2019 FEBRABAN Banking Technology Survey...Whether it is in a reconfigured bank branch or through a...

2019 FEBRABAN Banking Technology Survey

C O N D U C T E D B Y

FEBRABAN

FEBRABAN – Brazilian Federation of Banks is the main entity representing the Brazilian banking sector. It was

founded in 1967 in the city of São Paulo for the purpose of improving the financial system and its relations with

society and contributing to the economic, social and sustainable development of Brazil. The Federation’s goal is

to represent its members at all levels – the Executive, Legislative and Judicial branches, and entities representing

society – enhance the regulatory framework, aimed at continual improvement of production and reduce risk

levels. It also focuses its efforts on increasing the public’s access to financial products and services.

Deloitte

Deloitte is a global leader in auditing, consulting, financial advisory, risk management, tax consulting and related

services. Our network of member firms, present in more than 150 countries and territories, serves four out of

five organizations listed by Fortune Global 500®. Learn how Deloitte’s 286,200 professionals positively impact

our clients at www.deloitte.com.

http://www.deloitte.com

2019 FEBRABAN Banking Technology

Survey

C O N D U C T E D B Y

4

Introduction

Introduction

The FEBRABAN Banking Technology Survey, conducted by the Brazilian Federation of Banks in partnership with Deloitte, arrives in its 27th edition in 2019, once again tracing an overview of investments and trends in technology for the financial sector.

In the previous editions of our study, we observed a consistent movement to strengthen

mobile banking, which, year after year, increased its reach and relevance in client bank-

ing operations. This time, we have identified that mobile banking has achieved another

important milestone: the performance of financial transactions, such as payments of bills

and money transfers – including Credit Order Document (COD) and Electronic Funds

Transfer (EFT). The fact that clients are prioritizing the mobile phone to perform these

transactions is an indicator of the confidence they place in banks and that financial insti-

tutions are on the right track in offering solutions that combine ease of use and security.

Banks are complex and heavily regulated structures, but they are also in the daily lives of

people and act side by side with other sectors in the forefront. Innovating without put-

ting this structure at risk is a challenge that financial institutions are embracing, applying

what is most advanced in terms of technology and considering the behavior of their most

valuable asset: the client.

The resources invested by financial institutions in cybersecurity, analytics tools and ar-

tificial intelligence have met the needs of clients. Examples are the leap of interactions

through chatbots and the greater offer of products and services in digital channels.

Whether it is in a reconfigured bank branch or through a digital experience in a mobile

application, the essence is the same: to ensure that the client has access to quality servi-

ces, with the agility and dynamism that the contemporary world demands.

To occupy a space in the mobile device is also to occupy a space in people’s lives. Stan-

ding side by side with the most commonly used tools – such as communication, work and

leisure – is an honor and also a responsibility for financial institutions. Technology is not

only a benefit in itself: its effect is realized when there is a purpose in its application, as

well as synergy with the other elements that make up the market and business context in

which the banks are inserted.


5

Conducting this study each year offers us a valuable opportunity to reflect, based on con-

crete data, on what is influencing the paths of the financial sector in Brazil and the rela-

tionship of clients with banking services. Sharing these results and insights with the mar-

ket is a key step in further strengthening this important industry.

Gustavo Fosse Sergio BiaginiFEBRABAN Sectorial Director of

Technology and Banking Automation

Deloitte Brazil Financial Services

Industry Lead Partner

SummaryExecutive summary 6

The evolution of channels: mobile banking consolidates 9

Digital accounts: the bank even more accessible to the client 21

Investments and expenses: technology at the user’s fingertips 27

Emerging technologies: the bets from the banks 31

Channels in transformation: physical and digital complete each other 37

Banks 4.0: Trends for the future of financial institutions 41

6

1

4 Points of sale growth strengthens client behaviorIn addition to mobile banking, the only channel presenting increase in the composition of

transactions was that of points of sale. The transactions carried out by this channel in the

retail market exceeded, in volume and in participation, financial transactions made through

the traditional channels. Following a worldwide trend, “credit and debit devices” became

more widely used in retail and service establishments, and clients became accustomed to

the convenience of paying via card , even for small purchases of their day-to-day routines,

decreasing the number of transactions with cash.

3 Payments and money transfers stand out among mobile transactionsWhile the volume of bill payments performed via internet banking remained at the same

level of 1.5 billion, the number of transactions carried out via mobile has almost doubled to

1.6 billion. Thus, the mobile phone has surpassed internet banking in client preference for bill

payments and bank transfers (including COD and EFT).

2 Mobile banking gains strength among financial transactionsFinancial transactions via mobile grew 80% in 2018 compared to 2017, maintaining the

channel’s upward trend for payments of bills, money transfers (including COD and EFT) and

investments. In 2017, 1.7 billion financial transactions were carried out via mobile phone

– about half of the 3.5 billion transactions of this type made through computer. In 2018,

3 billion financial transactions were performed via mobile, close to the 3.9 billion financial

transactions carried out via internet banking in the same period.

Digital channels drive growth in banking transactionsThe ease of use, security and convenience offered by the digital channels made banking

transactions to once again record a consistent and significant growth. Six out of ten banking

transactions are already carried out by mobile application or internet banking. In 2018,

the major driver of the increase in the number of operations was again the mobile phone:

while the growth of banking transactions in general was of 8%, the jump in the number of

transactions via mobile banking was by 24%. The share of mobile phone transactions of total

banking transactions increased from 35% in 2017 to 40% in 2018.

Executive summary


7

5

6

7

Clients adhere to digital accountsIn 2018, 2.5 million accounts were opened via mobile – an increase of 56% compared to

2017. The number of accounts opened via internet banking also jumped from 26 thousand

in 2017 to 434 thousand in 2018. The growth in the offer of digital services is a reflection

of banks’ concern to broaden and facilitate client access to banking services. The number of

mobile banking accounts jumped from 57 million in 2017 to 70 million in 2018, while users

who perform at least 80 percent of transactions through that channel, called heavy users,

went from 16.3 million in 2017 to 26.8 million in 2018.

Investments and expenses continue to place technology at the user’s fingertipsIn 2018, R$ 19.6 billion was invested in technology by financial institutions, with the goal

of better serving the needs of clients in a fast-moving world in terms of technological

transformation; an increase of 3% compared to 2017. There was an increase in expenses with

technology, which rose from R$ 13.2 billion to R$ 13.9 billion. Investments, in turn, remained

at the same level, going from R$ 5.8 billion to R$ 5.7 billion – reflecting the effort of the banks

to follow the evolution of technology in an efficient way to offer leading edge services to their

clients.

Analytics and artificial intelligence rank high on investmentsThe strategic view on data usage puts big data and analytics at the top of the ranking of

the technologies in which banks invest – 80% noted that this tool received funding in

2018. Following are artificial intelligence and cognitive computing (73%), applied mainly to

improve the relationship between banks and clients. Interactions via chats operated by service

professionals grew by 364% in 2018, reaching 138.3 million. Even more impressive was the

2,585% expansion in chatbots – in which interaction is automated by robots that use natural

language and continuously improve as they are used: in 2017 3 million interactions were

performed via chatbots, while in 2018 80.6 million were performed.

Sample and methodology

20 banks from Brazil or operating in Brazil, which represent 91% of the banking industry’s assets

in the country, participated in the survey. The survey was conducted through the application of an

online form to these financial institutions, in addition to interviews with specialists, consolidation of

public data and Deloitte’s surveys.

The evolution of channels: mobile banking consolidates

8


9



10

Digital channels have been evolving in convenience, ease of use and security. As a

result, banking transactions presented consistent and significant growth. By 2018,

the major driver of the increase in the number of transactions was again the mo-

bile phone: while the growth of banking transactions in general was of 8%, the jump in

the number of transactions via mobile banking was by 24%.

To exemplify the speed of growth of mobile banking, the number of transactions through

this channel – 31.3 billion in 2018 – is almost double the 18.6 billion registered in 2016.

That year, for the first time, the number of transactions made by clients through mobile

phone surpassed that of transactions through internet banking.

2014 2015 2016 2017 2018

Mobile banking

Internet banking

POS (Points of sale)

ATM

Correspondents

Bank branches

Contact centers

8%

14%

12%

2.3

1.54.9

7.2

10.2

18.0

4.748.8

55.7

65.4

73.278.9

1.44.4

7.8

10.0

17.7

11.2

1.45.6

9.7

10.2

15.5

18.6

1.55.9

10.9

9.9

15.7

25.3

1.44.0

12.6

9.2

16.2

31.3

3.2 4.4 4.04.2

18%

EVOLUTION OF BANKING TRANSACTIONS BY CHANNEL (IN BILLIONS OF TRANSACTIONS)

The share of the mobile banking in the composition of total transactions increased from

35% in 2017 to 40% in 2018. Together, the digital channels have increased their partici-

pation in relation to traditional channels: six out of ten banking transactions are already

carried out by the client through the cell phone or the computer.

In addition to mobile, the only channel to present an increased percentage in the compo-

sition of transactions was that of points of sale (POS). The so-called “credit and debit de-

vices” have become more widely used in retail and service companies, following a strong

trend in client behavior.

Six out of

ten banking

transactions are

already carried

out by mobile or

the computer


11

2014 2015 2016 2017 20183

10

15

21

37

10

28

14

18

32

20

28

15

16

24

28

27

15

14

22

35

25

16

12

20

40

4 6 7 5 5

Mobile banking

Internet banking


ATM

Correspondents

Bank branches

Contact centers

COMPOSITION OF BANKING TRANSACTIONS BY CHANNEL (IN %)

2014 2015 2016 2017 2018

Digital channels (mobile banking and internet banking)

Traditional channels (ATMs, banking correspondents, bank branches and contact centers)

POS

15%

47%

38%

14% 15%16%

52%57%

60%

34%28%

24%15%

52%

33%

COMPOSITION OF BANKING TRANSACTIONS BY CHANNEL (IN %)

The number of financial transactions via mobile banking grew about 80% in 2018 com-

pared to 2017, maintaining the channel’s upward trend of adherence to this channel for

transactions such as payments of bills, money transfers (including COD and EFT) and in-

vestments.

In 2017, 1.7 billion financial transactions were carried out by mobile phone – about half

of the 3.5 billion transactions of this type carried out through the computer. In 2018,

3 billion financial transactions were performed via mobile phone, bringing the perfor-

mance of this channel significantly closer to the 3.9 billion financial transactions via in-

ternet banking.

Bill payments and

money transfers

(including COD

and EFT) are

now performed

preferably via

mobile banking.


12

The convenience of transacting through the mobile phone helps in explaining client ad-

herence to this channel. However, when we talk about financial transactions, security

becomes especially relevant. Understanding this, banks have been following the continu-

ous and rapid evolution of security tools to provide the market with the most advanced

capabilities.

On the clients’ side, ease of use and confidence in the platforms developed by financial

institutions for mobile phones contribute to the expansion of options for financial trans-

actions. In this context, everyone benefits: banks increase the efficiency of their processes

and offer more sophisticated and value-added services through the application of tech-

nology, and clients gain time and convenience to manage their funds, investments and

financial commitments.

BANKING TRANSACTIONS IN DIGITAL CHANNELS (IN BILLIONS OF TRANSACTIONS)

Mobile banking Internet banking

1,5

2014 2015 2016 2017 2018 2014 2015 2016 2017 2018

18.0 17.7

15.5 15.7 16.2

14.2

3.8

14.0

3.7

12.1

3.4

12.2

3.5

12.3

3.9

4.7

11.2

18.6

25.3

4.50.2

10.7

0.5

17.6

1.0

23.6

1.7

31.3

28.3

3.0

Without financial activity

With financial activity




13

In the general composition of banking transactions carried out by mobile banking, the

share of financial transactions carried out by individuals increased from 6% to 9%. Com-

panies also appear to want to increase the use of the mobile to operate their corporate

accounts. Among legal entities, mobile banking has made a discreet but important move

to increase its share in both types of transactions (with or without financial activity).

COMPOSITION OF BANKING TRANSACTIONS – MOBILE BANKING (IN %)

COMPOSITION OF BANKING TRANSACTIONS – INTERNET BANKING (IN %)

2017 2018

91 86

63

9

41

Individual – without financial activity

Individual – with financial activity

Legal entity – without financial activity

Legal entity – with financial activity

2017 2018

3727

8

41

7

14

49

17

Individual – without financial activity

Individual – with financial activity

Legal entity – without financial activity

Legal entity – with financial activity

In the amount of transactions with and without financial activity through internet bank-

ing, legal entities increased their share in relation to individuals. In the total number of

transactions carried out through the computer, almost half are financial transactions car-

ried out by companies. This is an indicator of the opportunity banks have to attract com-

panies to mobile banking transactions.

Among legal

entities, mobile

banking has made

a discreet but

important move to

broaden its share

in transactions

with and without

financial activity.

Sample: 11 banks

Sample: 12 banks


14

The transactions carried out by POS exceeded, in volume and in share, financial transac-

tions made through the traditional channels. This result reinforces the increasing dissemi-

nation and reach of points of sale, which have definitively impacted the behavior of clients

who have become accustomed to the convenience of paying even the small purchases of

their daily life via card.

Excluding withdrawal transactions (one of the few ones that still need to be carried out

within a physical place), financial transactions carried out at ATMs, correspondents, bank

branches and contact centers total 7.7 billion, close to the 6.9 transactions on digital

channels.

EVOLUTION OF FINANCIAL TRANSACTIONS BY CHANNEL (IN BILLIONS OF TRANSACTIONS)

11.4

2014 2015 2016 2017 2018

6.9

12.6

11.2

4.2

7.8

6.9 6.87.6

8.8

7.7

4

7.2

4.4

9.7

10.6 10.9

5.2

10.9

12.4

Traditional channels (ATMs, correspondents, bank branches and contact centers)

Traditional channels without withdrawal



COMPOSITION OF FINANCIAL TRANSACTIONS BY CHANNEL (IN %)

50 47 49 47 44 36

18 19 1918 18 2317

32 34 3433 38 4138

45

2012 2013 2014 2015 2016 2017 2018





15

11.4

2014 2015 2016 2017 2018

6.9

12.6

11.2

4.2

7.8

6.9 6.87.6

8.8

7.7

4

7.2

4.4

9.7

10.6 10.9

5.2

10.9

12.4


Traditional channels without withdrawal



It has never been so easy to check the balance or request a bank statement through the

phone or the Internet. The very convenience in the use of the cell phone and the com-

puter to carry out banking transactions contributed to the upward trend in the number of

transactions without financial activity carried out through the digital channels. Regarding

the volume of transactions without financial activity and in relation to the share of each

channel in the total of these transactions, mobile banking and internet banking increase,

year by year, their share in relation to the other channels (ATMs, correspondents, bank

branches and contact centers).

The growth in the number of transactions without financial activity carried out via digi-

tal channels was 4.9 billion, while transactions of this type in traditional channels fell

by 1.4 billion. This means that the Internet and mobile absorbed the general increase of

2.9 million in transactions without financial activity and also a portion of the transactions

that were performed in the traditional channels.

29.7

2014 2015 2016 2017 2018

7.6

40.6

8.08.210.2

18.7

24.6

9.0

35.7



EVOLUTION OF TRANSACTIONS WITHOUT FINANCIAL ACTIVITY BY CHANNEL (IN BILLIONS OF TRANSACTIONS)

COMPOSITION OF TRANSACTIONS WITHOUT FINANCIAL ACTIVITY Y CHANNEL (IN %)

62

38

68 75

32

69

31

80 84

25 20 16

74

26

2012 2013 2014 2015 2016 2017 2018



The transactions

carried out by

POSs surpassed,

in volume and in

share, the financial

transactions carried

out via traditional

channels.


16

Of the number of transactions carried out by correspondents, 86% are transactions with

financial activity. In ATMs, of all transactions, 58% have financial activity; in bank branch-

es this proportion is 54%. Despite the prevalence of traditional channels in the perfor-

mance of this type of transaction, the share of financial transactions in the total transac-

tions carried out through mobile phones and the Internet increased in 2018 compared to

2017. This shows that banking institutions continue to seek to provide quality services

and in line with the change in clients’ behavior, who have increasingly preferred to carry

out financial transactions through digital channels.



100

100

2017

2018

10.9 billion

12.6 billion

89

86

11

14

2017

2018

4.0 billion

4.2 billion

49

46

51

54

2017

2018

5.9 billion

4.0 billion

49

42

51

58

2017

2018

9.9 billion

9.2 billion

77

76

23

24

2017

2018

15.7 billion

16.2 billion

93

90

7

10

2017

2018

25.3 billion

31.3 billion

97

97

3

3

2017

2018

1.5 billion

1.4 billion

TRANSACTIONS WITH AND WITHOUT FINANCIAL ACTIVITY: COMPOSITION BY CHANNEL

POS CORRESPONDENTS

ATMs BANK BRANCHES

INTERNET BANKING

CONTACT CENTERS

MOBILE BANKING


17

In 2017, 1.5 billion payments were performed through internet banking - a volume sig-

nificantly higher than the 872 million transactions of this type through the mobile phone.

In 2018, however, there was a reversal in this indicator: while the volume of payments

made by internet banking remained at the same level of 1.5 billion, the number of these

transactions carried out via mobile has almost doubled, reaching 1.6 billion and making

the mobile phone for the first time to exceed the clients’ preference for bill payments.

Mobile money transfers (including COD and EFT) also started to be performed primar-

ily by mobile banking – the growth of such transactions, carried out via smartphones,

jumped from 394 million to 862 million, surpassing the 534 million transfers made

through the internet banking.

Making investments was a type of transaction that presented an important growth in

internet banking – which indicates how this channel has space to develop in the offer

of solutions that involve the most sophisticated and customized management of cli-

ent’s assets.

EVOLUTION OF TRANSACTIONS WITH AND WITHOUT FINANCIAL ACTIVITY BY CHANNEL (NUMBER OF TRANSACTIONS)

MOBILE BANKING INTERNET BANKING

2017 2018 Variation (%) 2017 2018 Variation (%)

Bill payments 872 million 1,6 billion 80% 1.5 billion 1.5 billion 0%

Transfers / CODs / EFTs 394 million 862 million 119% 485 million 534 million 10%

Credit acquisition 225 million 359 million 60% 87 million 86 million -1%

Investments 10 million 14 million 36% 58 million 94 million 63%

Balance checks 18.6 million 21.8 billion 17% 6.2 billion 5.1 billion -17%


18

Service at branches and banking service stations (PABs) continues to be important, espe-

cially in relation to credit acquisition, deposits and investments. This result reinforces a

new role that has been assigned to the bank branches, which now have a more advisory

profile. Clients go to bank branches to find reliable advice for managing their assets, while

day-to-day operations are preferably performed through digital channels.

In ATMs, all sorts of transactions – with the exception of withdrawals – dropped. This

movement, coupled with the growth in the number of bank transfers and the payments

made by digital channels, in addition to the significant volume of transactions via POS,

reveals a strong upward trend in digital payments of services and products.

EVOLUTION OF TRANSACTIONS WITH AND WITHOUT FINANCIAL ACTIVITY BY CHANNEL (NUMBER OF TRANSACTIONS)

BRANCHES AND PABs ATMs

2017 2018 Variation (%) 2017 2018 Variation (%)

Bill payments 587 million 468 million -20% 841 million 780 million -7%

Transfers / CODs / EFTs 54 million 53 million -1% 223 million 213 million -4%

Credit card applications 30 million 36 million 19% 77 million 63 million -18%

Investments 26 million 31 million 19% 43 million 10 million -77%

Balance checks 1.7 billion 1.3 billion -26% 3,5 billion 3,0 billion -13%

Deposits 416 million 443 million 7% 762 million 735 million -3%

Withdrawals 584 million 367 million -37% 2.4 billion 2.5 billion 4%

In 2018 there was a 14% growth in the number of insurance policies contracted by bank-

ing conglomerates (which includes the holding companies and brokerage firms belonging

to the banks). The survey showed that 96% of the total policies were contracted within

bank branches, ATMs, correspondents and contact centers. There is thus a potential for

growth in the contracting of insurance through digital channels, making these excellent

means for banks to drive new business.


19

872

349

265

53

205

397

284

62

210

503

304

71

234

532

340

77

284

611

374

88

335

953

11121233

1408

2014 2015 2016 2017 2018

Vida e previdência Auto Residencial Outros

INSURANCE CONTRACTED THROUGH THE BANKING CONGLOMERATE (IN MILLIONS)

CONTRACTING OF INSURANCE BY CHANNEL (IN %)



96

4

20

Digital accounts: the bank even more accessible to the client


21


22


The number of current accounts and savings accounts remained stable in 2018,

compared to the previous edition of the survey. As in 2017, banks had in 2018 a

portfolio of 155 million checking accounts and of 168 million savings accounts.

In 2018, 2.5 million accounts were opened via mobile phone – an increase of 56% com-

pared to the 1.6 million recorded in 2017. The number of accounts opened via internet

banking also jumped from 26 thousand in 2017 to 434 thousand in 2018.

This significant growth in the offer of digital services is a reflection of banks’ concern to

facilitate client access to banking services. Through a tool that is becoming more sophisti-

cated and powerful every day – the smartphone – it is possible, with all the convenience,

to open an account and have access to a series of services and features to carry out finan-

cial transactions.

There are still important regulatory aspects to be observed in relation to the so-called

digital accounts, which are now marketed by both the main banks in Brazil and by finte-

chs that are part of the current financial ecosystem. The free access to accounts that are

exclusively operated by electronic means is ensured by Resolution No. 3,919/10 from

the Central Bank of Brazil and is an inevitable trend in the present competitive market

context.

ACTIVE ACCOUNTS (IN MILLIONS)

2014 2015 2016 2017 2018

182 185199

168 168

Savings accounts**Current accounts*

2014 2015 2016 2017 2018

156 155 158 155 155

* Sample: 19 banks** Sample: 14 banks

In 2018, 2.5 million

accounts were

opened via cell

phones – an

increase of 56%

over the 1.6 million

recorded in 2017.


23

In this revolution promoted by the digitization of banking solutions, the role of bank

managers or clerks at branches is now mainly of advisory and focused on services of

greater complexity.

In recent years, the number of accounts using mobile banking has grown at a much fas-

ter pace than those with internet banking. If, in 2017, the volume of accounts accessed

through cell phone was the same as the number of accounts used via the computer, in

2018, for the first time, smartphone-operated accounts surpassed accounts with inter-

net banking.

Mobile banking

Internet banking

46

2014 2015 2016 2017 2018

70

53

3331

40

25

42

57 57

ACCOUNTS USING MOBILE BANKING AND INTERNET BANKING (IN MILLIONS) *

*Active accounts with some transactions in the last 6 months

For the first time,

smartphone-

operated accounts

surpassed the

accounts with

internet banking.

ACCOUNTS OPENED VIA MOBILE BANKING ACCOUNTS OPENED VIA INTERNET BANKING

Sample: 10 banks

1.6 million

2017

26 thousand

2017

2.5 million

2018

434 thousand

2018

24


Among the accounts with the use of mobile banking, individuals represent 94%, while

legal entities account for 6%. Internet banking, on the other hand, has 87% of individuals

and 13% of legal entities.

After three consecutive years of decline in the number of transactions performed via in-

ternet banking accounts, this channel presented an increase of 11% in 2018, going from

275 million transactions in 2017 to 306 million. In relation to transactions carried out

through mobile banking accounts, once again the trend of a slight increase was registered,

alike that in the previous year.

COMPOSITION OF ACCOUNTS USING MOBILE BANKING AND INTERNET BANKING (IN MILLIONS) *

*Active accounts with some transactions in the last six months

70 million* 53 million


Individuals

Legal entities

6 13

94 87

COMPOSITION OF ACCOUNTS USING MOBILE BANKING AND INTERNET BANKING (IN BILLIONS OF TRANSACTIONS)

** Transactions in active accounts with some transactions in the last six months

Mobile banking

Internet banking

337

2014 2015 2016 2017 2018

447

306339

189

442

575

426 444

275


25

Users who perform at least 80% of transactions on the same channel are considered

heavy users. Considering this criterion, mobile banking accounts with heavy users jumped

from 16.3 million in 2017 to 26.8 million in 2018.

While the total number of mobile banking accounts grew by 23% over the previous year,

mobile banking accounts with heavy users recorded an even bigger increase of 64%.

Although the number of internet banking accounts presented a drop of 7% in 2018 over

the previous year, the volume of internet banking heavy users grew almost 50% in the

period, indicating that client engagement with mobile has not completely eliminated the

use of internet banking facilities and resources.

In mobile banking, the concentration of accounts with heavy user clients is 38%, sig-

nificantly higher than the 12% recorded in internet banking. Among the mobile banking

heavy users, 95% are individuals; in the internet banking, although individuals still make

up a majority, the legal entities’ share among heavy users is of 48%.

ACCOUNTS WITH USE OF MOBILE BANKING ACCOUNTS WITH USE OF INTERNET BANKING

ACCOUNTS WITH HEAVY USERS BY CHANNEL (IN %)


Individuals

Legal entities

5

48

9552

2017 2018

57 million

16.3 million

26.8 million

70 million23%

64%

29%38%

2017 2018

56.9 million

4.1 million 6.1 million

52.8 million-7%

48%7% 12%

Heavy users of mobile banking

Heavy users of internet banking

Sample: 10 banks

Sample: 10 banks

26

Investments and expenses: technology at the user’s fingertips


27


28


Despite the challenges of the Brazilian economic scenario, banks recorded, for the

second consecutive year, an increase in investments and expenses directed to te-

chnology. R$ 19.6 billion was invested in technology by financial institutions to

better meet the new demands of clients, a growth of 3% in comparison to 2017.

Notwithstanding the recent challenges and impasses in Brazil’s economy, there was an

increase in expenses with technology, which rose from R$ 13.2 billion to R$ 13.9 billion.

Investments, in turn, remained at the same level, going from R$ 5.8 billion to R$ 5.7 bil-

lion – reflecting the effort of the banks to continue following the evolution of technology

in an efficient way to offer cutting edge services to users.

2012 2013 2014 2015 2016 2017 2018

Investments

Expenses

12.1

7.2

13.8

7.0

13.5

7.9

13.7

5.4

13.3

5.3 5.8

18.6 19.0

13.913.2

5.7

19.619.3 20.8 21.419.1

TOTAL EXPENSES ON TECHNOLOGY (IN R$ BILLIONS)

The focus on the development of new features to make the banking clients’ daily life eas-

ier made software, once again, to represent the largest share of investments and expenses

on technology.

Macroeconomic and exchange-rate aspects affected the maintenance and technological

updating expenses in 2018, causing an increase in expenses (investments combined to

expenses) on both hardware and software. In 2018, hardware expenses increased from R$

6.1 billion to R$ 6.5 billion, while software expenses increased from R$ 9.5 billion to R$

10.1 billion.

The cheaper prices of telecommunication infrastructure were reflected in the index that,

for another year, had a decline in both investments and expenses.

R$ 19.6 billion

was invested

in technology

by financial

institutions to

better meet the

new demands of

clients, a growth of

3% in comparison

to 2017.


29

TOTAL EXPENSES ON TECHNOLOGY BY CATEGORY (IN R$ BILLIONS)*

TOTAL INVESTMENTS IN TECHNOLOGY (IN R$ BILLIONS)* TOTAL EXPENSES ON TECHNOLOGY (IN R$ BILLIONS)*

Software Hardware Telecommunications

0.22.4

3.1

0.7

3.9

3.3

0.32.2

2.9

0.42.0

2.9

5.4 5.3

0.32.2

3.3

5.8 5.77.9

2014 2015 2016 2017 2018 2014 2015 2016 2017 2018

2.8

4.1

7.0

3.7

4.7

5.1

3.5

4.6

5.6

3.2

4.6

5.5

3.1

3.9

6.2

13.7 13.3 13.2 13.913.5

*Mainframe software investments and expenses are included in hardware

*Mainframe software investments and expenses are included in hardware

6.7

3.5

2014 2015 2016 2017 2018

10.1

6.5

3.0

8.5

8.4

8.48.6

4.4

6.8

3.9

9.5

6.1

3.4

Total 21.4 19.1 18.6 19.0 19.6

Software

Hardware

Telecommunications

All over the world, banks represent the second-largest sector investing resources in tech-

nology, only behind governments and far ahead of the telecommunications industry. In

Brazil, for the first year, the spending of the banking sector on technology reached the

same level as that of the government sector.

*Other industries Education; tourism, hotels and leisure; advertising and other services

Source: Gartner

COMPOSITION OF TECHNOLOGY SPENDING BY SECTOR IN 2018 (%)

14%

8%

9%

6%6%5%5%

5%

4%

6%

5%

3%3%

7%14%

Brazil

Information technology

Mining

Non-durable products

Securities

Heavy industry

Automotive

Other industries*

Government

Banking industry

Telecommunications

Retail

Water, electricityand gas

Health services

Transportation

Insurance

R$ 41.3 billion

World

13%

6%

9%

6%7%5%5%

6%

3%

6%

5%

4%2%

7%16%

R$ 2.8 billion

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Emerging technologies: the bets from the banks


31


32


80% 73% 67%

60% 60%

The resources invested by banks in technology are primarily intended for clients to

have a better experience with banking products and solutions - which involves as-

pects such as security and processing capacity. In this context, data represent the

cornerstone for any business strategy, as they convey information, evidence habits and

provide insights facilitating the decision-making process of financial institutions.

The growing importance of the strategic use of data has put big data and analytics at the

top of the ranking of the technologies in which banks invest. Next comes artificial intel-

ligence and cognitive computing, applied extensively mainly to facilitate client relation-

ships with banks.

TECHNOLOGIES THAT MOST RECEIVE INVESTMENTS

Robotics Open banking/ Marketplace banks

Big Data/Analytics Artificial Intelligence / Blockchain Cognitive Computing

Sample: 15 banks


33

When asked what the priorities for technology investments are, banks replied that trans-

actions with financial activity emerge in the first place for both mobile banking and in-

ternet banking. This indicator reveals the banks’ concern to offer, with security and con-

venience, the possibility of clients performing more complex and higher added-value

transactions.

It is worth noting that marketing and sales efforts are more heavily targeted to mo-

bile banking than to internet banking, indicating the potential that institutions see to

strengthen client relationships through their mobile phones.

The growing importance of the strategic use of data

has put big data and analytics at the top of the ranking

of the technologies in which banks invest.

Financial transactions

Marketing and Sales

Non-financial transactions

Accessibility

Multi-channel integration

Customization by the client

87%

67%

67%

47%

40%

40%

80%

73%

47%

47%

33%

27%

PRIORITY INVESTMENTS


Sample: 15 banks

34


Investments in communication and customer relationship tools were reflected in the sig-

nificant increase in the interactions between banks and users through digital channels. In-

teractions via chats (operated by service professionals) grew by 364% in 2018, reaching a

volume of 138.3 million.

Even more impressive was the 2,585% expansion in chatbots – in which the interaction is

automated by robots that use the natural language and continuously improve as they are

used. While in 2017 3 million interactions were carried out via chatbots, in 2018, transac-

tions totaled 80.6 million. This has undoubtedly been one of the resources in which banks

have most applied the artificial intelligence and cognitive computing tools to provide users

with a better experience with banking solutions and products.

DIGITAL CHANNELS INTERACTIONS

29.8 million 138.3 million

Chat

2017 2018

+364%

3 million 80.6 million

Chatbot

2017 2018

+2.585%

618 million 735 million

Email

2017 2018

+19%


35

Banks invested R$ 38.4 million in technology training to their professionals. In all, more

than 63 thousand professionals participated in technology training aggregating 1.3 mil-

lion hours.

Investments in the communication and customer

relationship tools were reflected in the expressive

increase of the interactions between banks and users

through digital channels.

R$ 38.4 million invested

63 thousand participating professionals

1.3 million training hours

TECHNOLOGY TRAINING

Sample: 15 banks

36

Channels in transformation: physical and digital complete each other


37


38


According to data from the Central Bank of Brazil, in 2018, the total number of

branches was 21.6 thousand, remaining practically stable in relation to 21.8

thousand in 2017. Compared to the previous edition of the survey, there was no

change in the distribution of branches through the country, with the Southeast region

once again concentrating more than half of the establishments.

PABs have been a valuable resource in

maintaining client’s connection with banks.

SOURCE: CENTRAL BANK OF BRAZIL

NORTH – 1.1 thousand2017 5%2018 5%

MIDWEST – 1.8 thousand2016 8%2017 8%

SOUTH – 4.0 thousand2017 19%2018 19%

SOUTHEAST – 11.2 thousand2017 52%2018 52%

NORTHEAST – 3.5 thousand2017 16%2018 16%

BANK BRANCHES IN BRAZIL

21.622.923.1 21.823.4

2014 2015 2016 2017 20180

80

BANK BRANCHES IN BRAZIL (IN THOUSANDS)

In relation to the Contact Centers (PABs) and Electronic Contact Centers (PAEs), Central

Bank numbers indicate that there was also a small decrease for the second consecutive

year. In the composition of these two channels, however, it was possible to observe that

the proportion of PABs has been increasing (32% in 2016 to 35% in 2018), compared to

the share of the PAE, which fell from 68% to 65% in the same period.

This data indicates that PABs, installed within a government-administered entity or pri-

vate company for the purpose of providing the banking services of a branch to the em-

ployees and officers of those institutions, have been a valuable resource for maintaining

the client’s connection with banks.


39




NORTH – 3.5 thousand2017 7%2018 7%

MIDWEST – 4.1 thousand2017 9%2018 9%

SOUTH – 10.1 thousand2016 21%2017 22%

SOUTHEAST – 20.6 thousand2017 45%2018 44%

NORTHEAST – 8.4 thousand2017 18%2018 18%

VOLUME AND DISTRIBUTION OF PABS AND PAES

46.745.5

51.047.148.5

2014 2015 2016 2017 2018

80

172.6182.4184.4

175.6180.1

2014 2015 2016 2017 20180

250

2016

2017

2018

68% 32%

66% 34%

65% 35%

Electronic contact center (PAE)

Banking contact center (PAB)

PABS AND PAES IN BRAZIL (IN THOUSANDS)

ATMS IN BRAZIL (IN THOUSANDS) ATMS ADAPTED TO PEOPLE WITH DISABILITY

According to the Central Bank survey, for the fourth consecutive year, there was a slight

drop in the number of ATMs in Brazil – result of technological consolidation designed to

optimize costs and further promote security for clients.

In the FEBRABAN Banking Technology Survey, it was identified that there was an in-

crease of about five percentage points in the number of ATMs adapted for people with

disabilities, which reinforces the concern of banks with accessibility of their services to

all clients.

80.6% 85.2%

2017 2018

40

Banks 4.0: Trends for the future of financial institutions


41


42


The financial services sector, in Brazil and in the world, is currently at an inflection

point. In order to deal with the evolution of a segment that undergoes profound

technological, regulatory and market changes, banks are faced with the need to

conduct strategic changes in their business and operating models.

The Global Banking and Capital Markets Outlook 2019 study, conducted globally by De-

loitte, points out the most critical points to be observed by financial institutions that

want to seize the moment to put these necessary transformations into practice. A decade

after the outbreak of the global financial crisis, it is possible to assess its impact on the

banks’ compliance structure, which have become more resilient and even better prepared

to deal with the risks.

Some of the transformation pillars to be addressed by the financial services industry in-

clude:

1. Exponential technologiesThe potential of emerging technologies is increasing every day. Artificial intelligence and

cloud computing are already significantly transforming many aspects of the banking sys-

tem. Although the initial enthusiasm with blockchain has cooled, the industry continues

to navigate toward practical applications of this technology. It is worth observing how

all these technologies depend on the availability of abundant, accessible, clear and inte-

grated data.

2. Financial ecosystemWith the growing convergence of the financial services industry, relationships between

banks, fintechs and big techs are evolving rapidly. Promoting a true context of collabora-

tion is still a challenge for financial institutions. Competing at times but also playing part-

nering roles, these players have been focusing on roles previously exclusive to the banks

– such as investments and means of payment – and have eventually been contributing to

a more collaborative and innovative approach for the sector.

3. Digital transformationMore than specific investments, banks should focus their efforts on digital transforma-

tion as a comprehensive and long-term process. As the world becomes more volatile,

the change to be driven by financial institutions must be precise and follow their core

strategy so that it can actually translate into a new operating model. This transformation

must begin fundamentally with banks reaffirming their role in the global financial system.

Financial institutions should increase trust and efficiency in their processes so that tech-

nology is applied to support a clear business vision and purpose.


43

4. Technological synergyThe success of banks in their digital transformation will depend primarily on how technol-

ogy and operations strategy will be able to operate systems, platforms, software, tools

and infrastructure together. Data management, infrastructure centralization and artificial

intelligence represent the cornerstone of this integrated approach, applied in a way that

creates the maximum value for institutions.

5. Talents for the banks’ futureAutomation, on-demand economics, crowdsourcing and demographic shifts already im-

pact the way work is and will be done by financial institutions. However, any transfor-

mation in people management that aims only at the elimination of routine tasks and

cost management will be limiting. In that sense, the keywords for today’s and tomorrow’s

talents are relevancy, creativity and problem solving. Skills for designing a better client

experience or managing change may become, in the future, as or more important than in-

dustry knowledge. In a context dominated by machines and knowledge without borders,

it becomes valuable to promote interdisciplinarity, intuition, creativity, judgment, persua-

sion and empathy.

6. Risks of a new eraWith the evolution of technology, new risks related to the application of algorithms and

artificial intelligence challenge banks to rethink the previously established ethical and

compliance aspects. In a data-driven economy and business model, privacy and security

are at the heart of new regulations – such as the Brazilian General Data Protection Act

and equivalent international legislation. Thus, the next generation of cyber-risk manage-

ment should consider an approach that strengthens controls on technological infrastruc-

ture, uses analytics and big data in a safe and responsible way and builds a resilient infra-

structure to withstand systemic disruptions and long periods of stress.

7. Digital servicesImagine a bank branch that looks like a cafeteria, where you can connect, meet people

and work. It seems distant from the current model, but this approach may bring some

clues as to how banks are re-imagining their spaces and channels for the provision of

digital services. Self-service platforms, virtual meetings with the manager and extended

hours for remote services are some of the possibilities that have already been envisaged

by financial institutions in this sense.

44


Artificial intelligence: transformation in the financial ecosystem

Artificial intelligence has been significantly changing the operating models of financial

institutions. This incorporation, however, does not happen without challenges: in order

to succeed, it is necessary to reorganize strategic priorities with the implementation of

artificial intelligence and create a sustainable competitive dynamic in the sector’s eco-

system.

Cognitive technologies represent a new way of attracting clients, gaining competitive-

ness and driving operational efficiency. At the same time, they require specific skills to

deal with new business models and collaboration between competitors. The report “The

new physics in financial services: artificial intelligence transforms the finance ecosys-

tem” conducted by Deloitte in partnership with the World Economic Forum, provides im-

portant insights into how artificial intelligence radically transforms front and back office

operations and raises new regulatory issues in financial markets.

Among the impacts of artificial intelligence on financial institutions, it is worth men-

tioning:

1. From costs to profits: institutions should transform their back-office activities driven

by artificial intelligence into external services so as not to be outdated in their rela-

tions with clients;

2. Client loyalty: with the erosion of old methods of differentiation, artificial intelligence

enables financial institutions to put aside the “war for the lowest price” and prioritize

other ways of standing out in the eyes of clients;

3. Autonomous financing: the client experience will be enhanced by artificial in-

telligence and automation, also improving financial results;

4. Obstacles and collective solutions: Collaborative solutions based on shared

databases increase performance in non-competitive operations and increase the se-

curity of the financial system;


45

5. Market segmentation: the use of artificial intelligence facilitates the search of

clients who want to compare costs and services, opening space for new innovative ni-

che structures;

6. Data agreements: in an ecosystem where institutions fight for the diversity of

data usage, managing partnerships with potential competitors is a bold strategy;

7. Regulated data: privacy regulations and data portability will shape the ability

of financial institutions to deploy artificial intelligence, making these regulations as

important as traditional standards for competitive positioning;

8. Balanced talents: the establishment of teams with knowledge in artificial intel-

ligence will be the greatest challenge for organizations and will pose risks to those who

do not follow the transitions;

9. New ethical dilemmas: global communities have a common interest in miti-

gating the risks of technological development. When introducing artificial intelligence

into business processes, a collective analysis of the regulatory oversight principles and

techniques to address possible nebulous ethical issues is essential.

Get to know these and

other Deloitte global

studies on technology

for the financial services

industry at

www.deloitte.com.br

46


Survey project leadership: Brazilian Federation of Banks (FEBRABAN)

FEBRABAN professionals directly involved in the initiative:

Gustavo Fosse (Sectorial Director of Technology and Banking Automation),

Sergio Leo (Director of Image and Communication Policies),

Cleide Sanchez Rodriguez (Communications Manager),

Adriana Mompean (Communications Advisor) and

Carolina Leonor Souza (Director of Business and Operations)

Preparation of this survey’s edition: Deloitte Brasil

Deloitte professionals directly involved in the initiative:

Sergio Biagini (Lead Partner of the Financial Services industry),

Renato Souza (Brand & Communication Director),

Giovanni Cordeiro (Senior Research Manager),

Beatriz Barbosa (Research Analyst),

Evelyn Carvalho (Communications Supervisor) and

Paschoal Baptista (special collaboration)

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