Branchless Banking and Consumer Protection in Brazil

January 12, 2010    

As part of its Global Policy Initiative, CGAP partnered with the Central Bank of Brazil (CBB) in 2008 to assess the key issues and concerns around consumer protection for branchless banking services. The report, available here in English and Portuguese, highlights the findings.

The use of electronic channels (branchless banking) for conducting retail financial transactions is a fast-growing segment of the Brazilian banking sector. These products and delivery channels often bring financial services to populations for whom banking is either not possible, or too costly and time consuming. The growing popularity of these new financial services is evidenced by the fact that in 2008 over 90% of the total noncash bank retail payment transactions in Brazil were processed via electronic channels, with increased use of cards as a payment instrument.

Despite positive developments and the overall belief that branchless banking has achieved significant scale without major drawbacks and problems for the consumer, there are important opportunities to improve the enforcement of consumer protection principles in this new sector of banking. The report discusses the legal and regulatory framework for financial consumer protection, presents issues and problems in the relationship between branchless banking providers and clients, and introduces recommendations for achieving a balance between openness to innovation and protection in a branchless banking environment.