In this third post in the series on Brazil, we discuss another recurring issue about the agent business in Brazil. Read our first two posts on Brazil here.

In a country where agents have existed for close to 10 years nationwide, we would expect that by now banks would have found business reasons to share agents. From a consumer perspective, it is clearly attractive to be able to access banking services for multiple providers at a single agent. Yet agents in Brazil are still exclusive to banks and branded exclusively. Regulation in some markets requires agent exclusivity, but that is not the case in Brazil which makes this largely a business decision. After all these years, why hasn’t it made business sense to banks to share agents? Why haven’t retailers and agent companies struck partnerships with multiple banks and been more aggressive as they have in Mexico?

Does the new Elo brand indicate future plans to share agent networks?

It is important to note that there is already “sharing” of agents at some level. Credit agents are already shared between the small and medium banks, like Banco Cacique and Banco BMG, which specialize in offering payroll-consigned loans. Sharing credit agents turns out to be an attractive situation for these banks which often don’t have bank branches. New regulation recently restricted tiering for these types of agents — you can only outsource one level — but that will not stop the sharing (it should decrease however, the actual number of agents). Transactional agents, on the other hand, while exclusively branded and contracted with one bank can handle transactions for multiple banks. Just as it is with interoperable ATMs, transactional agents of one bank can process boletos (see here again on background) of another bank with differential charges. At least when it comes to processing boletos, which as discussed in an earlier post cover a range of payment transactions and are most likely 70%+ of transactions at agents, there is some form of interoperability at agents. 

But beyond this sharing there has been no interest or movement from banks, agent companies or retailers to have co-branded agents or to create a different customer experience. Large banks such as Banco do Brasil, CAIXA and Bradesco sign exclusivity agreements with their agents and agent managers. Agent managers appear to be satisfied dealing with one bank. Banco do Brasil has relationships with 50+ agent companies and those companies in turn appear content with getting a piece of the action from one bank. That may explain in part why there hasn’t been consolidation between these companies in Brazil.

Yet there are reasons to think that banks will combine efforts with agents. As we mentioned above, a number of factors may restrict the role of agents to purely a teller function which may make it easier for banks to share a point. The new regulations have also prohibited banks from branding transactional agents, removing any visible markers of exclusivity. Three of the largest banks — Bradesco, Banco do Brasil and CAIXA — continue to strike partnerships and share infrastructure. They have agreed to share their ATM networks, they have created the card brand Elo, and Bradesco and Banco do Brasil now co-own the Cielo acquiring network. It is possible they could also share agents. In fact, one possibility is a basket of financial services under the Elo brand available across the agent networks of all three banks. Perhaps Bradesco customers will be able to transact at Banco Postal locations even if the new JV now belongs to Banco do Brasil.

The bigger question mark looms over traditional consumer goods retailers, like Casas Bahia (originally featured in C.K. Prahalad’s Bottom of the Pyramid book) and Magazine Luiza. In markets like Mexico and South Africa where retail chains are as developed as in Brazil, retailers have found benefits to their core business and new revenue opportunities from getting involved in banking. This has not happened yet in Brazil and it remains an opportunity worth exploring.

- Kabir Kumar & Yanina Seltzer