Technological progress brought important strategic and structural changes to the Portuguese banking sector. The objective of this presentation was to analyse the Portuguese banking sector’s evolution trends, considering the contribution of technological innovation to its modernization and development.

1. The Irruption of the Electronic
Distribution Channels and the
New Banking System Scenario
Fernando Ferreira & Pedro Cravo António Freitas
School of Technology and Management Social Faculty of Bahia
Beja - Portugal Brazil
NEWI, Wrexham, North Wales, UK
September 7th to 9th 2005

2. Why have we chosen this subject?
 The last decades showed that technological progress
brought important strategic and structural changes to
the Portuguese banking sector.
 With this in mind, our objective with this paper was
to analyse the Portuguese banking sector’s evolution
trends, considering the contribution of technological
innovation to its modernization and development.

3. Introduction
 Portuguese banks and financial institutions changed
deeply in the last 3 decades because of the increasing
use of ICT.
 Internet Banking has been responsible for a total
redefinition of the distribution services, creating a
highly competitive environment.

4. Introduction (cont.)
 Technological innovation turned banking services
into a complex market, where the frontier between
financial services can no longer be easily
distinguished (e.g. banking ↔ insurance).
 This led to the creation of important economic
groups that offer all kinds of financial services
transforming the traditional distribution channels.

5. Questions
 To what extent can technology increase the
competition level between financial institutions?
 Can it create or destruct competitive advantages?
 What are the trends for the banking sector future?

6. The New Banking System Scenario
 New and more aggressive competitors;
 Globalization;
 Technological innovation;
 The need for human resources with the right skills.
• This scenario poses several difficulties to the
development of the Portuguese banking system.

7. The New Banking System Scenario (cont.)
 Major difficulties for Portuguese financial services:
• ICT use;
• Strategies implementation;
• Introduction of new financial products and services;
• Clients adaptation to the new distribution channels.
 In the last decade, the situation has improved, but
with different speeds in the essential dimensions of
its development.

8. New Distribution Channels
 The importance of ICT resulted in the diversification
of the distribution channels used by banks.
Importance of the distribution channels
5%
12%
Cheques
32% Direct Debits
56% Others
18% Cash Withrawal
27% Balance/Statement Print
6%
Payments
Source: Banco de Portugal, 2001

9. Recent and Future Trends
 Traditional distribution channels will suffer
significant disinvestment, as opposed to ICT
investment.
 The financial activity will be led by information
access’ equity power and by the offer of new
financial products and services.
 Business will focus on clients, instead of products.
Thus, clients loyalty will be a critical factor for the
survival of financial institutions.

10. Recent and Future Trends (cont.)
 Products and Services can be easily copied and
improved. This kind of investment doesn’t make
sense any more.
 Banks should focus on clients orientation.
 Multi-channel distribution strategies are arising,
leading the traditional agencies network of most
banks to shrink.

11. Recent and Future Trends (cont.)
 ICT’s use is no longer just simply convenient; it’s
now an important factor of competitive advantage.
 With higher penetration rates, lower costs and several
other advantages, this distribution channel will be
preferred by clients.
 The expansion of this (new) channel strongly
depends on the number of Internet users.

12. Conclusions
 Challenges increase according to clients expectations,
and those increase with the emergence of new
transaction methods based on new technologies.
 The Internet and ICT increment the access to
information, changing consumers behaviour.
 Financial institutions try to fulfil the clients needs and
to do so, they need to make use of new technologies
and adopt a new approach to business.

13. Conclusions (cont.)
 But...
 The majority Portuguese banks recognise the
deficient use of these technologies.
 Eurostat ranks Portugal almost in last place
concerning the number of Internet users.
 The government needs to implement policies that
incentive the use of new technologies, but also that
protect users and prevent them from adopting a self-
exclusion behaviour.

14. Thank you!
Pedro Manuel Cravo
pedro.cravo@estig.ipbeja.pt