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In view of the strategic and financial benefits of Internet banking, Brazilian financial institutions have aggressively pushed their online services, making Brazil one of the most developed countries in Latin America in terms of e-banking practices. In the process, they are expanding their customer base and providing opportunities for Internet service providers (ISPs) and telecoms service companies, according to a recent report by Pyramid Research, the Economist Intelligence Unit’s Internet and telecoms consultancy.

Retail banks are at the forefront of e-banking in Brazil. They offer a variety of Internet services to individual and business clients. The key to e-banking success for these institutions is their ability to provide a complete portfolio of banking services online.

The results are significant: up to 24% of some banks’ customer bases registered as e-banking customers, as is the case with Banco Bradesco. Of the top 20 institutions (in terms of assets, accounting for 87% of Brazil’s total banking system), 16 offer e-banking services. Eleven already offer advanced e-banking services, such as brokerage or investment-fund options. Thirteen offer clients some type of banking services over mobile phones or handheld devices (so-called m-banking).

Online readiness of Brazil’s top 20 banks
%

Have websites 100
Provide basic e-banking services 80
Provide m-banking services 65
Provide advanced* e-banking services 55

* Securities investment.

SOURCE: Pyramid Research.

Brazilian e-banking faces two main challenges: increasing the number of people who can access the Internet and persuading customers to carry out transactions online. They are addressing these tasks with the following tactics:

* Free Internet access. Brazilian banks were quick to understand that ready Internet access is crucial for developing an online customer base. Banks were at the head of the free Internet phenomenon that swept Brazil in early 2000. Now that the frenzy has dissipated and most free ISPs have gone out of business or radically changed their business models, banks remain among the few that still provide Internet access free of charge. Most banks have chosen one of two approaches: partnership with a single ISP to provide unlimited access, or partnership with a variety of ISPs to offer a limited number of access hours.

* PC financing. Penetration of personal computers in Brazil is very low (7%), and banks are trying to increase their percentage of clients who can take advantage of e-banking services. Many of the largest banks have earmarked considerable funds for financing the purchase of in 2001.

* Reduced fees. E-banking significantly cuts transaction costs for banks. Some of the savings is passed on to clients. Some larger retail banks drop all fees for online transactions, with the exception of money transfers, which are nonetheless 50% cheaper online than they are at a branch.

* Alternative payment methods. Banks have the advantage of secure financial payment sources — a valuable asset given the serious problem of unpaid bills and the low penetration of credit cards in Brazil — and have been quick to capitalise on this asset to offer alternative payment methods.

* Partnerships. Brazilian banks have established an extensive network of partnerships intended to take advantage of their wide customer base and their ability to guarantee payments. They have forged alliances with mobile telecoms service operators, ISPs and e-tailers to offer diverse client services.

SOURCE: Business Latin America