Case 2: Using Point of Sale (POS) Terminals

Vital Savings Statistics: Caixa Economica Federal, Brazil (US$)1/ Type of institution Development Bank Number of deposit accounts 39,220,809   Demand deposits 3,334,029   Term deposits 19,699,379 Average savings account (for individual savers) $ 827   Demand deposits 830   Term deposits 514 Total value of savings($) 25,127,808,067   Demand ($) 24,813,108,953   Term($) 251,346,947 Total number of borrowers n/a Loan portfolio($) 20,044,728,088 Percentage of rural/urban clients n/a Number of branches (*) 2,400 (*) Total branches plus Caixa's correspondents = 18,317. Data as of June 2006

Technique:
Using Point of Sale (POS) devices based in lottery outlets and other commercial establishments to expand an existing network.

Takeaway:
Under the right circumstances, implementing POS terminals can be more cost-effective than creating new branches.

Results:
In three years after it began POS implementation, Caixa opened more than 1 million "Caixa Facil" accounts. It only took Caixa one and a half years to extend its network to every single municipality in Brazil.

Case:
Caixa Economica Federal is the main federal government bank in Brazil, initially created in 1861 to promote universal access to financial services in Brazil. It holds the traditional responsibilities of a development bank, such as investing in urban infrastructure projects and providing real estate loans, as well as providing financial services to the general public, including a full range of savings accounts.

In December 2000, Caixa launched a program to extend its network in order to reach customers in virtually every district of the country. Instead of opening branches, Caixa decided to build a network of 'banking correspondents': lottery outlets and retail stores equipped with a point-of-sale (POS) terminal that could offer a full range of banking and payment services. The goal was to reduce the maximum distance between customers and a bank correspondent to two or three kilometers. As of 2005, Caixa had more than 12,000 POS outlets present in all of the country's 5,562 municipalities and aims to increase its network to 20,000 correspondents by the end of 2007. At the moment, close to 45% of all of its banking transactions are handled at POS outlets.

The banking correspondent model implemented by Caixa is technology-intensive. It requires a POS card-reader, a barcode scanner (used for bill payment transactions) and a personal computer. Some correspondents connect to the network through a dial-up connection and others use hi-speed satellite connection. Set-up costs are higher for satellite connections than for dial-up ($2,800 vs. $2,000 respectively), but monthly charges are lower ($40 vs. $80). By contract, opening a new branch can cost up to $400,000 - making the financial advantages of establishing correspondents obvious.

The spread of POS outlets round the country and the introduction of a simplified current account called "Caixa Fácil" are having a positive impact on savings. "Caixa Facil" accounts can be opened at any Caixa correspondent using an identification card, tax file number, and residence documentation. It allows up to four withdrawals and four balance enquiries per month at no cost. As of June 2006, Caixa had opened about 4.4 million new accounts with an average balance of $45.50.

Compared to its peers, Caixa is a market leader holding 30% of market share, while its closest competitors Banco Postal and Banco Popular hold 12% and 10%, respectively. Other banks have followed Caixa's model and opened POS correspondents round the country, but Caixa holds the largest retail network. Caixa has also strategically installed correspondents in very small towns with neither banks nor post offices. Today, 11% of Caixa's POS correspondents are in rural/remote areas.

In rural or urban areas, one key element of Caixa's model is the selection of the retail outlet where the POS will be installed. Once the retailer is chosen, Caixa provides all the equipment, training and contracting. The commercial establishment provides a staff person, who manages the device and handles the transactions, which usually take about five seconds to process: the client swipes the card, enters a PIN, and requests/gives the amount to the attendant. The establishment then benefits from increased traffic in its establishment, which usually leads to more business.

In sum, Caixa's model is an example of how the transaction costs of savers can be significantly reduced with the use of technology. Caixa's account holder's can deposit at an outlet or retail store that is considerably closer to them than a bank branch and the transaction is transparent and little time consuming. The introduction of Caixa Facil has been an important complement to Caixa's POS model in facilitating access to financial services in Brazil, resulting in an important increase of account holders.