FEBRABAN Research of Banking Technology 2013

FEBRABAN Research of Banking Technology 2013

A healthy, ethical and efficient financial system is a prerequisite for the economic, social and sustainable

development of the country.

The “FEBRABAN Research of Banking Technology” is held for 22

years in order to show to different publics the evolution of the

national banking industry, especially in issues related to technology;

This year, the Brazilian Federation of Banks - FEBRABAN, in

partnership with Strategy& (formerly known as Booz & Company),

continued innovating and furthering research with the goal of providing

new perspectives and reflections on technology in the banking

sector;

GOALS

In this sense, it surveyed, consolidated and analyzed a large set of

indicators showing the effort and commitment of the sector to an

efficient and sustainable financial system that contributes to the

economic development of the country;

GOALS

In 2014, the research encompassed 97% of the banking sector

relative to the total number of branches, also representing more than

90% of total assets of the sector - totaling 18 financial institutions

operating in Brazil;

In addition, the research was complemented with data from other

associations and even international governmental agencies to

incorporate important issues in order to broaden and deepen the

analysis of the data.

+16% per year

6,340

5,640

4,970

4,200

3,520

+12%

2009 2010 2011 2012 2013

The banking market in Brazil continues to grow 2 digits in assets and

linearly on current accounts (6% per year) - banking index also evolved

from 2009 to 2013

Total of Assets of the Banking Sector(1)

[in Billions]

Note: (1) Data from the Central Bank of Brazil regarding the banking sector as a whole

Source: Central Bank of Brazil, Analysis by Strategy&

+4%

+6% per year

83 89 92

51% 53% 97 103 49%

+6%

55% 57%

+4%

2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

The banking market in Brazil continues to grow 2 digits in assets and

linearly on current accounts (6% per year) - banking index also evolved

from 2009 to 2013

Total of Current Accounts(1)

[in Millions]

Banking in Brazil(1)

Active CPFs(2)/PEA (2009-2013)

Note: (1) Data from the Central Bank of Brazil, regarding the banking sector as a whole

Note: (2) Total number of CPFs with active relations disclosed by CCS (Customer base of the National Financial System) of the Central Bank of Brazil.

Source: Central Bank of Brazil, IBGE, Analysis by Strategy&

per year

Number of branches grows in line with the banking, ensuring quality of care -

agencies index by 100,000 customers in Brazil is similar to those of

developed countries

Number of branches, PABs and PAEs(1)

(Absolute total in working – in thousands)

+3%

+3%

Bank

Branches PABs and PAEs

61 61 65 67 68 20 19 21 22 23 41 42 44 44 46

2009 2010 2011 2012 2013

Count Current Per Branch 4.148 4.546 4.319 4.379 4.511

Branch / 100 Thousand Banked 33 30 30 30 30

Adults

Note: (1) The definitions from PAB and PAE from Resolution No. 2,099 from the Central Bank of Brazil, Chapters III and VI, respectively, from Attachment III, must be taken into consideration.

Source: Central Bank of Brazil, PNAD, IBGE, World Bank, Analysis by Strategy&

per year

Number of branches grows in line with the banking, ensuring quality of care -

agencies index by 100,000 customers in Brazil is similar to those of

developed countries.

Number of Branches per 100 Thousand Banked Adults

(2013)

16 10

Current

Account per

Branch

CIN AFS

20

IND

27 22

MEX UK

30

BRA

33

TUR

38

USA

N/A 13,302 9,174 6,312 5,735 4,551 6,060 4,889

Note: (1) The definitions from PAB and PAE from Resolution No. 2,099 from the Central Bank of Brazil, Chapters III and VI, respectively, from Attachment III, must be taken into consideration.

Source: Central Bank of Brazil, PNAD, IBGE, World Bank, Analysis by Strategy&

Branches in regions North and Northeast showed a higher percentage growth from 2009 to 2013 – Central-West increased more in 2013

Number and Penetration of Branches

[in Thousands- 2013]

Penetration: Branches /100,000

economically active people

Note: The penetration of branches is calculated as the quotient between the number of branches over the PEA of a given region. Source: Central Bank of Brazil, IBGE, FEBRABAN Research of Banking Technology 2014, Analysis by Strategy&

per year

Branches in regions North and Northeast showed a higher percentage

growth from 2009 to 2013 – Central-West increased more in 2013


[in Thousands - 2013]

Penetration: Branches /100,000 economically active people


per year



Number and Penetration of branches


Penetration: Branches /100,000 economically active people


per year







Nota: The penetration of branches is calculated as the quotient between the number of branches over the PEA of a given region.

Source: Central Bank of Brazil, IBGE, FEBRABAN Research of Banking Technology 2014, Analysis by Strategy&

per year







Note: The penetration of branches is calculated as the quotient between the number of branches over the PEA of a given region.


per year

North and Northeast regions have the highest annual percentage growth

in the number of branches – Southeast region had the greater absolute

increase in 2013

The percentage increase in the number of branches in the last five years has occurred primarily in the Northeast and North regions;

Last year, the Southeast had the highest absolute growth in branches - about 340 branches- and the Central-West, the largest percentage increase (+6.1%), driven also by the relevance of the agricultural economy; The Southeast, South and Central-West regions have similar levels of penetration of branches, around 25-30 branches per 100,000 economically active people;

The difference in penetration for Northwest and Northeast regions is related to the lower banking in these regions and the profile and frequency of consumption of bank customers in the regions Central-West, Southeast and South.



The coverage of clients via correspondents is representative; their total

number and penetration continue to grow in all regions

Number and Penetration of Correspondents(1)


Penetration: Correspondents/100,000














The coverage of clients via correspondents is representative; their

total number and penetration continue to grow in all regions

















The coverage of clients via correspondents is representative; their

total number and penetration continue to grow in all regions










The correspondents in the country ensure a good coverage of basic banking services in all regions, complementing the role of branches;

In addition, the correspondents in the country have an important social role, enabling greater professionalism of the economy and financial and social inclusion;

The Southeast, South and Central-West regions have similar levels of penetration of correspondents around 350-400 correspondents to every 100,000 economically active people; Due to changes in the regulation of hiring correspondents in the country by CMN Resolution 3,954, from 2011, there was a significant variation in the amount of correspondents between 2011 and 2012.




The volume of banking transactions grows 2 digits, driven primarily by

transactions without financial movement and transactions from internet

and mobile banking. Banking Transactions per Origin

(in Billions)

+14% a.a.

+13%

40.2 6% Mobile

TACC 09-13 +270% +8%

35.7 2%

4% 3%

Correspondents Contact Center

+5% 31.8

4% 10% 4%

Branches

+1%

23.6

5% 4%

16%

12% 31%

31%

28.2 4% 4%

5% 4% 12% 14% 12%

13%

27% 29%

39% 36%

11% 13%

26%

39%

13%

23%

41%

POS

ATM

Internet

+16%

+6%

+23%

2009 2010 2011 2012 2013

Transactions per Active Current Account

2009 2010 2011 2012 2013

283 318 346 367 389

Source: FEBRABAN Research of Banking Technology 2014

The volume of banking transactions grows 2 digits, driven primarily by

transactions without financial movement and transactions from internet and

mobile banking.

Banking Transactions per Origin

With financial movements (in Billions)

Banking Transactions per Origin

Without financial movements (in Billions)

Source: FEBRABAN Research of Banking Technology 2014

Correspondents

Branches

POS

ATM

Internet

Banking

Mobile

Contact Center

Branches

ATM

Internet

The channels have very different profiles on the type of transaction - virtual

channels are even more representative in handling financial transactions

without financial movement

Channel per Type of Transaction

% of the total of transactions per channel and total of transactions [in Billions]

2012 2013

POS 100% 4,8 100% 5,2

Correspondents 93% 7% 1,4 92% 8% 1,3

Branches 75% 25% 4,0 74% 26% 3,9

ATM 49% 51% 9,1 50% 50% 9,4

Internet Banking 20% 80% 14,0 18% 82% 16,6

Mobile Banking 3% 97% 0,81 3% 97% 2,3

Contact Center 3% 97% 1,6 3% 97% 1,5

With Financial Movement Without Financial Movement

Source: Central Bank of Brazil, FEBRABAN Research of Banking Technology 2013

Although internet banking grows in importance for transactions with financial

movement, the branches are still relevant to this type of transaction

Average of Monthly Transactions per Current Account


2009 2012 2013 2009 2012 2013

POS 2,9 4,1 4,2 - - -

Correspondents 0,9 1,1 1,0 0,1 0,1 0,1

Branches 3,0 2,6 2,3 0,8 0,8 0,8

ATMs 3,6 3,9 3,8 3,7 3,9 3,8

Internet Banking(1) 1,8 2,4 2,5 5,6 9,6 10,9

Mobile Banking(1) < 0,1 < 0,1 0,1 N/D 0,7 1,8

Contact Center < 0,1 < 0,1 < 0,1 < 0,1 1,3 1,2

1)Calculation performed based on the total of active current accounts on the banking system, and not on accounts with enabled internet or mobile banking

– in such a case we’d have the following profile:

- Internet Banking (2013): with movement = 6,2 / month; without movement = 26,9 / month

- Mobile Banking (2013): with movement = 0,9 / month; without movement = 15,8 / month

Source: Central Bank of Brazil, FEBRABAN Research of Banking Technology 2014

In 2013, there was the consolidation of the importance of transactions via

internet and mobile banking, which is also reflected in the types of banking

transactions

Users Behavior

(% of the Sum of the Volume of Transactions)

Comparison between Modalities

(% of the Volume of Transactions)

1. Transfer vs. Deposit

Transfer

Deposits

2. POS vs. Withdrawal

POS Withdrawal

3. Credit Hiring for Individual

Non-Attendance

Internet Banking and Mobile Banking Other Channels (Branches, ATMs and Contact Center)

POS + Correspondents

Attendance

Source: 1) Hiring credit considers only transactions held at branches. Non-Attendance considers all other channels

Source: FEBRABAN Research of banking Technology 2013

Internet Banking recorded a strong growth in recent years with strong

relevance of financial transactions without financial movement – the

ones with financial movement also grow

Accounts with Internet Banking

(in Millions)

TACC 09-13

+14% +19% +25%

per year

+23%

16,6 12,5 14,0 +18%

20.8 25.3

31.4 37.0 41.8

+13% 7,3

5,5

10,0 2,6 2,8 3,1 1,8 2,2 13,6

7,8 9,9 11,3

2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

25% 29% 34% 38% 40%

352 397 398 379 397

% of Accounts with Internet Banking Annual Transactions in Internet Banking

per Current Account with Internet Banking


Source: FEBRABAN Research of Banking Technology 2013, Ibope

Transactions in Internet Banking

(in Billions)

per year

Transactions via mobile banking continue to increase exponentially, and

banks continue to bet in the platform

Accounts with Mobile Banking

(in Millions)

Transactions in Mobile Banking (in Billions)

2.338 80 823

2

% of Accounts with Mobile Banking Annual Transactions in Mobile Banking

per Current Account with Mobile Banking


Source: FEBRABAN Research of Banking Technology 2013, Anatel, IBGE, Analysis by Strategy&

per year per year

With the increase of use of this channel by users, banks are increasingly

investing in applications, both internationally and in Brazil

International Examples

The accelerated penetration of smartphones in all social classes also

helps the growth of transactions by electronic means

Penetration of Internet and Smartphone

(% of the population total)

100%

80%

60%

40%

20%

0%

Penetration Internet

31%

Penetration Smartphone

1%

’07 ’08 ’09 ’10 ’11

USA GER FRA UK

Convergence Zone

52%

27%

’12 ’13E + 5 years

Penetration of developed economies

today

80-85%

75-80%

Current level of countries with greatest

smartphone penetration

Korea UK USA

Norway EAU

+10

years

Source: World Bank, International Telecommunication, Union, World Telecommunication/CT, Cetic, IPC Target, Analysis by Strategy&

The number of ATMs maintains the constant growth in recent years

(2% annually), while transactions per terminal grew at higher rates

in the last 5 years (5% per year).

Total of ATMs in Brazil

(in Thousands)

Source: FEBRABAN Research of Banking Technology 2013, FMI, Analysis Strategy

per year

The trend for higher concentration of functions per ATM allows for increased

and better use level of each terminal, Brazil is one of the countries with

the largest number of possible operations at ATMs globally

Transactions per ATMs

(in Thousands)


per year

Even though the representativeness of transactions at ATMs declined from

2009 to 2013 on total channels (31% vs. 23%), the absolute number of

transactions grew on average 6% per year during the same period

Total Transactions at ATMs

(in Billions)


per year

Banks also continue investing in accessibility and functionality on ATMs for

customers Base Configuration of ATMs

In Thousands (2009-2013) # of ATMs (Thousands) 200 -

150 -

100 -

50 -

0

156 161

52% 57%

28% 27% 10% 6% 10% 10%

Checks Dispenser

159 162

60% 61%

26% 25% 5% 2% 9% 12%

Cash Dispenser

ATMs with Accessibility (%)

90

166 80

70 60 61% 50

40 30

24% 20

2% 10

13% 0

% of ATM - Accessibility

Terminals for deposits/extracts ATMs Full

34

Note: ATMs Full are equipment with two or more of the following functions: cash dispenser, terminal for deposit and extracts and check dispenser.

Source: FEBRABAN Research of Banking Technology 2013, Analysis by Strategy&

The increasing number of transactions at POS indicate increased

penetration and use of cards

Number of Cards(1)

[in Millions]

+10% per year

27% +9%

20% 800-850

Expenses with card

[% of Family Consumption - 2013]

52% 48%

46%

35%

30%

687 749

565 628

2009 2010 2011 2012

2013E

BRA BRA

2009 2013

AFS TUR UK USA CAN

Note: includes debit cards, credit cards and retail

Source: ABECS, Bank for International Settlements,

FEBRABAN Research of Banking Technology 2014, Analysis Strategy&

The increasing number of transactions at POS indicate increased

penetration and use of cards

Total of POS Transactions

[in Millions]

Transactions per Card [in Number of Transactions]

Note: includes debit cards, credit cards and retail

Source: ABECS, Bank for International Settlements,

FEBRABAN Research of Banking Technology 2014, Analysis by Strategy&

per year per year

Even at a time of slower economic growth, expenses and

technology investments by banks continue to rise

Expenses and Investments in

Technology per Banks in Brazil (in Billions of Reais)

27%

Note: “Other“ includes expenses and investments, including new technologies not classified as hardware, software or telecom by the banks

Source: FEBRABAN Research of Banking Technology 2014, Analysis by Strategy&

Brazil is a major player in the banking technology industry worldwide -

which has become the largest investor in IT among industries

Participation of the Financial Sector on the Total of Expenses with IT in Brazil

(% of the Total Expenses with IT – 2013)

Total expenses with IT in Brazil: USD 61 Bi (2013)

(1) including Banks and Insurance Companies

Source: FEBRABAN Research of Banking Technology 2013, Gartner, Analysis by Strategy&

GER USA

Brazil is a major player in the banking technology industry worldwide - which has

become the largest investor in IT among industries

Expenses and Investments in Technology of

the Financial System(1)

(in Billions of USD - 2013)

Total expenses with IT by the banking industry:

USD 336 Bi (2013)

11,1

(1) including Banks and Insurance Companies Source: FEBRABAN Research of Banking Technology 2013, Gartner, Analysis by Strategy&

A healthy, ethical and efficient financial system is a prerequisite for the

economic, social and sustainable development of the country

FEBRABAN Research of Banking Technology 2013

Key Findings

In 2013, transactions on Internet Banking accounted for 41% of total transactions, the channel being the most representative

The Mobile Banking channel had an exponential growth of 184% over the previous year and now represents 6% of the total number of transactions - the faster penetration of smartphones in all social classes also helps the growth of transactions in this way;

As effect of this trend, in the last year Internet Banking and Mobile Banking have already exceeded the sum of transactions in branches, ATMs and Contact Centers, becoming the preferred channel for transactions by bank customers

In 2013, expenses and investments in technology by banks reached U.S. $ 20.6 billion and, even at a time of slower economic growth, continue to increase (3% in 2013) - part of these investments can be explained by the increasing demand for access to banking services by electronic means;

The tech industry for the banking sector is already approaching investments in developed countries such as France and Germany, and corresponds to 18% of IT expenses in Brazil countries - in line with developed and emerging countries;

The growth of around 20% per year of software expenses is a positive sign for the quality of IT expenses - software also increased its share of the total expenses between 2009 and 2013.

Documents

FEBRABAN Research of Banking Technology 2013