Banco do Brasil, Latin America’s
largest bank by assets, and Banco Bradesco are merging parts of
their cards businesses to create a new venture called Elo which
will target unbanked Brazilians. The banks want the new venture to
capture 15% of Brazil’s card market in the next 5 years, and are
projecting synergies of BRL1bn.

“Most of the growth in market share
is expected to come from new clients,” said Marcelo de Araújo
Noronha, general director of Bradesco’s cards division.

“It is based on the growth we have
been observing in cards in the lower and middle-income bracket. We
intend to capture part of this growth with the new brand. The
growth will also come from competition between our new brand and
the traditional brands.”

Araújo Noronha said he wanted Elo
to compete with card schemes Visa and MasterCard, mainly among the
low-income segment. Customers will be offered the choice of either
Elo or Visanet-branded cards when they open accounts.

Banco do Brasil and Bradesco are
already big players in Brazil’s cards market, operating Cielo,
Brazil’s largest card processor, and Companhia Brasileira de
Soluções e Serviços (CBSS), which issues Visa Vale’s social benefit
card products.

The new Elo brand will be used
across debit, credit and prepaid products in an effort to improve
consumer understanding of where certain products can be used. This
will tie in with the banks’ Cielo processing and merchant acquiring

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The new business structure will
have three main elements. The first will be Elo Banco, a banking
business which will focus on private label, debit and credit cards.
The second is an administration and services unit which will focus
on prepaid card solutions and services. The prepaid business will
be branded Elo Vale. The third business unit will be the Cielo
processing and acquiring business, which will keep its current

“We want the new brand to be
simple, uncomplicated and have a strong national identity as a
Brazilian brand,” Noronha said.

Changes to the Cielo business are
subject to the approval of shareholders.

The news comes as Brazilian regulators consider more strict
rules on credit card operators unless they agree on a code of self
regulation. There is concern over card fees and their impact on low
income card holders.