Banco Fibra, a mid-size Brazilian bank with close ties
to retailers, is well placed to take advantage of Brazil’s
burgeoning credit card market, analysts tell Robin Arnfield. The
bank is also considering a move into Brazil’s rapidly developing
merchant acquiring market.


Owned by Brazilian industrial
conglomerate Grupo Vicunha, Banco Fibra started life in 1987 as a
commercial bank making loans to SMEs, but has recently been making
inroads in the consumer finance market.

Its CrediFibra consumer finance
subsidiary specialises in co-branded Visa credit cards, car loans,
payroll-deductible loans, bank loans, and CDC (Crédito Direito ao
Consumidor/direct-to-consumer) loans offered through retailers.

CrediFibra also has a partnership
with Credicard Financing, the consumer finance arm of Credicard,
Citibank’s Brazilian credit card subsidiary, to market payroll
loans to Credicard customers.

During 2010, CrediFibra plans to
invest BRL12m ($6.8m) in technology and marketing initiatives in
order to expand its loan book.

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In August 2009, Fibra entered the
credit card market with a co-branded Visa card targeting
real-estate brokers. A COFECI/CRECI card was launched in
partnership with COFECI (Conselho Federal de Corretores de
Imóveis/federal council of real-estate brokers) and CRECI
(Conselhos Regionais de Corretores de Imóveis/Regional councils of
real-estate brokers).

The bank aims to have around 90,000
of the cards in issue, potentially generating revenues of BRL500m,
within five years. It also plans to launch a series of co-branded
Visa cards with major Brazilian retailers such as the Nagumo
supermarket chain.


Retail focus

“Fibra is now very much focused on
the retail sector,” says Evette Treewater, a senior analyst at in
the Sao Paolo, Brazil office of US consultancy Kroll.

The bank’s main consumer finance
activity is point-of-sale loans. By 31 March, Fibra’s point-of-sale
loan book had risen by 116% to BRL600m from BRL278m in March 2009.
Fibra had around 3,500 retail partners and provided consumer loans
at 11,265 point-of-sale outlets at 31 March.

“Fibra is trying to move
step-by-step into the consumer lending and credit card market, and
I think the bank is going about it the right way,” says Marilyn
Parker, senior vice-president at US consultancy Speer &

The bank is clearly serious about
its retail push, appointing Antônio Francisco de Lima Neto, former
president of Banco do Brasil, as its president in August 2009. In
March, it bought Sofcred, the consumer credit arm of Banco Sofisa,
providing in-store finance, payroll loans, credit cards and car
loans in Brazil.


Expanding into

De Lima Neto said in May he wants
Fibra to expand in credit card issuing and also possibly enter an
alliance in credit card merchant acquiring and processing.

Treewater says Fibra’s
direct-lending partnerships with retailers give the bank a good
basis for expanding its co-branded credit card business.

“In Brazil, it is very common to
offer a co-branded credit card or private-label card with a limited
credit limit to low- to middle- income consumers who apply for
credit in a store,” she says. “These are people who do not qualify
for bank loans, so retailers step up to offer them credit.”

“Fibra has plenty of options on the
acquiring side,” says Parker. “It could get involved with Santander
Conta Integrada, the acquiring joint venture between Santander
Brazil and IT firm GetNet.”

Launched in March 2010, Santander
Conta Integrada plans to compete with Visa acquirer Cielo (formerly
VisaNet) and MasterCard processor Redecard in Brazil (see CI
434, page 4

From 1 July, the Brazilian
acquiring market is being deregulated, with the ending of the ban
on a single acquirer processing transactions for both Visa and
MasterCard. From that date, Cielo will lose its exclusive right to
acquire Visa transactions, while Redecard has already ceded its
exclusive right to acquire MasterCard transactions. Cielo has
already stated that it plans to acquire MasterCard and other
payment brands.

“Santander Conta Integrada has
acquired MasterCard but is expected to acquire Visa and other
payment brands,” Parker says. “Other entrants to the Brazilian
acquiring market will also eventually offer duality.”

In another move to increase
competition in the Brazilian cards market, Banco do Brasil and
Bradesco, the owners of Cielo, have launched Elo, intended as a
rival to both the Visa and MasterCard brands (see
). Elo, which will encompass credit, debit,
private-label, and prepaid cards, will target unbanked and
low-income consumers. CI also understands Fibra is
considering a partnership with Elo.

“With the acquiring market opening
up, there are opportunities for banks to have both credit card
issuing and acquiring businesses,” says Kristin Moyer, research
director for banking and investment services, at Gartner.

“The value lies in the fact these
banks can leverage the synergies between their acquiring and
issuing businesses and drive more value in every transaction for
the entire payment value chain from cardholders to merchants.”


Brazilian cards market

Associação Brasileira das Empresas
de Cartões de Crédito e Serviços, the Brazilian association of
credit card and service companies, estimated in April this year
that the total number of credit cards in issue in Brazil rose by
11% year-on-year to 142.2m.

Total credit card transactions in
April were up 11% year-on-year to 224.48m, while credit card
billings rose by 21% year-on-year to BRL23.68bn.

A major driver for credit card
growth is the large number of Brazilian consumers who are moving
off low incomes and developing affluent spending habits.

“Since 2002, 20m people have
emerged from the totally unbanked low-income sector into the
middle-income sector,” says Treewater.

“There is a lot of card issuing by Brazilian banks and retailers
to the newly banked. Another growth area for card issuers is the
various regions in Brazil such as the north east, where
historically there has been low penetration of cards.”