1.1 2.8 0.2Colombia 64.8 24.2 7.8 3.1Argentina 89.0 7.0 1.0 3.0Venezuela 75.1 0.0 0.0 24.9Chile 90.6 3.8 0.0 5.6Ecuador 95.1 0.1 0.0 4.7Dom. Rep, 42.0 5.0 3.0 50.0Bolivia 21.4 2.9 4.9 70.8El Salvador 70.0 10.0 0.0 20.0Paraguay 61.0 11.0 0.0 28.0Uruguay 96.0 1.0 1.0 2.0Costa Rica 78.0 2.0 0.0 20.0Trinidad & Tobago 73.0 4.0 2.0 21.0
71.1 6.8 2.0 20.1Source: UPU Statistics 2001
Traditional letter mail presents the main revenue source, exposed to the risk of decline. Diversification into financial and retail service is a major challenge Revenues from financial services represent only 2% from total postal operator revenues in Latin America.Practice in Europe, Asia and Africa shows that financial services through the post offices provide a revenues stream between 30% and 50% of total revenues, and up to 80% of revenues generated through the retail counters
Latam Posts: heavily dependent on revenues from traditional mail
Post Offices: nationwide networksPost Offices: nationwide networks
Administration Population (mil.)
Post Offices
Nr of inhabitants
per Post office
Brazil 172.4 12520 13,769Mexico 101.8 9882 10,296Colombia 42.8 1332 32,132Argentina 36.2 5363 6,754Venezuela 24.6 424 58,090Chile 15.4 574 26,829Ecuador 12.9 125 103,040Cuba 11.2 1044 10,757Dom. Rep, 8.5 209 40,813Bolivia 8.3 142 58,239El Salvador 6.4 239 26,778Paraguay 5.6 281 20,071Uruguay 3.4 1134 2,963Costa Rica 3.9 126 30,714Trinidad & Tobago 1.3 197 6,599
454.7 33592 13,535Source: UPU Statistics 2001 36835
Post Offices provide nationwide coverage also in rural areas and poor
communities and offer low-threshold access.
Latin America: limited to postal money orders?Latin America: limited to postal money orders?
CountriesPFS
DivisionPFS
SubsidiaryPFS
Partner
PaymentsMoney Orders Savings
ConsumerCredit
MutualFunds
Insurance Internet
Postal Financial Services in the Latin American and Caribbean Region
Argentina
Brazil
Canada
Mexico
US
Cuba
Venezuela
Uruguay
Peru
Nicaragua
Netherlands Antilles
El Salvador
Colombia
Chile
Aruba
Costa Rica
Obstacles in development of financial services through post offices in Latin America
Obstacles in development of financial services through post offices in Latin America
on:
History
Regulatory framework
Consumer behavior
Postal Reform
–Most Latin American countries lack a tradition in Postal (Savings) Banks; in many cases Postal savings banks have failed at an early stage in the last century;
–The (interpretation of the) legal framework prohibits the post offices to provide financial services, or to act on behalf of banks;
–Successive economic crises and hyperinflation have undermined the incentive for the middle and lower income groups to save; Latin American consumers, also those with limited financial means require up-to-date financial products supported by modern technology; –Although postal markets in Latin America have been de facto liberalized, few countries have determined the course of postal reform, liberalization/privatization
Finance
–Postal operators face declining revenues streams, high fixed costs, and difficulties to access finance; high initial investments seem necessary to implement financial services
Drivers for Postal Banking ReformDrivers for Postal Banking Reform
Customers• Increasing sophistication (cards, travel)• International remittances • Older, wealthier (wealth accumulation)• Reliability, Solidity• Convenience and One-Stop Service• Microfinance
Impact:Need for a cost-efficient,
transparent financial services concept for the
mass consumer, supported with a dense physical infrastructurePOSTAL BANKING
Technology• Transparency: margins down• Automated channels: lower costs
possible • E-Commerce/Internet; cross selling
with logistics, transport and communications viable
Financial Sector:•Focus on wealthy consumers through urban branches•On-line banking too sophisticated/expensive•Cheque and credit card based payment systems too costly•Need for alternative channels to reach out to rural areas
Macro economic environment• Different growth and maturity rates• Stability• Open economy
Postal Sector
•Commercialization
•Privatization
•Globalization
•E-Commerce concepts
•Need to optimize RoA on Post Office Network
•Diversification into Financial Services
Banco Postal, BrazilBanco Postal, Brazil
Policy ideas 1996-1997 Feasibility Study 1998-1999 including nationwide
market and opinion research) Pilot with 36 Post offices (April 2000-April 2001) Change of regulatory framework allowing post offices
to become “correspondent”of a bank (March 2001) Public auction “Banco Postal” (July 2001 Bradesco won all 15 licenses (Sept 2001) Contract negotiations and preparations for
implementation Launch of services in 1,000 Post Offices in March
2002; Product offer includes VISA electron card, and current account and deposit account
Subsequently expansion to currently 5,000 post offices
>600,000 accountholders, previously unbanked;average deposit > US$ 600;
Micro finance offered since August 2003; within 2 weeks more than 6,000 contracts
Expansion to pensions, life insurance as “Seguros Postal” expected to be launched in next 6 months.
Further product diversification...
Other initiatives underwayOther initiatives underway
:
Uruguay
Costa Rica
Nicaragua
Cuba
–CorreoBanc; objective to expand from bill collection into offering account based services (payments, savings, ..); 88% of the population does not have a savings account or payments card;
–Costa Rica and Nicaragua have implemented web-based electronic remittance services on-line through post offices; expansion meets legal/institutional obstacles;
–Correos de Cuba have introduced chipcard payment solution and web-based on-line remittances; expansion into deposit-taking and credit prohibited by Central Bank.
Exciting opportunities for Post offices in the LAC regionExciting opportunities for Post offices in the LAC region
On the basis of remittances flows and account-based relations, Postal banking would have the opportunity to offer efficient micro finance solutions providing (micro) finance to foster economic development trough small enterprise developmentAn estimated 60% of the Latin American do not have access to bank accounts, cards. Through their nationwide networks, post offices can complement the existing financial infrastructure and provide access to the unbanked, including rural areas and poor communities.
More than US$ 30,000 million international remittances flow into the Latin American and Caribbean region. The 37,000 post offices across the region currently process less than 0.8% of this flow. With cost-efficient solutions and advanced technology, this clearly presents an opportunity for most of the postal operators through cost-efficient solutions such as Eurogiro and UPU-IFS.
Bron:
PFS Reform DynamicsPFS Reform Dynamics
AUSNZ
IRL
D
NL, B D , N
DK
I
Cash transactions at counters Account based servicesGiro or Savings
Credits
no
Yes
State Intervention/Social Obligations
yes
no
RUS
P
Full range of consumer bankingat post offices
CH
J
CEEPL, CZ, SKROM, BUL
YU
A
US
Brazil
EGY SA
F
GR
AgendaAgenda
Origin and History
International Overview
“Best Practice” profile
Rationale
Development Scenario
Partnership Models
Stakeholders’ Approach and Financing issues
Profile of the Financial Services offered through the Post
Profile of the Financial Services offered through the Post
Customers:Focus on local consumer market and large corporates (employers, utilities, retail chains)
Products:Full range of standard financial products and services
Distribution:Direct marketing approach via multichannel distribution
Institutional:Various options/model, trends towards partnership with fully licensed financial institutions
Consumer: Post (bank) is Different!Consumer: Post (bank) is Different!
Traditional bank
Segmented
High entry
Personal selling
Broad range ofspecialist products
Intransparent
Own branches
Short opening hours/ 5 days
Post(banking): a viable solution for mass financial services
Post(bank)
Mass scale
Low entry
“Anonymous”
Broad range of standard products
Transparent
Post Office with multichannelLong opening hours/ 6 days
Direct Bank
Segmented
High entry
“Anonymous”
Broad range of standard products
Transparent
Internet/Phone
24 hours/ 7days
Growth inaccounts
accountholders
Postal cards/accounts: the gateway Postal cards/accounts: the gateway
Mortgages
Consumer credit
Investment fundsand discount broking
Savings
Payment products
Insurance
Retail Concept Retail Concept
Convenience• Easy access and
low threshold• Standardized
productsCompetitive price• Free (basic) payment
package• Value for money
Credibility• Good, efficient
service• Decent (no fine
print)• Reliable (mail and
IT)
Crystal clear products
• Full basic range• Transparent product
rangecontinuous communication pressure
excellent service qualityintegrated customer approach
++
+
... The account is our ‘shop’ without thresholds, accessible for everybody
Multichannel DistributionMultichannel Distribution
Mass media
InternetPC Based Banking
ATMs
Post offices
Telephone
Post OfficesPost Offices
Multi-purpose service and information shopping “centres”
High technology
Universal counters
Omnipresent, long opening hours
AgendaAgenda
Origin and History
International Overview
“Best Practice” profile
Rationale
Development Scenario
Partnership Models
Stakeholders’ Approach and Financing issues
Rationale for PFS ReformRationale for PFS Reform
In spite of significant obstacles and barriers, there appears to be a strong rationale for developing and introducing the financial service through the postal networks in the Latin American and Caribbean region.
Why ?
Postal Financial Services:
a “hybrid” issue impacting:
• Financial Sector Development
• ICT Infrastructure Development
• Postal Sector Development
Financial Sector DevelopmentStabilization and CohesionFinancial Sector DevelopmentStabilization and Cohesion
PFS Reform can help to strengthen and deepen the financial sector; the use of the wide post office network can help to support financial sector stability;
Channelling the international remittances in a cost-efficient way
Pooling small savings into funds that can be used for national development
‘Banking the unbanked’- Providing access to the financial sector in rural areas, poor communities and senior citizens
Promoting efficient resource mobilisation and resource allocation
Efficiently supporting international payments and trade flows
Promoting efficiency in the payment system, especially for small-value payments and bulk payments
Information Infrastructure Development; Social CohesionInformation Infrastructure Development; Social Cohesion
By building a modern financial service technology infrastructure through post offices, the infrastructure stands a better chance to become economically viable way.
PFS can help and facilitate the e-program undertaken by the government
Linking the population(including the poor, the rural communities, senior citizens) into the global economy and international (financial) systems;
“Closing the digital divide”;
Promoting e-readiness ;
providing public access to Internet and the communications infrastructure;
–e-mail, e-commerce, e-government, e-learning;
–other e-services ;
Postal Sector DevelopmentPostal Sector Development
Most public postal operators strongly feel the impact of global integrators in the express, logistics and mail market. To ‘survive’ postal operators need to improve quality of services, and diversify and broaden the range of services to be able to offer One-Stop-Shopping and to generate alternative sources of revenues
PFS Reform contributes to:
Commercially viable and economically sustainable post office network - providing open and affordable access to basic financial services, information, communication and other consumer services;
Enhanced competitively of the post office network in retail (financial) services delivery
Improved turnover at post offices, optimised utilisation of the fixed assets and staff, and thus improving the RoA ration
Enriching and sustaining the employment at post offices Creation of cross-selling opportunities between postal, retail and
financial services Attracting investments into the development of the post office
network
AgendaAgenda
Origin and History
International Overview
“Best Practice” profile
Rationale
Development Scenarios
Partnership Models
Stakeholders’ Approach and Financing issues
Existing situation – High-end focusExisting situation – High-end focus
High-end marketProfile: payment account with savings accountcredit card and investment account
Poverty line
B&C market Profile: some have savings account,no payment account
D marketProfile: no savings account,no payment account
Competition increasesCompetition increases
Volume
Value
Low
High
Low High
Bank A
Bank D
Bank B
Bank C
Bank E
Challenge – Post Office entering competition from a different segmentChallenge – Post Office entering competition from a different segment
Volume
Value
Low
High
Low High
Bank A
Bank D
Bank B
Bank C
Bank E
Opportunity Opportunity
Volume
Value
Low
High
Low High
Bank A
Bank D
Bank B
Bank C
Bank E
PostOffice
Challenge = Capturing the unbankedChallenge = Capturing the unbanked
High-end marketProfile: payment account with savings accountcredit card and investment account
Poverty line
B&C market Profile: majority has savings account,no payment account
D marketProfile: no savings account,no payment account
Opportunity - “Overlay network”Opportunity - “Overlay network”
Physical network
Electronic network
Services Financial services