Brazil’s Banco Bradesco sees itself as a pioneer of digital banking, due to the very high levels of digital channel adoption by its customers and technology innovations, despite the challenges posed by regulation. Robin Arnfield investigates.
The second largest private Brazilian bank, Banco Bradesco opened a "bank of the future" branch in the JK Iguatemi shopping mall in São Paulo in August 2012 to showcase its vision of the future of banking. The Bradesco Next branch offers biometric ATMs that let customers withdraw cash without using cards or PINs and receive transaction receipts by email. It also provides smartphones that customers can use to learn about Bradesco’s mobile banking services.
Bradesco customers can obtain personalised financial advice from touchscreen-activated digital avatars and talk to human advisors via videoconferencing links. To access the personalised information on the touchscreens, customers need to have previously registered for Bradesco’s biometric ATM access service, and log in using a palm-reader.
"Bradesco is using Bradesco Next to demonstrate banking services that it has developed but not yet launched," says Fabrizio Pinna, a senior executive at Scopus Tecnologia, Bradesco’s banking technology development subsidiary. "For example, Bradesco will launch an application in January 2013 enabling customers to deposit cheques in real time into their accounts by scanning them into an iPhone. Customers can see how digital cheque scanning works by using the demonstration iPhones provided in Bradesco Next."
"We are using Bradesco Next to teach our customers how to use the mobile banking applications we’ve developed," says Luca Cavalcanti, director of Bradesco’s digital channels. "Some of our customers have downloaded our smartphone apps, but don’t really know how to use them."
Services available on the Bradesco Celular mobile banking platform, which supports iPhone, iPad, Blackberry, Android and Windows Phone-based smartphones, as well as Java-based cellphones, include paying utility bills via SMS or by scanning the barcode on the bill into their mobile device. Bradesco customers can use their Bradesco Celular-connected cellphone as a two-factor authentication device for transactions they carry out on other Bradesco channels, by downloading security software developed by Scopus.
Bradesco has a history of being first in the Brazilian banking market. It introduced Brazil’s first credit card in 1970 and launched the country’s first Internet banking service in 1996. Bradesco is also the first Brazilian bank to offer banking on Facebook and to introduce biometric readers enabling its customers to access Bradesco ATMs without needing to enter their cards or PINs. "We are a pioneer in digital banking," says Cavalcanti.
Bradesco, which spent USD2.1bn in IT in 2011, sees technology investments as essential to its expansion plans. But it is not alone among Brazilian banks in investing heavily in technology. According to Brazilian banking industry association Febraban (Federação Brasileira de Bancos), Brazilian banks increased their investment in technology from BRL14.1bn (USD6.96bn) in 2009 to BRL16.1bn (USD7.95bn) in 2010 and BRL17.9bn (USD8.84bn) in 2011.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataDigital transactions
According to Bradesco, 8 million out of its 65 million customers only used digital channels – ATMs, Internet banking, mobile banking and call centres – in the three months to 31 July 2012. "91% of Bradesco customers’ total transactions are carried out through digital channels," Cavalcanti says.
Internet banking accounts for 50% of total transactions, followed by ATMs with 30%, call centres with 7%, mobile banking with 4%, and branches with 9%. Bradesco customers carry out a daily average of 9.9m web banking transactions, 5.7m ATM transactions, 1.3m call centre transactions, and 1.2m mobile banking transactions.
In the seven months to 31 July 2012, total digital customer transactions rose by 22% to 3.7bn compared to the year-earlier period, Bradesco says. Mobile banking transactions rose from 42m a year earlier to 163m, while consumer and business internet banking transactions rose to 2.03bn from 1.59bn, and call centre transactions from 231m to 281m. However, ATM transactions fell from 1.18bn to 1.23bn.
"Mobile banking is really taking off at Bradesco," says Cavalcanti. "In September 2012 alone, the number of Bradesco mobile banking transactions surpassed the number of call centre banking transactions. We had 42m call centre transactions and 42.7m mobile transactions in September 2012, and in October 2012, we expect to have 45m mobile transactions. Our personal and business Internet banking transactions grew by 26% year-on-year in the nine months to 30 September 2012 to 2.6bn, with a value of BRL2.9 tn. The launch of Bradesco’s F.Banking Facebook banking service in April 2012 really helped to expand our Internet banking transaction volumes. As of October 2012, we had 100,000 F.Banking users."
As at October 2012, Bradesco clients could only view their account statements and balances, transfer funds between accounts, and pay bills due to Bradesco via F.Banking. Bradesco stresses that, although its customers use Facebook as the front-end, all their transactions take place within the bank’s secure Internet banking system, and no information is stored on Facebook.
Online market research firm eMarketer estimates that the number of Facebook users in Brazil will grow from 41.5m in 2012 to 60m in 2013.
High adoption
"The level of digital channel adoption by Bradesco’s clients is outstanding," says Ed O’Brien, director of Mercator Advisory Group’s banking channels advisory service. "In other countries, having 50% of total transactions take place through digital channels would be seen as impressive. But I am not surprised by the level of digital channel adoption by Bradesco clients. Brazil is a very forward-looking market for payments and banking. It has a very robust banking system, and local banks are very open-minded about the future of banking."
"Other Brazilian banks are also demonstrating high levels of electronic channel adoption," says Neil St Germain, a director at US consultancy Bank Solutions Group. "The reason for this is the convenience that mobile and Internet banking offer. Like banks in other markets, Brazilian banks have been integrating their various channels so that customers experience seamless transactions. What you start on the Internet channel, for example, can be finished on another channel. So, if an Internet transfer fails to go through, you can phone the call centre, and the agent will see the transaction you had begun and help you complete it."
"Brazilian banks’ ATMs offer a very high number of different services, as the banks want to take customers out of their teller lines," says Pinna, "So their ATMs need to offer the same types of services that the tellers do, for example, payment of taxes and utility bills, renewal of driver’s licences, insurance policy sales, and prepaid cellphone top-up. For example, you can carry out 500 different types of transaction at Bradesco’s ATMs."
Government-controlled Banco do Brasil, the country’s largest bank, says that 32% of its total customer transactions take place at ATMs, 40% via Internet banking and 1% via mobile banking. A September 2012 article in Diario Comercio Industrio quotes Alexandre de Barros, technology vice president at Itaú Unibanco, Brazil’s largest private bank, as saying that in the last four years Itaú has seen Internet banking transactions grow by 159% and ATM transactions grow by 40%. However, in the last two years, mobile banking transactions grew by 788%, de Barros told the Brazilian newspaper.
According to a survey of Brazilian banks by Febraban, mobile banking transactions on smartphones and tablets in Brazil rose by 50% in 2011 compared to 2010. Febraban says that the number of chequeing accounts accessed by mobile devices rose from 1.3m in 2009 to 2.2m in 2010 and 3.3m in 2011.
Febraban says Internet banking transactions grew by 20% year-on-year in 2011, to account for 24% of total Brazilian banking transactions. It predicts that mobile banking will grow by 50-70% over the next five to seven years, until it has become as popular as Internet banking. "I think Febraban’s forecast is realistic," says St Germain.
Biometric ATMs
Bradesco launched its first biometric ATMs in 2007, using Fujitsu’s PalmSecure readers which scan users’ palm veins. Since July 2011, Bradesco customers have been able to withdraw cash from the bank’s biometric ATMs without needing to enter their PIN, just by using their card and the biometric reader. In September 2012, Bradesco saw 32m biometric transactions at its ATMs.
"By November 2012, we will have upgraded 90% of our 35,223 ATMs to biometric technology," says Cavalcanti. "During the first half of 2013 we will upgrade the remaining ATMs to biometrics. Already, all our ATMs in the states of Rio de Janeiro, Pernambuco, and São Paulo are biometric-enabled."
Cavalcanti says that half of the 11,300 off-premise ATMs belonging to the Banco24Horas inter-bank ATM network are biometric-enabled. Under an agreement with TecBan (Tecnologia Bancária), Banco24Horas’ owner, Bradesco customers are able to use Banco24Horas ATMs.
By October 2012, 10m Bradesco customers were registered for, and were using, biometric ATM access, Cavalcanti says. "From November 2012, we will offer biometric ATM access without requiring cards or PINs, and will roll this feature out to all our ATMs by June 2013," he says. "Since August 2012, we have been piloting cardless access to our biometric ATMs in Bradesco Next, and it has been working better than we expected. In the first two months, there were 2,000 cardless biometric ATM transactions."
ATM-sharing
In February 2011, Bradesco, Santander do Brasil, and Banco do Brasil signed an agreement to share their off-premise ATMs. According to Reuters, the agreement covers 11,000 ATMs owned by the three banks in locations such as supermarkets and airports.
"There is a growing tendency for banks to share ATM networks in Brazil," says Pinna. "This means that, instead of multiple banks running competing ATMs in the same non-bank location, they can share a single ATM, which reduces the cost of their ATM estates."
In June 2012, Scopus launched ATM Multibanco, an Internet Protocol-based software platform designed to facilitate ATM sharing by different banks. "We developed ATM Multibanco because there are technological challenges in integrating the banks’ different ATM software programs in the same ATM," says Pinna. "Using ATM Multibanco, a bank can display its own customer interface on a shared ATM’s screen. This means that, when a Bradesco customer, for example, uses a shared Santander ATM, they see a Bradesco interface. Banks can also use ATM Multibanco to personalise the ATM screen and provide marketing offers for each customer."
ATM Multibanco includes an NFC capability, which means that a customer could initiate an ATM transaction on their NFC-enabled smartphone, while remote from an ATM, and then complete the transaction at an NFC-enabled ATM. Pinna says that Bradesco has 14,000 contactless ATMs supplied by NCR, which have the capability to accept NFC transactions.
"We have been piloting ATM withdrawals using contactless debit cards in Bradesco Next," says Cavalcanti. "We have also developed a platform for NFC-enabled smartphone ATM withdrawals. Before we launch our NFC-enabled smartphone ATM service for our general customer base, we will let customers try it out exclusively in Bradesco Next."
In July 2011, Scopus acquired a 49% stake in NCR’s Brazilian manufacturing subsidiary, NCR Manaus, and, at the same time, Bradesco committed itself to buying 30,000 NCR ATMs over the next five years.
Smartphone cheque deposit
Under current Brazilian banking regulations, customers are required to deposit paper cheques at their bank, even if the bank offers a smartphone-based remote deposit capture application. "We want to use the smartphone cheque deposit application we will launch in early 2013 to convince the government that it needs to change the law," says Cavalcanti. "Our aim is to prove that smartphone cheque deposit works very well and that customers shouldn’t be required to keep paper cheques. But, to achieve this goal, we need to get a lot of people using our smartphone cheque deposit service."
Scopus developed the software for Bradesco’s iPhone cheque deposit service, and is also planning a version for the Android 2 platform. "Our software generates an image of the cheque, and carries out electronic authentication to prove the customer’s identity," says Oscar Dantas, a manager in Scopus’ Innovations Division. "It also reads the OCR codes on the cheque and sends the information to the bank."
Dantas says that Bradesco and Scopus are working with the Brazilian regulators to persuade the Government to change the law on cheque imaging. "When Bradesco launches its smartphone cheque deposit service, until the law changes, it will have to provide various options for customers to send cheques to the bank," he says. "One option would be to provide a collection point in a shopping mall, where customers can drop off their scanned cheques for collection via a courier."
Dantas says that, when Brazilians pay cheques in at a branch, there is a delay of one to two days while the funds are frozen. "The idea with smartphone cheque scanning is to deposit the funds in real-time into the customer’s account," he says. "Banco Central do Brasil, the Brazilian central bank, is very supportive of plans to move to cheque image scanning, as it wants to improve the flow of money between accounts. Moving to smartphone cheque scanning will very significantly improve the time needed to process cheques."
"Febraban is working to introduce cheque remote deposit capture in Brazil, and I think a law permitting paperless cheque deposit could be introduced in Brazil in 2013," says Romeo Gonçalez, Latin American sales director at Panini Brazil, a cheque capture technology firm.
According to Banco Central do Brasil, 1.67bn cheques were written in Brazil in 2010, worth a total of BRL2.68tn, compared to 1.8bn cheques in 2009, amounting to BRL2.5tn, and 2.5bn cheques in 2005, amounting to BRL2.2tn. The decline in the number of cheques is due to growth in payment cards usage. According to Febraban, the number of credit, debit and store cards in Brazil rose from 183m in 2002 to an estimated 687m in 2011.
