Financial Inclusion through the Post Balancing Public Policy Objectives and Commercial Viability

Transcription

1 Financial Inclusion through the Post Balancing Public Policy Objectives and Commercial Viability UPU / AFI Workshop on Financial Inclusion and Postal Banking Bern, 10 November 2009, Hans Boon

2 Rural Post OfficesPortals for Financial Access, Inclusion and Literacy More analysis is needed for public policy and business modeling Close to home In spite of regional differences, postal networks tend to be the densest existing access infrastructures. especially in rural areas. Often not included in data research. Recent research for selected CIS indicates for rural areas a ratio of 1 bank branch compared to 10 up to 25 post offices. Most post offices have a long tradition in serving the un(der) served mass market. In CIS countries payments volumes via the postal networks are comparable to those of the banking sector, in some case > 5 times the entire banking sector. Mail volumes are often (far) too low to justify the dense networks of offices and delivery staff. Access, Inclusion and Literacy are the key issues in poverty reduction strategies and existing postal networks could fill in a gap Page 2

3 Five Forces Analysis: Dynamic Environment Continued need for cost-efficient and innovative approaches in Post Banking, providing countervailing power Financial Sector Focus on wealthy consumers through urban branches On-line banking too sophisticated/expensive Cheque and credit card based payment systems too costly Need for alternative channels Postal Sector Threat of New Entry Competitive Rivalry Transparency: margins down Automated channels: lower costs possible E-Commerce/Internet: cross-selling with logistics, transport and communications viable Commercialisation Privatisation Globalisation Supplier Power Competitive Rivarlry Buyer Power Need to optimize RoA on Post Office Network Diversification into Financial Services and ICT Buyer Power Increasing sophistication (cards, travel), financial literacy Macro Economic Environment Different growth and maturity rates Stability Open economy Migration Threat of Substitution Older, wealthier (wealth accumulation) Reliability, Solidity Convenience and Services

4 Life Cycles in Post Banking 150 years of providing access to transaction banking... Customers/ Transactions/ Balance Sheet 0.75 billion users 2.5 billion users? Innovative models focus around payments, linkages with MFI, MTOs, Mobile 1.5 billion users Postbank (partnerships) Regulated licensed banks under separate management POSB, CCP/CNE, PKO PSK, CEP, CPdA, PSP, RPS etc. State Owned Postal Managed Initiatives outside Financial Sector Extended Life of Legacies + Financial Outreach Innovation Time

5 Historic Model Public finance. outside the financial sector? Page 5

6 Origin and Rationale Relevant in 1861 and 2011? to provide secure and solid deposit for small/micro savers everywhere, anytime and money transfer instruments widely and easily accessible to the public, government agencies and companies to efficiently mobilize and pool national financial resources and utilize the resources for economic development Page 6

7 Origin and key features SCENE Advantages and disadvantages Privileges Restrictions Conclusion State guarantee on on deposits; Company tax exempt; Exclusive Access to to all all postal offices based on on intransparent costing methodology; State commerical support to to process bulk payments from/to government agencies (pensions, tax, social security, civil servants) No extensive risk management; No Central Bank requirements compliance; Closed payment circuit Lack of of commercial flexibility and freedom in in product innovation (new products requiring parliamentary approval )) Lack of of flexible pricing instruments (( cabinet/ parliamentary approval), Asset management (( gilt-edged/long term only) Balance sheet structure: mismatch (on demand liabilities vs vs long-term assests) Inability to to offer competitive, full service to to corporate market Inefficiency/ high cost of of post office network; impact on on image Post Current account lending Civil Servant pay scales incompetitive with market Depending on governance, management and market conditions, the original key features could create an instant success or a troublesome operation

8 Original key features lead to failures or limitation in the SCENE development objectives Symptoms Poor service quality Loss of of market share; less than 3% Increasing dormant accounts High cost; inefficient Losses in in asset management Internal clashes between Post and Postal Savings Bank End of of product life cycle Reasons Lack of of response to to customer needs due to to legal and institutional framework Forced to to finance postal or or public deficit Lack of of business orientation --unstable environment Inadequate investments in in product and IT IT development Lack of of credible partners Conflicting missions (post-bank) Conclusion In many cases and at some stage of development (risk of) failure becomes imminent. This has induced many governments and regulators to review the institutional framework of the postal savings bank.

9 Competition and Deregulation SCENE Issues for Government Intervention: pro and contra Pro Financial sector needs to to be be fully accessible at at affordable prices by by any citizen; Postbank can provide counter vailing power to to consumers and improve efficiency ii Banks not (sufficiently) interested in in (mass) and low-income group/rural communities; MFI are focussed on on credit. Payments system needs to to include all all (also small value) payments flow to to develop efficiently Cons Fair level playing field requires that Postbank is is a financial institution, supervised by by Central bank Postbank participates in in collective deposit insurance for for entire banking sector; Commercial/product flexibility Market Saturation for for financial services does not justify special intervention of of government Unwind postal and financial services Conclusion Change in the institutional framework for the postal savings bank tends to depend on political consensus

10 From Postal Savings Bank to Post Bank Often a long way. A new Kid in the Banking Sector? Central Bank and established banks are not always keen to see a new competiton. How to regulate and oversee the operations in the postal network? What if the new bank is successful and competitive for the mass market? Separating from Post The process of asset and liability separation and the process of establishing a new, transparent accountable relationship is often complicated and time consuming. It often requires a broader set of changes within the Post or postal sector, including the definition of financing the postal USO. Page 10

11 Post Banking as a public-private partnership A demanding challenge to build a matching fit Public sector Cross-sectoral Policy coordination (Finance, Postal, ICT) Regulatory framework Postal regulator for mail operations; Central Bank/FSA for financial services; Postal USO and level playing field competition Transparency and sustainability; separate management and accounting for postal and financial services Corporate Governance and accountability Commercialization/ Public-Private Partnerships Contract relations Capacity Building Technology Private sector Qualified institution(s) (licensed by Central Bank) Institutional strength Strategic long-term commitment (> 7 years) Market understanding and Business case Resources (Marketing, Management, Financial, Technical) and/or necessary capacity building Connection to Interbank Clearing House, and international payments systems Synergy potential MIS Contract relations Exclusive or neutral? Integrated financial services or product supplier? Page 11

12 Result: Different Post Bank Models develop. The Joint-Venture model, with Post as a key shareholder in the Post and the Post Bank being an integrated provider of financial services. Clear division of responsibilities and joint usage of the postal network [several sub options: Post is majority owner, minority owner, or Postbank is co-owner of postal network) The Post Bank building its own branches/centres and moving towards multi-channeling. Post becomes the integrated physical distribution (sales) network for one financial partner, but competes with other channels. Post Bank is small or limited in comparison to Post and Post becomes an integrator in the provision of financial services. Post uses the strength of its brand and develops a complete package via multiple financial partners Page 12

13 New Technologies An extra dimension in the challenges Mobile Money provides threats and opportunities to Post Banks. The next generation will need agents for cashing the SMS message. A new partnership structure between Mobile Operator, Post and Bank? Access to Internet increases and replaces the need for mail and banking agencies. Will take Post Banks and Posts reposition Post Offices as portals promoting access to Internet? Page 13

14 The Post Office in a changing globalised postal world Opportunity and Rationale for Post Banks Partnerships widely differ Financial Services Partnerships Solution? Strategic Partner Add on? Global Integrators Regional and National Dominant Players Marginalised Postal Networks Global integrators develop broad networks of MSME/Mass retail sales points. Simple, easy, often shop in the shop plus limited 24 hours Business Points/Centres Regional players and Dominant National operators restructure their retails networks, focus on franchising, agencts and retail partnerships Marginalised operators retain large networks as their main and last asset seeking diversification and partnerships Page 14

15 Unlocking the Postal Potential Thinking and moving out of the Mail Box Page 15

16 New Business Models to balance the public policy objective to ensure inclusion, access, literacy with transparent and fair competition and commercial viability 1 2 Post repositioned as a Non-Bank Financial Insitution, focus on money transfers, remittances, linked to clearing/settlement systems and agent for other financial services (insurance, savings, credit..) Post with a specialised Financial Institution function (payments/transactions/savings) and linkage with MicroFinance 3 Post as a partner with one or more banks/ FI, under long term contract, concession, or Joint Venture 4 Regional Cooperation between Posts/Postbanks to create economies of scale 5 Postal Corporate Finance leveraged through the (real estate) assets of the postal network Page 16

17 Sending Money.Delivering Money? A key issue in the economic viability of marginalised postal operators and the access/inclusion issue Rural Remittance Supermarkets..? Many of the First Mile Post Offices and Postbanks provide a (very) limited offer to (unbanked and temporary) migrants (regulatory cost) For Last Mile Postal Networks a key opportunity, but uncaptured, to deliver the money home, or at the post office, sent from any point in the world. Migrant Remittances could generate more revenues for the postal operators than current mail operations and initiate or lead the change process of the postal network to a portal network for financial transactions Delivery of remittances at Post Office or via the Postman significantly reduces the (hidden) cost of the remittances, and presents a trigger for development of (new) financial services Page 17

18 From Agenda to Action Planning for the Future of Postal Financial Inclusion Next steps in international cooperation? [Market] Research, Analysis, Diagnosis of the role of Post Banks and Postal Networks and partners, technology needs to be systematically and periodically undertaken; producing benchmarking. rating and a basis for sound practices and standards Knowledge Centre, Seminars and Training for the various segments of stakeholders, ranging from Central Banks, Development Banks, Govt Institutions, Posts, Banks, Insurers and Money Transfer Organisations Think Tank for further business concept development, working across borders, also for regional post bank ventures, bridging gaps between first mile and last mile money remitters Development Fund for Post Banks focussed on institution building, strengthening of postal (retail) networks and ICT open standard solutions 5 International platform or organisational framework to link development, management, local practitioners and stakeholders Page 18

19 Thank you for your attention! Page 19