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JOINT ECB-MNB CONFERENCE

Explore the evolution of the Brazilian payment system towards a "less cash" society, focusing on key initiatives, challenges, and drivers identified by the Central Bank. Discover strategies to promote financial inclusion, reduce shadow economy activities, and enhance payment efficiency.

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JOINT ECB-MNB CONFERENCE

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

  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. 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. 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. Means of paymentUser’s behavior

  6. Usage of access channelsVolume of transactions

  7. ATM terminalsInternational scenarios

  8. POS terminalsInternational scenarios

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

  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. Brazilian retail payment system • 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

  12. From a cash-based to a less cash society Challenges • 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

  13. From a cash-based to a less cash society Drivers • 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

  14. From a cash-based to a less cash society What can the Central Bank do • 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

  15. From a cash-based to a less cash society What has the Central Bank done • 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)

  16. From a cash-based to a less cash society What has the Central Bank done (cont.) • 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

  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. Daso M. Coimbra Departmentof Banking OperationsandPayments System daso@bcb.gov.br +55 (61) 3414-1340

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