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E-finance for SMEs in Brazil Antonio C. B. Oliveira Executive Director, Banco Itaú [email protected] UNCTAD, Geneva, October 2001 Commercial Banking in Brazil 170 banks Leading banks are universal banks Large retail banks have an extensive branch network covering the entire country

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e finance for smes in brazil
E-finance for SMEs in Brazil

Antonio C. B. Oliveira

Executive Director, Banco Itaú

[email protected]

UNCTAD, Geneva, October 2001

commercial banking in brazil
Commercial Banking in Brazil
  • 170 banks
  • Leading banks are universal banks
  • Large retail banks have an extensive branch network covering the entire country
  • Banking processes are modern and investment in IT is high and comparable to developed countries
  • Public services bills and taxes are paid at banking branches
  • Service oriented culture
  • Trend is toward consolidation and reduction of the number of banks
  • Highly competitive banking system with incresing presence of global players
top brazilian banks
Top Brazilian Banks

Source:Brazilian Central Bank - billion US dollars

why brazil has a modern banking system
Why Brazil has a modern banking system?
  • Brazilian banks have invested heavily in IT since the late 60’s.
  • High inflation rate was driving the technological development in the banking system
  • Inflation may also be the explanation of the relatively high penetration of banking in Brazil (65% of the population have a banking relationship)
  • Inflation is under control since 1994 and competition is driving IT investment
internet in brazil
Internet in Brazil
  • 5,9m regular home users
  • 11m total number of users
  • 46m projected number of users in 2005
  • 8m e-banking users
  • ISP offer includes free access, low speed paid access and broadband
  • E-commerce still very small but growing
internet banking overview
Internet banking overview
  • Most Brazilian banks are following the “clicks & bricks” strategy
  • Internet used as low cost distribution channel
  • Increasing acceptance of internet banking by both individuals and companies
  • Active promotion of online banking
  • Some banks are entering into strategic alliances with ISP, others are offering free Internet access to customers
sme and e finance
SME and E-finance
  • SME are active users of E-finance in Brazil
  • 30% of Itaú SME customers use E-finance
  • National payment system is essential infrastructure for E-finance
  • E-finance more important for transactions and payments than in credit and loans
payment systems infrastructure
Payment systems infrastructure
  • Brazil has a standard national system to handle all types of payments by individuals and enterprizes
  • This system was the foundation upon which E-finance was able to develop
national payment system
National payment system
  • Seller send invoices eletronically to banks
  • Banks print invoices and deliver them to buyer
  • Buyer can pay invoice on any branch bank in the country or through e-finance
  • Invoices sent to banks for collections are used as collateral to get credit
  • The system is evolving to a completely paperless system in which invoices will be sent by email or presented to the buyer in XML format and paid by e-finance transactions.
clearing system for payments
Clearing system for payments
  • Invoice payments are handled by a national clearing system operated by Banco do Brasil
  • Money transfers between individuals and companies are processed by the same system
  • The system is paperless, very eficient and fully compatible with the Internet banking channel.
e finance services available to sme
E-finance services available to SME

Current account management

  • Obtain balances, statements and other information (browser and e-mail)
  • Transfer money to other accounts
  • Send payment orders
  • Request checkbooks
e finance services available to sme14
E-finance services available to SME

Payment of salaries

  • All employees open accounts in the same bank as the company
  • Salary payments are electronically sent to the bank and credited to employees
e finance services available to sme15
E-finance services available to SME

Collections of receivables

  • SME send electronically all sales invoices to bank
  • Bank print and mail invoices
  • Invoices are paid at any bank branch or by Internet transaction
  • Bank collect payment from clearing system and transfer money to SME
e finance services available to sme16
E-finance services available to SME

Payment of suppliers

  • Invoices sent by suppliers are eletronically sent to bank
  • On or before due date, company authorize on Internet the bank to charge the payment to the current account
  • Bank send payment through the national clearing system
  • Company can manage payment schedules and receive control reports
e finance services available to sme17
E-finance services available to SME

Credit Related Services

  • Credit application submitted electronically
  • After a line of credit is approved by the bank, SME can use the loan via internet transaction.
  • Receivables are electronically sent to bank and used as collateral for loans
e finance services available to sme18
E-finance services available to SME

Expense account management

  • Employees are given magnetic cards
  • From any ATM in the country they can witdrawl advances from company accounts
  • Company can manage amounts and authorize withdrawls
e finance services available to sme19
E-finance services available to SME

Other functions available

  • Mutual funds investment
  • Payment of taxes and utilities bills
  • Credit card related transactions
  • Mobile banking
  • Insurance purchase
  • Buy and Sell stocks
critical factors for e finance development
Critical factors for E-finance development
  • National payment infrastructure as a foundation for E-finance
  • Service oriented culture
  • “Bricks & Clicks” strategy
  • Technologically advanced banking system
critical issues for e finance evolution
Critical issues for E-finance evolution
  • Laws and regulation for digital signatures of loans and other financial transactions
  • PKI infrastructure will be essential for lowering transaction costs
  • Adoption of compatible regulations for E-finance in Mercosur will enable international trade to use same mechanisms already in use for domestic financial transactions
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