Postal Banking - Financial Services and Post Offices

1. PPoossttaall
BBaannkkiinngg
Financial Services and Post Offices
Inter American Development Bank,
Washington D.C.,
Brown Bag Lunch,
11 September 2003
Hans Boon

2. Agenda
Origin and History
International Overview
“Best Practice” profile
Rationale
Development Scenarios
Partnership Models
Stakeholders’ Approach and Financing issues

3. Origin and History
1800 1860 1880 1980 2002
Postal
Money
Order
s
Postal
Saving
s
Postal
Giro &
Cheques
Postal
banking
Reform and
Revival

4. Origin
Government motives to establish postal savings
and giro institutions:
 to provide secure and solid deposit and money
transfer instruments widely and easily accessible to
the public, government agencies and companies
 to mobilize and pool national financial resources
and utilize the resources for economic development

5. Origin
Typical product features
 State Guarantee on Deposits
 Tax exempt
 Low minimum deposit
requirement
 Available at all post offices
 Limited fragmented product
approach
Typical operational
features
 Owned by Ministry of Finance
or specific fund
 Operated and managed by
Posts
 Not supervised by Central
Bank
 Resources invested in State
Treasury / Gilt-edged titles
 Bypassing Capital and Money
markets

6. Europe in evolution
Partnership Post- Bank
PFS Division of Posts
PFS Subsidiary Company with >50% ownership by Posts
As a phase in the transformation,
Swiss and Italian Posts have
established alliances for specific
product lines (mutual funds,
insurance)
Transformation of
Financial Services into a
bank or an alliance with a
bank is being considered
Creation of alliance
with banks in
consideration or
preparatory stage
Postbank is a
subsidiary of the
Posts
Post Offices are 50%
owned by Postbank (ING)
Originally organized within
the Post
 Trend towards ‘partnership’
between Post and (Post)
bank
–Alliance/ Contract/JV
–Subsidiary
 Significant market share in
payments and savings

7. Europe in evolution
P o s t a l F i n a n c i a l S e r v i c e s i n t h e E u r o p e a n U n i o n / W e s t e r n E u r o p e
C o u n t r i e s P F S
D i v i s i o n
P F S
S u b s i d i a r y
P F S
P a r t n e r
P a y m e n t s
A c c c o u n t s /C a
r d s
S a v i n g s C o n s u m e r
C r e d i t
M u t u a l
F u n d s I n s u r a n c e I n t e r n e t
A u s t r i a       
B e l g i u m       
D e n m a r k       
F i n l a n d   
F r a n c e       
G e r m a n y       
G r e e c e    
Ic e l a n d  
Ir e l a n d      
It a l y       
L u x e m b u r g   
N e t h e r l a n d s       
N o r w a y       
P o r t u g a l      
S p a i n     
S w e d e n   
S w i t z e r l a n d      
U n i t e d K i n g d o m    

8. Central and Eastern Europe
the leap forward
Postal Financial Services Overview in The Central and Eastern Europe
Bosnia &
Hercegovina
Postbank in Restructuring; Raiffeisen Zentralbank
acquired Hrvatska poštanska banka- Mostar
Bulgaria
Bulgarian Postbank (Alico+ EFG-Eurobank) has
been privatised
Croatia
Hrvatska Poštanska Banka (in rehabiltation
process)
Czech Republic
Poštovni Sporitelna (a division owned by CSOB-KBC)
Estonia
Postipank operated as brand allliance between
Eesti Post and Eesti Uhis Pank (Sampo-Finland)
Hungary
Postabank in privatisation process; bids have been submitted
Latvia
Postal Giro Accounting Centre (PNC) as a part of
Latvia Posts and partnership with Hansabank
Lithuania
Contracts with various banks for a limited scope of
services
Macedonia
Poštenska Stedelnica (limited banking license,
majority privately owned )
Poland Bank Pocztowy (66% owned by the Post)
Romania Banc Post (70% private, EFG-Eurobank)
Slovak Republic
Poštova Banka (11% owned by the Post, share of
State Consolidation Fund for sale)
Slovenia
Poštna Banka (45% owned by the Post and 55%
by a State Fund, earmraked for sale to NKBM
Yugoslavia
Poštenska Stedionica- recently licensed as a full-fledged
bank

9. Central and Eastern Europe
the leap forward (Continued)
Countires PostBank Cash Payments
Payments
Accounts/
Cards
Savings Consumer
Credit
Mutual
Funds Insurance Pension
Plans Internet
Albania no postbank
Bosnia &
Hercegovina
Bulgaria
Croatia HPB
Czech Republic
Estonia
Hungary
Latvia no postbank
Lithuania no postbank
Macedonia
Postenska
Stedelnica
Poland
Romania
Slovak Republic
Slovenia
Yugoslavia

10. Bank Branches in CEECs provide 30% of the
level of access compared to EU
Points of Access for Financial Services
Bank Branches- Post offices
Avg. N of People 1309
per Point
29%
71%
4298
CEE Countries EU Countries
Region
% Points of Access - Post Offices
% Points of Access - Bank Branches
Source: Statistical data from: ECB years: 2000 for EU countries and 2001 for CEE countries, UPU year 2000, BIS year 2000;
and ING own research year 2000
In Central and Eastern Europe Bank Branches provide an infrastructure for access to
the financial system that compares with 30% of the physical points of access into the
financial system in EU countries. IN EU Countries 30% of the infrastructure is provided
by post offices.

11. Access to Financial Services through Post
Offices would bridge the gap in the financial
infrastructure in CEECs considerably
Points of Access
Bank Branches- Post Offices
Avg. N of People
Served by 1
Point of Service
1922
55%
45%
1309
29%
71%
CEE Countries EU Countries
Region
% Points of Access - Post Offices
% Points of Access - Bank Branches
Source: Statistical data from: ECB years: 2000 for EU countries and 2001 for CEE countries, UPU year 2000, BIS year 2000;
and ING own research year 2000
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12. CIS; reform issues ahead
Posts: revenues strongly dependent on cash
payments services
 State Savings Bank still dominant position and
pursuing network reduction
 Large amount of cash under the mattress
 “Postbank” concept would trigger reform for the
Post and Communication and the Financial Sector.
Lead products:
–international remittances
–savings mobilization
–mail order credit

13. Africa; reform initiated
 For many Africans, Post
Office only accessible point
of entry into communications
and financial services
 Postal savings and
remittance service have
strong social role
Modernization of postal
financial services and reform
efforts need to be continued
Cross-border cooperation ?
PFS in partnership with Postal (Savings) Bank or
National Savings Bank
3 Post(Savings) banks
have established an
alliance for further
development
PFS or POSB structured and (de facto) managed within the
Post

14. Africa: postal savings
 Postal savings
banks tend to
develop ‘dual’
channel policy;
branches and post
offices
 Synergy
opportunities may
be missed
 Postal ICT
programs,
Telecenters and
reform,
privatization of
Posts and Postal
Banks underway

15. Asia, different models
Model/Typology Countries
Bureau of the Ministry of Posts and
Telecommunications
State Postal Bureau
Japan (Privatisation in 2007 ?)
Korea
China (IPO under preparation ?)
Post Office Savings Bank (as agency of the
Ministry of Finance), operated by the Posts
India, Pakistan
Jordan (Post incorporated in 2003)
Taiwan (Post incorporated in 2003,
privatisation under preparation)
Agent of the National Savings Bank and other Sri Lanka; Malaysia (Privatised postal
operator)
Postbank, as a licensed bank and
subsidiary/partner of the Post
Philippines, Iran, New Zealand, Mongolia
Postal Giro and Money order service (as part of
the Post)
Turkey (Per 1 Sept 2003 Postbank JV with
Citibank)
Postal Money Orders and other cash based
services
Thailand (Partnership with a bank under
preparation)
Lao PDR,
Bangla Desh
Sales of (account-based) financial products and
transaction (processing/routing) agent for many
or all banks
Australia

16. Overview of Latin American Postal Operators
Although postal markets feature strong private players,
private sector participation in public postal operators is very limited.
Colombia
• Administration Postal National (National
Postal Administration) (ADPOSTAL)
• 100% Govt. owned
• Reform options being considered
Ecuador
• Empresa Nacional de Correos
• 100% Govt. owned - Domestic Monopoly
• Privatisation plans stalled
Venezuela
• Instituto Postal Telegrafico (IPOSTEL)
• 100% Govt. owned
Guyana
• Domestic Monopoly
• 100% Govt. owned
Brasil
• Empresa Brasileira de Correios e
Telégrafos
• 100% Govt. owned
• public enterprise connected to the
Ministry of Communications;
incorporation proposed
Uruguay
• Administración Nacional de Correos
• a decentralized commercial service
• 100% Govt. owned; reform underway
Argentina
• Correo Argentino S.A. is a fully
privatized company
• concession holder Grupo Itrón S.A (GI)
• Ownership: – GI 86%; employees 14%.
Bolivia
• Domestic Monopoly
• 100% Govt. owned
• Privatisation plans stalled
Paraguay
• Domestic Monopoly
• 100% Govt. owned
• No privatisation plans
Chile
• Empresa de Correos de Chile (Postal
Corporation of Chile)
• 100% Govt. owned
• Incorporated, privatisation under
consideration
Surinam
• Domestic Monopoly
• 100% Govt. owned
• Commercialisation underway
Peru
• Domestic Monopoly
• 100% Govt. owned
• No privatisation plans
A s p a r t o f t h e 'B a n c o P o s t a l'
p r o g r a m m e , a p a r t n e r s h ip w it h a lo c a l
b a n k h a s b e e n c o n c lu d e d f o r p a y m e n t s
a n d s a v in g s
P F S p a r t n e r s h ip w it h a lo c a l B a n k
L im it e d P a y m e n t S e r v ic e s s t r u c t u r e d w it h in t h e P o s t
P a y m e n t s s e r v ic e s a r e o p e r a t e d b y t h e C o r r e o
A r g e n t in o w h ile a d d it io n a l f in a n c ia l s e r v ic e s a r e
s e p a r a t e ly s o ld b y B a n c o d e G a lic ia
( c o - s h a r e h o ld e r in t h e A r g e n tin e P o s t C o m p a n y )

17. Latam Posts: heavily dependent on revenues from
Administration % of revenues
from letter mail
traditional mail
% of revenues from
parcels and
logistics
% of revenues from
financial services
% of income from
other services
Brazil 44.0 23.0 5.0 28.0
Mexico 95.9 1.1 2.8 0.2
Colombia 64.8 24.2 7.8 3.1
Argentina 89.0 7.0 1.0 3.0
Venezuela 75.1 0.0 0.0 24.9
Chile 90.6 3.8 0.0 5.6
Ecuador 95.1 0.1 0.0 4.7
Dom. Rep, 42.0 5.0 3.0 50.0
Bolivia 21.4 2.9 4.9 70.8
El Salvador 70.0 10.0 0.0 20.0
Paraguay 61.0 11.0 0.0 28.0
Uruguay 96.0 1.0 1.0 2.0
Costa Rica 78.0 2.0 0.0 20.0
Trinidad & Tobago 73.0 4.0 2.0 21.0
71.1 6.8 2.0 20.1
Source: UPU Statistics 2001
Traditional letter mail presents the main revenue source, exposed to the risk of
decline. Diversification into financial and retail service is a major challenge
Revenues from financial services represent only 2% from total postal operator
revenues in Latin America.Practice in Europe, Asia and Africa shows that financial
services through the post offices provide a revenues stream between 30% and 50% of
total revenues, and up to 80% of revenues generated through the retail counters

18. Post Offices: nationwide
networks
Administration Population
(mil.)
Post
Offices
Nr of
inhabitants
per Post
office
Brazil 172.4 12520 13,769
Mexico 101.8 9882 10,296
Colombia 42.8 1332 32,132
Argentina 36.2 5363 6,754
Venezuela 24.6 424 58,090
Chile 15.4 574 26,829
Ecuador 12.9 125 103,040
Cuba 11.2 1044 10,757
Dom. Rep, 8.5 209 40,813
Bolivia 8.3 142 58,239
El Salvador 6.4 239 26,778
Paraguay 5.6 281 20,071
Uruguay 3.4 1134 2,963
Costa Rica 3.9 126 30,714
Trinidad & Tobago 1.3 197 6,599
454.7 33592 13,535
Source: UPU Statistics 2001 36835
Post Offices provide nationwide coverage also in rural areas and poor
communities and offer low-threshold access.

19. Latin America: limited to postal money
orders?
Postal Financial Services in the Latin American and Caribbean Region
Countries PFS
Division
PFS
Subsidiary
PFS
Partner
Payments
Money Orders Savings Consumer
Credit
Mutual
Funds Insurance Internet
    
    
  





 
Arub
a
Argentina
Brazil
Canada
Chile
Colombia
Costa Rica
Cuba
El Salvador
Mexico
Netherlands Antilles
Nicaragua
Peru
Uruguay
US
 
Venezuela










 

 










20. Obstacles in development of financial
services through post offices in Latin
America
on:
History
Regulatory
framework
 Consumer
behavior
Postal
Reform
–Most Latin American countries lack a tradition
in Postal (Savings) Banks; in many cases Postal
savings banks have failed at an early stage in the last
century;
–The (interpretation of the) legal framework
prohibits the post offices to provide financial
services, or to act on behalf of banks;
–Successive economic crises and hyperinflation
have undermined the incentive for the middle and
lower income groups to save; Latin American
consumers, also those with limited financial means
require up-to-date financial products supported by
modern technology;
–Although postal markets in Latin America have
been de facto liberalized, few countries have
determined the course of postal reform,
liberalization/privatization
 Finance
–Postal operators face declining revenues streams,
high fixed costs, and difficulties to access finance;
high initial investments seem necessary to implement
financial services

21. Drivers for Postal Banking Reform
Customers
• Increasing sophistication (cards, travel)
• International remittances
• Older, wealthier (wealth accumulation)
• Reliability, Solidity
• Convenience and One-Stop Service
• Microfinance
Impact:
Need for a cost-efficient,
transparent financial
services concept for the
mass consumer,
supported with a dense
physical infrastructure
POSTAL BANKING
Technology
• Transparency: margins down
• Automated channels: lower costs
possible
• E-Commerce/Internet; cross selling
with logistics, transport and
communications viable
Financial Sector:
•Focus on wealthy
consumers through
urban branches
•On-line banking too
sophisticated/expensiv
e •Cheque and credit
card based payment
systems too costly
•Need for alternative
channels to reach out
to rural areas
Macro economic environment
• Different growth and maturity rates
• Stability
• Open economy
Postal Sector
•Commercialization
•Privatization
•Globalization
•E-Commerce concepts
•Need to optimize RoA
on Post Office Network
•Diversification into
Financial Services

22. Banco Postal, Brazil
 Policy ideas 1996-1997
 Feasibility Study 1998-1999 including nationwide market
and opinion research)
 Pilot with 36 Post offices (April 2000-April 2001)
 Change of regulatory framework allowing post offices to
become “correspondent”of a bank (March 2001)
 Public auction “Banco Postal” (July 2001
 Bradesco won all 15 licenses (Sept 2001)
 Contract negotiations and preparations for implementation
 Launch of services in 1,000 Post Offices in March 2002;
Product offer includes VISA electron card, and current
account and deposit account
 Subsequently expansion to currently 5,000 post offices
 >600,000 accountholders, previously unbanked;average
deposit > US$ 600;
 Micro finance offered since August 2003; within 2 weeks
more than 6,000 contracts
 Expansion to pensions, life insurance as “Seguros Postal”
expected to be launched in next 6 months.
 Further product diversification...

23. Other initiatives underway
:
 Uruguay
 Costa Rica
 Nicaragua
 Cuba
–CorreoBanc; objective to expand from
bill collection into offering account based
services (payments, savings, ..); 88% of the
population does not have a savings account
or payments card;
–Costa Rica and Nicaragua have
implemented web-based electronic
remittance services on-line through post
offices; expansion meets legal/institutional
obstacles;
–Correos de Cuba have introduced
chipcard payment solution and web-based
on-line remittances; expansion into
deposit-taking and credit prohibited by
Central Bank.

24. Exciting opportunities for Post offices in the
LAC region
On the basis of remittances flows and account-based
relations, Postal banking would have the opportunity to
offer efficient micro finance solutions providing (micro)
finance to foster economic development trough small
enterprise development
An estimated 60% of the Latin American do not have access to bank
accounts, cards. Through their nationwide networks, post offices can
complement the existing financial infrastructure and provide access to
the unbanked, including rural areas and poor communities.
More than US$ 30,000 million international remittances flow into the Latin American and Caribbean region. The 37,000 post offices across
the region currently process less than 0.8% of this flow. With cost-efficient solutions and advanced technology, this clearly presents an
opportunity for most of the postal operators through cost-efficient solutions such as Eurogiro and UPU-IFS.
Bron:

25. PFS Reform Dynamics
AUS
NZ
IRL
Full range of consumer banking
at post offices
NL,
B D , N
DK
D
I
Cash transactions at counters Account based services
Giro or Savings
Yes
Credits
no
State Intervention/
Social Obligations
yes
no
RUS
P
CH
J
CEE
PL, CZ, SK
ROM, BUL
YU
A
US
Brazil
SA EGY
F
GR

26. Agenda
Origin and History
International Overview
“Best Practice” profile
Rationale
Development Scenario
Partnership Models
Stakeholders’ Approach and Financing issues

27. Profile of the Financial Services
offered through the Post
Customers:
Focus on local consumer market and large
corporates (employers, utilities, retail chains)
Products:
Full range of standard financial products and
services
Distribution:
Direct marketing approach via multichannel
distribution
Institutional:
Various options/model, trends towards
partnership with fully licensed financial
institutions

28. Consumer: Post (bank) is
Different! Traditional bank
Segmented
High entry
Personal selling
Broad range of
specialist products
Intransparent
Own branches
Short opening hours/ 5
days
Post(bank)
Mass scale
Low entry
“Anonymous”
Broad range of
standard products
Transparent
Post Office with
multichannel
Long opening hours/ 6
days
Direct Bank
Segmented
High entry
“Anonymous”
Broad range of
standard products
Transparent
Internet/Phone
24 hours/ 7days
Post(banking):
a viable solution for mass financial services

29. Postal cards/accounts: the gateway
Growth in
accounts
account
holders
Mortgages
Investment funds
and discount broking
Consumer credit
Savings
Payment products
Insurance

30. Retail Concept
... The account is our ‘shop’ without thresholds, accessible for everybody
Convenience
• Easy access and
low threshold
• Standardized products
Competitive price
• Free (basic) payment
package
• Value for money
Credibility
• Good, efficient service
• Decent (no fine print)
• Reliable (mail and IT)
Crystal clear products
• Full basic range
• Transparent product range
continuous communication pressure
excellent service quality
integrated customer approach
++ +

31. Multichannel Distribution
Internet PC Based Banking
Mass media
Mail
ATMs
Post offices
Telephone

32. Post Offices
Multi-purpose service and information shopping
“centres”
High technology
Universal counters
Omnipresent, long opening hours

33. Agenda
Origin and History
International Overview
“Best Practice” profile
Rationale
Development Scenario
Partnership Models
Stakeholders’ Approach and Financing issues

34. Rationale for PFS Reform
In spite of significant obstacles and barriers, there appears to be a
strong rationale for developing and introducing the financial
service through the postal networks in the Latin American and
Caribbean region.
Why ?
Postal Financial Services:
a “hybrid” issue impacting:
• Financial Sector Development
• ICT Infrastructure Development
• Postal Sector Development

35. Financial Sector Development
Stabilization and Cohesion
 PFS Reform can help to strengthen and deepen the financial
sector; the use of the wide post office network can help to support
financial sector stability;
 Channelling the international remittances in a cost-efficient way
 Pooling small savings into funds that can be used for national
development
 ‘Banking the unbanked’- Providing access to the financial sector
in rural areas, poor communities and senior citizens
 Promoting efficient resource mobilisation and resource allocation
 Efficiently supporting international payments and trade flows
 Promoting efficiency in the payment system, especially for small-value
payments and bulk payments

36. Information Infrastructure
Development; Social Cohesion
 By building a modern financial service technology infrastructure
through post offices, the infrastructure stands a better chance to
become economically viable way.
 PFS can help and facilitate the e-program undertaken by the
government
 Linking the population(including the poor, the rural communities,
senior citizens) into the global economy and international
(financial) systems;
 “Closing the digital divide”;
 Promoting e-readiness ;
 providing public access to Internet and the communications
infrastructure;
–e-mail, e-commerce, e-government, e-learning;
–other e-services ;

37. Postal Sector Development
 Most public postal operators strongly feel the impact of global
integrators in the express, logistics and mail market. To ‘survive’
postal operators need to improve quality of services, and diversify
and broaden the range of services to be able to offer One-Stop-
Shopping and to generate alternative sources of revenues
 PFS Reform contributes to:
 Commercially viable and economically sustainable post office
network - providing open and affordable access to basic financial
services, information, communication and other consumer
services;
 Enhanced competitively of the post office network in retail
(financial) services delivery
 Improved turnover at post offices, optimised utilisation of the
fixed assets and staff, and thus improving the RoA ration
 Enriching and sustaining the employment at post offices
 Creation of cross-selling opportunities between postal, retail and
financial services
 Attracting investments into the development of the post office
network

38. Agenda
Origin and History
International Overview
“Best Practice” profile
Rationale
Development Scenarios
Partnership Models
Stakeholders’ Approach and Financing issues

39. Existing situation – High-end focus
High-end market
Profile: payment account with savings account
credit card and investment account
B&C market
Profile: some have savings account,
no payment account
D market
Profile: no savings account,
no payment account
Poverty line

40. Competition increases
Volume
Value
Low
High
Low High
Bank A
Bank B
Bank D
Bank C
Bank E

41. Challenge – Post Office entering
competition from a different segment
Volume
Value
Low
High
Low High
Bank A
Bank B
Bank D
Bank C
Bank E

42. Opportunity
Volume
Value
Low
High
Low High
Bank A
Bank B
Bank D
Bank C
Bank E
Post
Office

43. Challenge = Capturing the
unbanked
High-end market
Profile: payment account with savings account
credit card and investment account
B&C market
Profile: majority has savings account,
no payment account
D market
Profile: no savings account,
no payment account
Poverty line

44. Opportunity - “Overlay network”
Services Financial services
Electronic network
Physical network