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Emerging Opportunities in the

Latin America Consumer

Finance Market: Market Size,

Strategies, Products, and

Competitive Landscape

Industry Forecast Report

Reference code: IS2010MR

Published: April 2012BRICdata

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EXECUTIVE SUMMARY

Emerging Opportunities in the Latin America Consumer Finance Market: Market Size, Strategies,

Products, and Competitive Landscape

© BRICdata. This product is licensed and is not to be photocopied Published: April 2012

1 Executive Summary

Brazil

Market size and growth potential

The Brazilian consumer finance market increased in value at a compound annual growth rate (CAGR) of

XX.XX% during the review period (2007–2011), to reach US$XXX.X billion in 2011. The market is projected to

achieve a CAGR of XX.XX% over the forecast period (2012–2016), to reach a value of US$X.XX trillion in 2016.

Trends and drivers

The success of Brazilian financial services is directly related to the country’s economic growth. After recording

declining levels of GDP growth due to the global economic crisis in 2009, the Brazilian GDP grew by positive

annual growth rates of X.X% in 2010 and X.X% in 2011. Furthermore, the Brazilian GDP is projected to record an

annual growth rate of X.X% in 2012. The country’s improved economic growth had a positive influence on the

population’s income levels, especially on the low-income population, which enabled a large number of low-

income consumers to afford for various consumer finance product categories, including credit cards, housing

loans, education loans, auto loans, payroll loans and personal loans, during the review period.

Brazil is preparing to host both the 2014 FIFA World Cup and the 2016 Olympic Games, and the preparations for

these major sporting events will increase the amount of infrastructure investment in the country over the forecast

period. Overall, Brazil is expected to invest a total of BRLX.X trillion into housing, construction, and infrastructure

development during 2011–2014. This is expected to support the growth of the consumer finance market,

especially the mortgage lending category, over the forecast period.

The Brazilian government introduced several social programs during the review period, including a second

growth acceleration program called Programa de Aceleração do Crescimento 2 (PAC 2). Under the PAC 2,

US$XXX billion will be invested in various housing, transportation, energy, and sanitation projects during 2011–

2014. This is expected to drive the growth of the mortgage lending category over the forecast period.

Challenges

The Central Bank of Brazil enacted a number of new regulations to govern the auto loans category during the

review period. Under its latest credit policies, the central bank tightened the liquidity requirements and increased

the average interest rates for auto loans from XX.X% in 2010 to XX.X% in 2011. As a result, the growth of the

auto loans category decelerated, which was already registered in 2011 and is expected to continue over the

forecast period.

The Brazilian customer satisfaction in financial services is one of the lowest in the world. Brazilian customers

faces problems especially related to retail and credit financing due to the unexpected interest rates imposed on

them by the financial lenders and due to the long transaction times for consumer finance products. This remains

an important constraint for the growth of the Brazilian consumer finance market.

Regulations

The Central Bank of Brazil is the organization that controls and regulates all banking activities in the country,

including the authorization, establishment and operation of various banks. Moreover, the central bank has

enforced a series of conditions on foreign investors that offer financial services in Brazil. According to Brazil’s

banking regulations, the following information must be given to the Central Bank of Brazil for foreign investors to

apply to operate in the Brazilian financial services:

The total capital of their financial investments

A list out of all benefits that could be met by the establishment of a local financial system for the Brazilian

economy, such as new technologies, products and services and competitiveness

A detailed list about the company’s existing activities in the Brazilian financial system, including any participation

in local economic groups

The company’s relationships with other financial institutions located abroad

Other issues related to legal issues that need to be considered by the Brazilian government

Competitive landscape

The Brazilian consumer finance market is highly competitive, and the market was fragmented between XXX

multiple banks, XX commercial banks, four development banks and XX investment banks in December 2010.

However, the competitive landscape in the market varies depending on which product is considered. For

example, the credit card and personal loans categories are highly competitive and fragmented due to presence of

EXECUTIVE SUMMARY




the large number of service providers in the country. Bradesco is one of the leading Brazilian credit card issuers,

with over XXX million credit cards in circulation that generated BRLXX.X billion revenue from credit cards in

2011. Meanwhile, the payroll loan category has been adopted by fewer banks and is in an early phase of

development.

Mexico


The Mexican consumer finance market valued US$XX.X billion in 2011, after recording a negative CAGR of -

X.XX% during the review period due to global recession. However, the consumer finance market is projected to

record a positive CAGR of XX.XX% over the forecast period, to reach a value of US$XXX.X billion in 2016. The

positive growth projection is mainly due to the country’s improving macroeconomic fundamentals and favorable

business environment.

Trends and drivers

Mexican retailers played a significant role in raising demand for the country’s consumer finance market during the

review period. There has been continuous improvement in Mexican retailers’ product offering and strategies in

order to increase their sales and revenues. For example, Mexican retailers offered credit to their customers

through various credit cards in collaboration with banks and financial institutions during the review period, which

enabled them to improve their sales volumes. In addition, leading retailers such as Almacenes Coppel, Elektra

and FAMSA have started their own banking operations to provide credit to consumers.

Mexico’s improved economic fundamentals backed by strong industrial growth resulted positive growth in

consumer credit, propelled consumer confidence and decrease in unemployment rate. Subsequently, consumers

increased purchasing power and spending on all kind of goods and services. Such factors helped the consumer

finance market to grow faster in 2010 and 2011. Furthermore, improved economic fundamentals encouraged

companies to ease lending interest rates, develop new credit products and services, and innovative marketing

strategies in order to attract consumers. This in turn, is expected to drive the credit market over the forecast

period.

Challenges

Mexico’s banking industry is highly concentrated and has a poor competitive environment due to the limited

number of businesses in the industry. The Mexican banking industry contains only seven large banks that control

XX.X% of the assets in the country’s total banking system. In addition, the consumer lending in the country is

underdeveloped, especially for financial card products, and the average per capita of financial cards in circulation

stood at 0.7 per inhabitant in 2010, which is almost three times lower than the Latin American average. The four

leading Mexican banks accounted for over XX.X% of the total value of total Mexican financial card transactions.

This poor competitive environment for consumer finance created a high lending interest rate, which subsequently

hindered the growth of financial cards in Mexico.

The Mexican economy is heavily cash-based with over XX% of the country’s total transactions performed through

cash. Consequently, banking penetration levels remained low when compared to other Latin American countries.

For example, the total amount of bank branches per XXXXXX inhabitants stood XX.X in 2010, while in Chile that

figure stood at XX.X and represented XX.X in the US. Meanwhile, the number of ATMs per 100,000 inhabitants

stood XX.X for Mexican in 2010, while in Chile this figure was XX.X and it was XX.X in Brazil. Mexico’s lending

penetration rate is exceptionally low, for example, personal loans as a percentage of GDP stood at X.X% in 2011

compared to XX.X% in Brazil and X.X% in Chile. In addition, mortgage loan penetration levels stood at X.X% in

2011, while this figure stood at XX.X% in Chile and X.X% in the Brazil. Low penetration level is posed challenge

for the consumer finance industry in Mexico.

Regulations

The Mexican regulatory framework is moderately complicated due to the presence of several different types of

banking institutions, such as commercial banks, brokerage firms, development banks, money exchange firms,

leasing companies and multiple purpose financial firms. Banco de Mexico is Mexico’s central bank, which

regulates and governs the country’s banking industry.

The Mexican government encourages foreign direct investment (FDI) in its banking industry through liberal

economic policies and its privatization initiative. In addition, Mexico has a higher number of free-trade

agreements than any other Latin American country.

EXECUTIVE SUMMARY





Mexican banking industry contained XX commercial banks and XX development banks in June 2010. Foreign-

controlled banks are the majority stake holders and have an established presence in the Mexican banking

industry, as foreign companies accounted for a share of XX.X% of the industry value. There were XX foreign-

controlled banks in the country in June 2010, four of which are among the seven largest banks in Mexico. The

seven largest Mexican banks, BBVA Bancomer, Banamex, Santander, Banorte, HSBC, Inbursa and Scotiabank

Inverlat, represented approximately XX.X% of the total Mexican banking system assets in June 2010. As such,

the Mexican banking industry is highly concentrated among seven leading banks.

Chile


The Chilean consumer finance market valued US$XX.X billion in 2011, after recording a CAGR of XX.XX%

during the review period. The consumer finance market is projected to record a CAGR of X.XX% over the

forecast period, to reach a value of US$XX.XXX billion in 2016.

Trends and drivers

There was a massive earthquake in Chile in February 2010, which had a negative influence on the country’s

economic development and significantly affected its infrastructure by damaging roads, commercial buildings and

houses. However, this provided opportunities for the Chilean mortgage lending category, as people whose

houses were damaged in the earthquake started to seek finance from the government and money lenders to

rebuild their houses.

The Chilean auto loans category registered significant growth during the review period due to the country’s rapid

vehicle sales growth and improving microeconomic factors. In addition, auto lenders reduced interest rates and

softened their payment procedures, which improved consumer confidence in auto loans. The growing automobile

industry is expected to support the growth of auto lending as a large proportion of vehicle purchases are financed

by loans in Chile.

Challenges

Chilean consumers tend to be charged higher interest rates on credit products due to the informality and lack of

transparency among retail lenders in the country. Consumers often find considerable differences in the provisions

and fees charged on the relatively similar credit products.

The Chilean consumer finance market comprises only a few companies that offer all types of consumer finance

products, including credit cards, mortgage loans, payroll loans and personal loans. Banco Santander Chile, the

largest Chilean consumer finance company, held over XX% of the total assets in retail banking, while the second-

largest company, Banco de Chile, accounted for approximately XX% of the total assets in the Chilean banking

industry. As a result, there is little competition in the consumer finance market, which resulted in high interest

rates and unnecessary processing charges on consumer finance products.

Regulations

Chile is one of the world’s emerging economies with highly integrated financial systems and capital markets. The

banks in Chile are supervised and controlled by an independent Chilean governmental agency named called the

Superintendency of Banks and Financial Institutions (SBIF).

Under the Banking Act, the Chilean banks must have a paid-in capital and reserves of CLPXXXXXX and, when

such the bank’s paid-in capital reaches CLPXXX,XXX, the effective equity required is reduced to XX% of its risk

weighted assets.


Chile’s banking industry contained XX banks, XX out of which were foreign-owned banks, while XX were

domestic banks and one was a state-owned bank in September 2010. The Chilean banking industry is controlled

by the multinational companies that have a large share in the industry. However, there are only a few banks,

including Banco Santander Chile, Banco de Chile, Banco de Estado and Banco de Credito e Inversion, that

provide a comprehensive range of credit products, including credit cards, housing loans, personal loans and

payroll loans. This makes the consumer finance market highly concentrated due to the limited number of

companies that offer consumer financial services.

TABLE OF CONTENTS




TABLE OF CONTENTS

1 Executive Summary .............................................................................................................................. 2 2 Latin American Consumer Finance Market Benchmarking ............................................................ 11

2.1 Overview of Latin American Consumer Finance Markets ..................................................................... 11

2.2 Latin American Countries Consumer Finance Market Dynamics .......................................................... 12

2.3 Macroeconomic Drivers ......................................................................................................................... 17

3 Brazil ..................................................................................................................................................... 19

3.1 Consumer Finance Market Environment ............................................................................................... 19

3.1.1 Consumer finance segmentation ........................................................................................................... 20

3.1.2 Microeconomic fundamentals ................................................................................................................ 23

3.1.3 Consumer demand dynamics ................................................................................................................ 28

3.1.4 Consumer attitudes towards credit ........................................................................................................ 33

3.1.5 Industry indicators.................................................................................................................................. 34

3.1.6 Regulatory framework ........................................................................................................................... 38

3.2 Market Size and Forecast ...................................................................................................................... 40

3.2.1 Overview ................................................................................................................................................ 40

3.2.2 Credit card loans.................................................................................................................................... 41

3.2.3 Personal loans ....................................................................................................................................... 42

3.2.4 Payroll loans .......................................................................................................................................... 43

3.2.5 Auto loans .............................................................................................................................................. 44

3.2.6 Mortgage lending ................................................................................................................................... 45

3.3 Trends and Growth Drivers ................................................................................................................... 46

3.4 Industry Structure and Competitive Landscape .................................................................................... 49

3.4.1 Overview ................................................................................................................................................ 49

3.4.2 Company profiles ................................................................................................................................... 52

3.5 Strategies ............................................................................................................................................... 53

3.5.1 Marketing and product strategies .......................................................................................................... 53

3.5.2 Market entry strategies .......................................................................................................................... 53

3.5.3 Growth strategies................................................................................................................................... 54

3.6 Challenges ............................................................................................................................................. 55

3.7 Future Prospects of Consumer Finance ................................................................................................ 56

3.7.1 Overview ................................................................................................................................................ 56


3.7.3 Personal loans and payroll loans ........................................................................................................... 56

3.7.4 Auto loans .............................................................................................................................................. 56


4 Mexico ................................................................................................................................................... 58



4.1.2 Macroeconomic fundamentals ............................................................................................................... 61


4.1.4 Consumer attitudes towards credit ........................................................................................................ 69


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4.1.6 Regulatory framework ........................................................................................................................... 74

4.2 Market Size and Forecast ...................................................................................................................... 75

4.2.1 Overview ................................................................................................................................................ 75


4.2.3 Personal loans ....................................................................................................................................... 77

4.2.4 Payroll loans .......................................................................................................................................... 78

4.2.5 Auto loans .............................................................................................................................................. 79


4.3 Trend and Drivers .................................................................................................................................. 81

4.4 Industry Structure and Competitive Landscape .................................................................................... 83

4.4.1 Overview ................................................................................................................................................ 83

4.4.2 Company profiles ................................................................................................................................... 85

4.5 Strategies ............................................................................................................................................... 86

4.5.1 Marketing and product strategies .......................................................................................................... 86

4.5.2 Market entry strategies .......................................................................................................................... 86

4.5.3 Growth strategies................................................................................................................................... 86

4.6 Challenges ............................................................................................................................................. 88

4.7 Future Prospects of Consumer Finance ................................................................................................ 89

4.7.1 Overview ................................................................................................................................................ 89


4.7.3 Personal and payroll loans .................................................................................................................... 89

4.7.4 Auto loans .............................................................................................................................................. 89


5 Chile ...................................................................................................................................................... 90



5.1.2 Macroeconomic fundamentals ............................................................................................................... 92



5.1.5 Regulatory framework ......................................................................................................................... 103

5.2 Market Size and Forecast .................................................................................................................... 104

5.2.1 Overview .............................................................................................................................................. 104

5.2.2 Credit card loans.................................................................................................................................. 105

5.2.3 Personal loans ..................................................................................................................................... 106

5.2.4 Payroll loans ........................................................................................................................................ 107

5.2.5 Auto loans ............................................................................................................................................ 108

5.2.6 Mortgage lending ................................................................................................................................. 109

5.3 Trends and Drivers .............................................................................................................................. 110

5.4 Industry Structure and Competitive Landscape .................................................................................. 112

5.4.1 Overview .............................................................................................................................................. 112

5.4.2 Company profiles ................................................................................................................................. 114

5.5 Strategies ............................................................................................................................................. 115

5.5.1 Marketing and product strategies ........................................................................................................ 115

TABLE OF CONTENTS




5.5.2 Market entry strategies ........................................................................................................................ 115

5.5.3 Growth strategies................................................................................................................................. 115

5.6 Challenges ........................................................................................................................................... 117

5.7 Future Prospects of Consumer Finance .............................................................................................. 118

5.7.1 Overview .............................................................................................................................................. 118


5.7.3 Personal loans and payroll loans ......................................................................................................... 118

5.7.4 Auto finance ......................................................................................................................................... 119


6 Other Latin America Markets ............................................................................................................ 120

6.1 Peru ..................................................................................................................................................... 120

6.1.1 Consumer finance market overview .................................................................................................... 120

6.1.2 Macroeconomic indicators ................................................................................................................... 121

6.1.3 Regulatory framework ......................................................................................................................... 127

6.1.4 Market size and growth potential – Peruvian banking industry ........................................................... 128

6.2 Market Size and Forecast .................................................................................................................... 130

6.2.1 Overview .............................................................................................................................................. 130


6.2.3 Personal loans ..................................................................................................................................... 132

6.2.4 Payroll loans ........................................................................................................................................ 133

6.2.5 Auto loans ............................................................................................................................................ 134


7 Appendix ............................................................................................................................................ 136

7.1 About BRICdata ................................................................................................................................... 136

7.1.1 Areas of expertise ................................................................................................................................ 136

7.2 Methodology ........................................................................................................................................ 137

7.3 Disclaimer ............................................................................................................................................ 138

TABLE OF CONTENTS




LIST OF FIGURES

Figure 1: Credit Card Loans Market Dynamics in Latin American Countries, 2007–2016 ........................................................................... 12 Figure 2: Mortgage Lending Market Dynamics in Latin American Countries, 2007–2016 ........................................................................... 13 Figure 3: Auto Loans Market Dynamics in Latin American Countries, 2007–2016 ...................................................................................... 14 Figure 4: Personal Loans Market Dynamics in Latin American Countries, 2007–2016 ............................................................................... 15 Figure 5: Payroll Loans Market Dynamics in Latin American Countries, 2007–2016 .................................................................................. 16 Figure 6: Brazilian Total Credit as Percentage of GDP (%), 2007–2011 .................................................................................................... 19 Figure 7: Brazilian Transaction Volumes by Payment Methods (%), 2010.................................................................................................. 20 Figure 8: Brazilian Transaction Values by Payment Methods (%), 2010 .................................................................................................... 20 Figure 9: Brazilian Transaction Value by Payment Method (BRL Billion), 2009–2013 ................................................................................ 21 Figure 10: Brazilian GDP at Constant Prices (BRL Billion), 2007–2016 ..................................................................................................... 23 Figure 11: Brazilian Inflation Rate (%), 2007–2016 .................................................................................................................................... 24 Figure 12: Brazilian Number of Households (Million), 2007–2016 .............................................................................................................. 25 Figure 13: Brazilian FDI Inflows (US$ Billion), 2007–2011 ......................................................................................................................... 26 Figure 14: Brazilian FDI as a Percentage of GDP (%), 2007–2011 ............................................................................................................ 27 Figure 15: Brazilian Annual Disposable Income (BRL Billion), 2007–2016 ................................................................................................. 28 Figure 16: Brazilian Unemployment Rate (%), 2007–2016 ......................................................................................................................... 29 Figure 17: Brazilian Urban and Rural Population (%), 2007–2016 ............................................................................................................. 30 Figure 18: Brazilian Population Size (Million), 2000–2050 ......................................................................................................................... 31 Figure 19: Brazilian Population Distribution by Age Group, 2010 ............................................................................................................... 32 Figure 20: Brazilian Population by Social Class Group (Million), 2003–2014 .............................................................................................. 33 Figure 21: Brazilian Banking Industry Value by Loans and Deposits (US$ Billion), 2007–2016 .................................................................. 35 Figure 22: Brazilian Banking Industry Growth by Performance Indicator (%), 2007–2016 .......................................................................... 36 Figure 23: Brazil Insurance Industry Dynamics (US$ Billion), 2007–2016 .................................................................................................. 37 Figure 24: Brazilian Consumer Finance Market Dynamics, 2007–2016 ..................................................................................................... 40 Figure 25: Brazilian Credit Card Loans Market Size (US$ Billion), 2007–2016 ........................................................................................... 41 Figure 26: Brazilian Personal Loans Market Size (US$ Billion), 2007–2016 ............................................................................................... 42 Figure 27: Brazilian Payroll Loan Market Size (US$ Billion), 2007–2016 .................................................................................................... 43 Figure 28: Brazilian Auto Finance Loan Market Size (US$ Billion), 2007–2016 .......................................................................................... 44 Figure 29: Brazilian Mortgage Lending Market Size (US$ Billion), 2007–2016 ........................................................................................... 45 Figure 30: Brazilian Consumer Finance Market Key Growth Drivers .......................................................................................................... 46 Figure 31: Brazilian Internet Penetration Rate (%), 2007–2016 ................................................................................................................. 48 Figure 32: Brazilian Leading Banks by Total Assets (%), December 2010 ................................................................................................. 50 Figure 33: Brazilian Total Assets by Types of Banks (%), December 2010 ................................................................................................ 50 Figure 34: Credit Card Penetration of Social Class Groups (%), 2011 ....................................................................................................... 59 Figure 35: Mexican GDP at Constant Prices (MXN Trillion), 2007–2016 .................................................................................................... 61 Figure 36: Mexican Inflation Rate (%), 2007–2016 .................................................................................................................................... 62 Figure 37: Mexican Number of Households (Million), 2007–2016 .............................................................................................................. 63 Figure 38: Mexican FDI Inflows (US$ Billion), 2007–2010 ......................................................................................................................... 64 Figure 39: Mexican Annual Disposable Income (MXN Trillion), 2007–2016 ............................................................................................... 65 Figure 40: Mexican Unemployment Rate (%), 2007–2016 ......................................................................................................................... 66 Figure 41: Mexican Urban and Rural Population (%), 2007–2016 .............................................................................................................. 67 Figure 42: Mexican Population Size (Million), 2000–2050 .......................................................................................................................... 68 Figure 43: Mexican Population Distribution by Age Group (%), 2007–2016 ............................................................................................... 69 Figure 44: Banking Industry Value by Loans and Deposits (US$ Billion), 2007–2016 ................................................................................ 71 Figure 45: Mexican Banking Industry Growth by Performance Indicator (%), 2007–2016 .......................................................................... 72 Figure 46: Mexican Insurance Industry Dynamics by Insurance Segment (US$ Billion), 2007–2016 .......................................................... 73 Figure 47: Mexican Consumer Finance Market Dynamics, 2007–2016 ...................................................................................................... 75 Figure 48: Mexican Credit Card Loans Category Size (US$ Billion), 2007–2016........................................................................................ 76 Figure 49: Mexican Personal Loans Category Size (US$ Billion), 2007–2016 ............................................................................................ 77 Figure 50: Mexican Payroll Loans Category Size (US$ Billion), 2007–2016 ............................................................................................... 78 Figure 51: Mexican Auto Loans Category Size (US$ Billion), 2007–2016 .................................................................................................. 79 Figure 52: Mexican Mortgage Lending Category Size (US$ Billion), 2007–2016 ........................................................................................ 80 Figure 53: Mexican Consumer Finance Market Key Growth Drivers .......................................................................................................... 81 Figure 54: Mexican Leading Banking Companies by Assets (%), June 2010 ............................................................................................. 83 Figure 55: Mexican Leading Banks by Total Assets (MXN Billion), June 2010 ........................................................................................... 84 Figure 56: Mexican Leading Banks by Net Income (MXN Billion), December 2010 ................................................................................... 84 Figure 57: Mexican Banking Penetration Rate (Million), 2003–2015 .......................................................................................................... 87 Figure 58: Chilean GDP at Constant Prices (CLP Trillion), 2007–2016 ...................................................................................................... 92 Figure 59: Chilean Inflation Rate (%), 2007–2016 ...................................................................................................................................... 93 Figure 60: Chilean FDI Inflows (US$ Billion), 2007–2011 ........................................................................................................................... 94 Figure 61: Chilean Annual Disposable Income (CLP Trillion), 2007–2016.................................................................................................. 95 Figure 62: Chilean Unemployment Rate (%), 2007–2016 .......................................................................................................................... 96 Figure 63: Chile Urban and Rural Population (%), 2007–2016 ................................................................................................................... 97

TABLE OF CONTENTS




Figure 64: Chilean Population Size(Million), 2000–2050 ............................................................................................................................ 98 Figure 65: Chilean Banking Industry Value by Loans and Deposits (US$ Billion), 2007–2016 ................................................................ 100 Figure 66: Chilean Banking Industry Growth by Performance Indicator (%), 2007–2016 .......................................................................... 101 Figure 67: Chilean Insurance Industry Dynamics (US$ Billion), 2007–2016 ............................................................................................. 102 Figure 68: Chilean Consumer Finance Market Dynamics, 2007–2016 ..................................................................................................... 104 Figure 69: Chilean Credit Card Loans Category Size (US$ Billion), 2007–2016 ....................................................................................... 105 Figure 70: Chile Personal Loans Category Size (US$ Billion), 2007–2016 ............................................................................................... 106 Figure 71: Chile Payroll Loans Category Size (US$ Billion), 2007–2016 .................................................................................................. 107 Figure 72: Chile Auto Loans Category Size (US$ Billion), 2007–2016 ..................................................................................................... 108 Figure 73: Chilean Mortgage Lending Category Size (US$ Billion), 2007–2016 ....................................................................................... 109 Figure 74: Chilean Consumer Finance Market Key Growth Drivers ......................................................................................................... 110 Figure 75: Chilean Leading Banking Companies by Assets (%), 2011 ..................................................................................................... 112 Figure 76: Chilean 10 Leading Banks by Assets (CLP Trillion), 2011 ....................................................................................................... 113 Figure 77: Chilean 10 Leading Banks by Net Income (CLP Billion), 2011 ................................................................................................ 113 Figure 78: Peruvian GDP at Constant Prices (PEN Billion), 2007–2016 ................................................................................................... 121 Figure 79: Peruvian Annual Disposable Income (PEN Billion), 2007–2016 .............................................................................................. 122 Figure 80: Peruvian Inflation Rate (%), 2007–2016 .................................................................................................................................. 123 Figure 81: Peruvian Urban Rural Population (%), 2007–2016 .................................................................................................................. 124 Figure 82: Peruvian FDI Inflows (US$ Billion), 2007–2010 ....................................................................................................................... 125 Figure 83: Peruvian Unemployment Rate (%), 2007–2016 ...................................................................................................................... 126 Figure 84: Peruvian Banking Industry Value by Loans and Deposits (US$ Billion), 2007–2016 ............................................................... 128 Figure 85: Peruvian Banking Industry Growth by Performance Indicator (%), 2007–2016 ........................................................................ 129 Figure 86: Peruvian Consumer Finance Market Dynamics, 2007–2016 ................................................................................................... 130 Figure 87: Peruvian Credit Card Loans Category Size (US$ Million), 2007–2016 .................................................................................... 131 Figure 88: Peruvian Personal Loans Category Size (US$ Billion), 2007–2016 ......................................................................................... 132 Figure 89: Peruvian Payroll Loans Category Size (US$ Billion), 2007–2016 ............................................................................................ 133 Figure 90: Peruvian Auto Loans Category Size (US$ Billion), 2007–2016................................................................................................ 134 Figure 91: Peruvian Mortgage Lending Category Size,(US$ Billion), 2007–2016 ..................................................................................... 135

TABLE OF CONTENTS




LIST OF TABLES

Table 1: Latin American Countries’ Macroeconomic Indicators, 2011 ........................................................................................................ 17 Table 2: Latin American Countries’ Macroeconomic Indicators, 2011 ........................................................................................................ 17 Table 3: Latin American Countries’ Macroeconomic Indicators, 2016 ........................................................................................................ 18 Table 4: Latin American Countries’ Macroeconomic Indicators, 2016 ........................................................................................................ 18 Table 5: Brazilian Population Size (Million), 2000–2050 ............................................................................................................................. 31 Table 6: Brazilian Banking Industry Value by Loans and Deposits (US$ Billion), 2007–2016 ..................................................................... 35 Table 7: Brazilian Banking Industry Growth by Performance Indicator (%), 2007–2016 ............................................................................. 36 Table 8: Brazil Insurance Industry by Insurance Segment (US$ Billion), 2007–2016 ................................................................................. 37 Table 9: Mexican Population Size (Million), 2000–2050 ............................................................................................................................. 68 Table 10: Banking Industry Value by Loans and Deposits (US$ Billion), 2007–2016 ................................................................................. 71 Table 11: Mexican Banking Industry Growth by Performance Indicator (%), 2007–2016 ............................................................................ 72 Table 12: Mexican Insurance Industry by Insurance Segment (US$ Billion), 2007–2016 ........................................................................... 73 Table 13: Chilean Population Size (Million), 2000–2050 ............................................................................................................................ 98 Table 14: Chilean Banking Industry Value by Loans and Deposits (US$ Billion), 2007–2016 ................................................................... 100 Table 15: Chilean Banking Industry Growth by Performance Indicator (%), 2007–2016 ........................................................................... 101 Table 16: Chilean Insurance Industry by Category (US$ Billion), 2007–2016 ........................................................................................... 102 Table 17: Peruvian Banking Industry Value by Loans and Deposits (US$ Billion), 2007–2016 ................................................................. 128 Table 18: Peruvian Banking Industry Growth by Performance Indicator (%), 2007–2016 ......................................................................... 129

LATIN AMERICAN CONSUMER FINANCE MARKET BENCHMARKING




2 Latin American Consumer Finance Market Benchmarking

2.1 Overview of Latin American Consumer Finance Markets

This report provides an overview of consumer finance in Latin America with a focus on the three leading markets: Brazil,

Mexico and Chile, and an additional feature on Peru. Consumer finance is developing in Latin America at one of the

fastest rates in the world, which provides attractive long-term possibilities for consumer finance providers. The results of

this research will encourage new consumer finance providers to capitalize on these strong growth prospects, especially

due to the limited opportunities in developed countries. The growth prospects of consumer finance in the region can be

indicated by an overview of Latin America’s demographic situation. Although estimates vary, a conservative estimate is

that over XX% of the region is either unbanked or under banked. Despite the existence of a large unbanked population,

Brazil is anticipated to account for the third-largest volume number of financial card transactions in 2013.

2.2 Latin American Countries Consumer Finance Market Dynamics

The credit card loans category in Latin American countries such as Brazil, Chile and Peru developed rapidly during the

review period. However, the Mexican credit card loans recorded a negative CAGR of XX.XX% during the review period, as

the number of cash-based transactions undertaken in this period increased following the global economic crisis that

adversely affected the Mexican economy in 2009. Despite this, the value of credit card loans in Brazil registered a CAGR

of XX.XX% during the review period, while Peru recorded impressive CAGR of XX.XX%, due to the growing demand for

credit in these countries and their increasing disposable income levels. In addition, Chile’s credit card loans value

increased at a CAGR of X.XX% during the review period, which was supported by the country’s improving business

environment.

The strong growth in the value of credit card loan categories is anticipated in the four large Latin American countries over

the forecast period, as a result of the improving microeconomic fundamentals in these countries. Peru will record the

fastest-growing credit card loans category, after achieving a CAGR of XX.XX% during the review period, while Mexico is

expected to record a CAGR of XX.XX%, Brazil will achieve a CAGR of XX.XX% and Chile will register a CAGR of X.XX%

over the forecast period.

The following figure displays the credit card loans market dynamics in Latin American countries during 2007–2016:

Figure 1: Credit Card Loans Market Dynamics in Latin American Countries, 2007–2016

Source: Central Bank of Brazil and BRICdata analysis © BRICdata

CONSUMER FINANCE MARKET IN BRAZIL




3 Brazil

3.1 Consumer Finance Market Environment

This chapter assesses the main growth drivers of consumer finance in Brazil, which is one of the largest emerging

countries in the world. The report identifies what determines the demand for the consumer finance market, its

performance, and the types of consumer finance products available in the country. Finally, the chapter details why Brazil is

the most attractive potential investment destination in the region for consumer finance providers.

Brazilian consumer debt levels remain low, which can be contrasted with the USA and UK where excessive levels of

personal debt have emerged. According to Ribereirao Preto, an expert in the banking industry at INEPAD, the total value

of loans in Brazil accounted for XX.X% of GDP in 2011, which is far lower than in developed countries. This suggests

there are opportunities for consumer finance providers to gain more customers and increase the country’s total loan value.

The personal loans category recorded an annual growth rate of XX.X% in 2011. As a result, it accounted for XX.X% of the

country’s total loans portfolio, while mortgage loans represented less than 7%, in 2011. Traditionally, personal loans have

been one of the most important types of consumer finance in Brazil. However, this has been challenged by the

introduction of payroll loans since 2003. A payroll loan is credit that is directly debited from a worker’s period wages.

It is expected that payroll loans will continue to erode the market share of personal loans in Brazil over the forecast period.

The Brazilian personal loans category is dominated by private-sector banks.

The following figure displays the country’s total credit as percentage of GDP during the review period

Figure 6: Brazilian Total Credit as Percentage of GDP (%), 2007–2011

Source: Central Bank of Brazil and BRICdata analysis © BRICdata

CONSUMER FINANCE MARKET IN BRAZIL




3.2 Market Size and Forecast

3.2.1 Overview

The personal loans category was the largest product in the Brazilian consumer finance market in 2011, as it valued

US$XXX.X billion in 2011. Meanwhile, the mortgage lending category was the fastest growing, as it increased in value at a

CAGR of XX.XX% during the review period. The mortgage lending category is expected to continue registering the fastest

growth over the forecast period. This will be supported by the country’s ongoing infrastructure development and

preparation for hosting major sporting events, which will also have a positive impact on Brazil’s overall industrial growth.

The Brazilian credit card loans category recorded significant growth during the review period, although it is still the

smallest consumer finance product in the country.

The following figure displays the Brazilian consumer finance market dynamics during 2007–2016:

Figure 24: Brazilian Consumer Finance Market Dynamics, 2007–2016

Source: BRICdata analysis © BRICdata

CONSUMER FINANCE MARKET IN CHILE




4 Mexico


Although it initially avoided the worst aspects of the prolonged economic downturn recorded in North America, Mexico’s

retail banking market is now facing challenges similar to those in the US and, as a result, banks are having to adjust their

business models. The Mexican economy may have entered into a period of growth, but the limited availability of credit

means that both banks and consumers are facing difficult choices. Despite this untapped customer groups and increased

competition provide positive growth potential for the consumer finance market. With unemployment on the rise and

suspicions remaining about the potential for long-term economic growth there are many doubts over the ability of

borrowers to pay their loans and, consequently, banks have downsized their credit businesses. However, a new source of

revenue could be created courtesy of changes to the financial legal framework, which would enable retail banks to expand

their networks at a lower cost.

Credit cards

According to the Bank of Mexico, the payments received by credit card holders increased by X% in 2011 over figures from

2010. By the end of 2011, XX.X million credit cards were in circulation, an annual rise of XX.X% from the second quarter

of 2010.

In June 2009 the average effective rate on credits cards was XX.X%. BanCoppel holds the highest effective interest rate

of XX.X% while Banco del Bajío provides the lowest rate of XX.X%. Of the largest consumer lending banks, HSBC has the

highest rate of XX.X%, Santander offers XX.X% and Banorte offers XX.X%. Industry forecasts project a decline in value

per transaction and transactions per card over 2009–2013. Prepaid cards are not expected to record a decline, due to the

countercyclical nature of the product.

The main challenge to sustaining payments growth in Mexico is to continue to migrate consumer payment preferences

from cash to cards, and encourage the adoption of cards by the unbanked population and under-banked consumers.

The following figure displays the credit card penetration of different social class groups in 2011. The credit card

penetration includes the percentage of homes in each social class group with at least one credit card:

Figure 34: Credit Card Penetration of Social Class Groups (%), 2011






4.2 Market Size and Forecast

4.2.1 Credit card loans

The Mexican credit card loans category valued US$XX.X billion in 2011, after registering a CAGR of -XX.XX% during the

review period. The negative growth was mainly due to the global financial crisis, which adversely impacted the Mexican

economy and had a negative influence on the credit card loans market as people increasingly opted for cash transaction

rather than credit. However, the market is expected to register a CAGR XX.XX% over the forecast period, due to the

country’s improving business environment and macroeconomic indicators.

The following figure details the size of the Mexican credit card loans category during 2007–2016:

Figure 48: Mexican Credit Card Loans Category Size (US$ Billion), 2007–2016






5 Chile


Credit has been a key instrument in the transformation of the Chilean economy since the early 1990s. This chapter

explores the consumer finance market in Chile, a country with one of the most open and export-oriented economies in the

region and with a uniquely structured credit card market, largely dominated by retailers. The chapter will focus on the vital

role played by non-banking institutions such as retailers in the rise of Chilean financial services. Chile is one of the fastest

growth economies in the region with an export-oriented strategy and a stable political environment.

5.1.1 Macroeconomic fundamentals

GDP growth

Chile’s GDP at constant prices valued CLPXX.X trillion in 2011, after recording a CAGR of X.XX% during the review

period. The global recession had a negative influence on Chile’s economy 2009 and, as such, the country’s GDP recorded

an annual growth rate of -X.X% that year. However, GDP growth is projected to increase at a CAGR of X.XX% over the

forecast period, to reach CLPXX.X trillion in 2016. Stable economic growth is expected to fuel the consumer finance

market in the country.

The following figure details Chile’s GDP at constant prices during 2007–2016:

Figure 58: Chilean GDP at Constant Prices (CLP Trillion), 2007–2016


APPENDIX




6 Appendix

6.1 About BRICdata

BRICdata publishes in-depth strategic intelligence reports that help its customers better understand opportunities in

emerging markets and industry sectors. Its reports provide an independent, expert view supported by primary research

and access to leading data and intelligence sources.

BRICdata is a comprehensive source of insights and analysis, and publishes a broad range of reports across a number of

different industry sectors, including consumer, retail, financial services, technology, telecoms and construction.

BRICdata is headquartered in London with research, analysis and account management teams based across Europe, the

US and Asia-Pacific. Its global research footprint is supported by a network of external associates, data partners and

industry experts to give the clearest possible perspective on emerging markets.

6.1.1 Areas of expertise

BRICdata operates a dedicated, multilingual team of in-house industry analysts with significant experience of global and

country-level research. BRICdata also maintains data and research partnerships with other research companies, industry

experts and trade associations, along with a network of independent industry consultants and former industry participants

contributing research and reports to bring additional insight and expertise in more specialist areas.

BRICdata’s research offering spans the following industry areas:

Construction

BRICdata publishes reports covering the entire construction value chain: construction materials, equipment, construction

services, architectural services and interior design. It also covers the main value sectors of construction activity:

commercial, infrastructure, industrial, institutional and residential.

This comprehensive view of the market enables BRICdata to detail key growth sectors and countries and identify the most

attractive industry opportunities.

Consumer goods

Covering a broad range of areas across the consumer goods market, from interior products to fast-moving consumer

goods (FMCG), ingredients, and packaging, BRICdata offers a comprehensive insight into key consumer sectors across

fast-growing markets, identifying key trends, future innovations and growth opportunities.

Comprehensive data sets including unique primary survey-driven research creates accurate market forecasts and

understanding of the factors driving consumption behavior.

Financial services Providing detailed insights into insurance and banking markets, BRICdata’s financial services reports identify key market

opportunities, emerging technologies and channel strategies. The reports provide unique data combined with local

examples of best practice and expert insights into the market.

Retail BRICdata maintains a comprehensive database of forecasts of retail spending, along with a series of unique indicators

enabling a forward view of retailers’ prospects in emerging markets. The reports identify emerging concepts in retail,

including the nascent online and mobile retail sectors in the BRIC countries and other emerging markets.

Technology

BRICdata tracks key trends and innovations, emerging technologies and markets, and the key operators in both emerging

markets and technologies. Covering a range of emerging and disruptive technologies including telecoms, social media,

online and mobile retailing, and telemedicine, BRICdata examines strategies for success, the state of the competitive

landscape and the inherent threats and opportunities in the emerging technological economy.

APPENDIX




6.2 Methodology

All BRICdata reports are rigorously sourced and created according to a comprehensive, two-stage methodology. This

includes internal audit and primary research.

A) Internal audit

Review of in-house databases to gather existing data:

o Historic market databases and reports

o Company database

o projects database

B) Primary research

Review of the latest company strategy and asset management trends

1) Research

A. Sources

Collection of the latest market-specific data from a wide variety of industry sources:

o Government statistics

o Industry associations

o Company filings

o Broker reports

o International organizations

B. Expert opinion

Collation of opinion taken from leading industry experts

Analysis of third-party opinion and forecasts:

o Broker reports

o Industry associations

o Official government sources

C. Data consolidation and verification

Consolidation of data and opinion to create historical datasets

Creation of models to benchmark data across sectors and geographies

2) Research Analysis

Market forecasts

Feed of forecast data into market models:

o Macroeconomic indicators

o Industry-specific drivers

Analysis of Market Databases to identify trends by sector:

o Latest trends

o Key drivers of the market

3) Report Writing

Analysis of market data

Discussion of company and industry trends and issues

Integration of survey results

Annual review of trends

Standardization of market definitions using recognized industry classifications

4) Quality Control

A. Templates

Detailed process manuals

Standardized report templates and accompanying style guides

Complex forecasting tool used to ensure forecast methodologies are consistently applied

QC checklists

B. QC process

Peer review

APPENDIX




Senior-level QC

Random spot checks on data integrity

Benchmark checks across databases

Market data cross-checked for consistency with accumulated data from company filings

6.3 Disclaimer

All rights reserved.

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means,

electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, BRICdata.

The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the

findings, conclusions and recommendations that BRICdata delivers will be based on information gathered in good faith

from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. BRICdata can,

therefore, accept no liability whatsoever for actions taken based on any information that may subsequently prove to be

incorrect.

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