Fishing for clients in unusual places

Brazilian banks reel in the unbanked

The arrival of Voyager III on the Amazon river bank is usually a big event in the sleepy hamlet of Belem do Solimoes. The ship has been chugging between Manaus and Tabatinga for four years, carrying merchandise for trading, but also offering financial services by Bradesco bank. It covers the 1,500-kilometer stretch twice a month, carrying foodstuffs… and a bank manager.

“Sometimes there are hundreds of people waiting for the goods to arrive by ship,” says Edmir Jose Domingues, executive superintendent at Bradesco Expresso, the correspondent banking unit of Bradesco. That means swarms of potential banking clients.

Voyager III continues its journey on the Amazon. Photo: Mark Berman/

Bradesco is one of the oldest banks in Brazil and now trails only state-controlled Banco do Brasil and Itau Unibanco in terms of assets. The strategy to fish for clients in unusual places, like the Amazon river or the favelas of Rio de Janeiro and São Paulo, is not exactly new. But it has gained momentum in recent years thanks to the creation of millions of jobs in Brazil, the emergence of a new middle class, and the demand for banking services from a sector of the population that never had access to them before.

Part of the challenge has been to attract this new breed of customers to an environment that is largely unfamiliar to them. “Sometimes people are a bit reluctant to go through the revolving door and all the security checks that exist at conventional bank branches,” says Lucia Helena Cuevas, executive manager of partnership networks at Banco do Brasil, Brazil’s largest bank.

One way to work around this is to open so-called correspondent banking units at post offices around the country. “Access is much easier at a post office,” she says. Banco do Brasil, which started operating the Banco Postal franchise this year, says it has been opening an average 100,000 new accounts per month. The bank hopes to lure 10 million new customers within five years.

At first, these new customers have access to basic services, like an account or a pensioners’ card to co-llect their monthly benefits. But they can also apply for some types of loans with the help of a banking correspondent, which reduces their dependence on informal credit agents, who typically charge extortionate interest rates. The bank also seeks to extend the relationship further. “The idea is to sell them other (financial) products,” says Cuevas.

Originally, Bradesco operated the Banco Postal franchise. Banco do Brasil took it over at the end of last year after agreeing to pay 2.3 billion reais, or more than $1 billion, to exploit the service for five years.

The banks’ main target is a new army of urban consumers. “We noticed that there was a great number on unbanked people in urban centers too,” says Gerson da Costa, a Bradesco manager, referring to people in lower-income jobs like car washers or elevator operators. This has prompted banks to set foot in favelas, like Paraisopolis in Sao Paulo or Cidade de Deus in Rio de Janeiro, in recent years. Bradesco says it’s planning to set up a fourth automatic teller machine at its branch in Paraisopolis, and is also working on a partnership with Casas Bahia, a popular home and electronics appliance store.

Bradesco, which opened 5 million new accounts when it operated Banco Postal, now says it is opening 7,000 new accounts per day through banking correspondents, which are regulated by the central bank as part of its official financial inclusion strategy. (There are currently over 40,000 banking correspondents across the country.)

“We have a very segmented approach. The increase in income has had a strong positive impact on our business,” says Domingues.

Despite efforts in recent years to attract new customers though, there is a long way to go. At the beginning of last year, the Institute of Applied Economic Studies (IPEA), a government think- tank, found that 39.5 percent of Brazilian adults still did not have a bank account. Interestingly, the same survey found that another 39 percent had only had a bank account for five years or less. In 2011, according to the Brazilian Federation of Banks (Febraban), the number of checking accounts reached 92 million, a 3.8 percent increase compared with 2010. Febraban says access to banking increased by 6 percent last year, but it noted less than a third of customers from the lower income rungs owned a credit or debit card. In short, Brazilian banks still have a lot of fishing (and catching) to do.


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