Banking & financial services: the trends, the issues, the solutions.

Latin American banks and financial service providers are looking ahead to 2006 with a positive outlook. Stronger economies throughout the region are creating growth opportunities in trade finance, private banking, corporate card issurance, electronic payments and insurance benefits.

At the same time, the deployment of new technology allows financial companies to deliver their services more quickly and efficiently. "International banks are using technology to serve their customers effectively over longer distances," says Agustin Abalo, immediate past president of the Florida International Bankers Association (FIBA) in Miami. "And we are still only at the beginning of their revolution in technology."

In Brazil alone, more than 18 million clients use the Internet for banking transactions, according to Aldo Luiz Mendes, vice president, Banco do Brasil. "For 2006, we are investing in options like mobile banking to bring us closer to our clients," he says.

Increased responsiveness to customers is becoming even more important as financial service providers respond to the pressures of globalization, as well as regulatory and compliance requirements. "Financial institutions must satisfy requests for information from their customers, as well as from regulators," adds David Konfino, president, International Division, Regions Bank in Coral Gables, Florida.

Other challenges for financial service providers include ensuring the security of data, and building customer awareness of new electronic tools like the corporate card and automated supply chain payment programs. And it's not just technology--employers must provide attractive benefits programs to recruit and retain skilled managers.

Here's a closer look at the key challenges and opportunities for Latin America's banking and financial service sector.

BRAZIL TO ENJOY EXPANSIVE MARKET

Thanks to continuing job growth, stable prices and increased purchases of consumer goods, the Brazilian financial sector is expected to expand in 2006. "We believe there are market opportunities on the credit side, such as lending for micro and small businesses, as well as for foreign trade," says Aldo Luiz Mendes, vice president of finance, capital markets and investor relations, Banco do Brasil. "We also expect to see increased demand for non-banking services, such as credit and corporate cards, as well as insurance products."

Mendes believes online banking volume will grow significantly as well. "Most of the Brazilian financial providers are already online," he says. "This is part of a continuous move toward greater efficiency throughout Latin America's financial system." In 2004, for instance, 83.5 percent of all Brazilian transactions were made through non-traditional delivery channels, he adds.

To build revenue, Brazilian banks will be seeking to increase their client bases by adding consumers who do not currently have accounts. Other growth strategies include cross-selling products and services to existing customers, increasing the volume of credit operations and cutting costs through automated technology and strategic partnerships. Mendes says banks will also invest more in hiring and training of their employees.

"Banco do Brasil invests systematically in new technology to improve its services to customers, its profitability for shareholders and its support for the community," says Mendes. "For 2006, we are investing in the development of options like mobile banking to bring our bank closer to our clients," he adds. For more information, visit: www.bb.com.br.

ELECTRONIC PAYMENT THE MISSING LINK IN SUPPLY CHAIN EFFICIENCY

In today's global economy, improvements in how supply chains are managed allow raw materials for a personal computer to be sourced in Brazil, manufactured in China, assembled in the US, and shipped anywhere in the world. Such a complex flow requires planning to be successful. In the words of Professor Warren H. Hausman from the Department of Management Science & Engineering at Stanford University, "tremendous strides have been made regarding product supply chain efficiencies--resulting in sharply reduced lead times, lower inventories, more responsiveness and variety, collaboration on planning and forecasting, and improved customer service."

However, financial flows have not been addressed with the same sense of urgency as material and product flows. As a result, business-to-business payment has not seen a corresponding increase in efficiency in the last 10 years, despite the availability of automated payment programs such as Visa Commercial Solutions. Most companies have not integrated payment into their supply chain management systems, resulting in inefficient financial processes.

What is it meant by "inefficient financial processes"? Most companies manage their financial flows manually, using paper-based invoicing and payment systems; initiating, tracking and reconciling these paper-based invoices and payments can be a significant part of a company's treasury costs. In a white paper on supply chain efficiencies, Professor Hausman uses the example of a major hotel in Latin America that moved from operating several chains with numerous hotels per chain, to a Shared Services Center across all their hotels chains for procurement, A/P, and A/R. By unifying the business process of all the hotels, they have increased productivity and estimate $2.5 million-$3.5 Million (USD) in annual benefits.

Best practice companies are going the extra mile by integrating financial flows as part of their overall supply chain management systems. In quantitative terms, companies that embrace existing electronic payment solutions could save almost US$10 million annually per US$1 billion in revenue.

Rafael de la Vega, Vice president of Commercial Solutions, Visa International Latin America and Caribbean, emphasizes that "payment solutions can add significant advantages in terms of saving time, reducing cost and increasing visibility, and they have been designed to integrate seamlessly with companies' existing supply chain infrastructure."

The net results are measurable benefits for suppliers, manufacturers, retailers and consumers. But, before implementing any change, management should consider the following questions:

* What is the current status of our company's financial flow processes?

* What are the areas of most importance/potential for our company?

* What is our bottom-line profitability potential from improved financial flow processes?

* What resources are needed to adopt new automation solutions and ensure a smooth transformation?

* How can I lay out a roadmap for change?

About Visa: Visa connects cardholders, merchants and financial institutions through the world's largest electronic payments network. Visa products--which offer unsurpassed global acceptance at more than 24 million acceptance locations including close to one million ATMs--allow buyers and sellers to conduct commerce with ease and confidence in both the physical and virtual worlds. As an association owned by 21,000 member financial institutions, Visa is committed to the sustained growth of electronic payment systems to support the needs of all stakeholders and to drive economic growth. For more information, visit www.corporate.visa.com.

CORPORATE CARD OFFERS MARKET OPPORTUNITIES FOR LATIN BANKS

Corporate cards will offer a significant market opportunity for Latin American banks in the coming year. By building awareness of the corporate card's versatility as an effective purchasing tool and a secure payment option, banks can help meet a growing need in the region's business sector.

"Many Latin American enterprises, as well as midsize and small businesses, are just beginning to understand how the corporate card is a valuable financial tool," says Ramon Martin, senior vice president, Latin America, Caribbean & Canada, American Express Corporate Services. "That is shown by the fact that the percentage of purchases made by corporate card or individual credit card is still very low in Latin America compared with more established markets."

Martin says corporate cards provide significant benefits, beginning with better control of business-related expenses in the travel and entertainment (T&E) sector. "In a global marketplace, Latin companies must travel abroad to be competitive," he adds. "That means that T&E must be considered an investment, just like the purchase of a new manufacturing plant."

From better reporting capabilities to the ability to set limits on purchases, corporate cards can make a major contribution to a company's profitability in many other areas besides T&E. In addition, corporate cards can reduce the internal time and expenses involved with processing individual reimbursement requests, receipts and invoices.

"We expect to see more and more Latin corporations acting to expand on the corporate card concept by purchasing not just airline tickets and hotel accommodations, but also office furniture, computers and phones," Martin says. "Banks can help businesses understand that a corporate card is a tool that can drive tremendous value for the organization through increased usage."

Both the corporate card and the traditional individual credit card also offer the advantages of a highly secure payment system, as well. And the reporting capabilities available with both types of cards provide valuable decision-making information to businesses and consumers.

One recent trend in the corporate card market is for companies to build employee-oriented programs that support their business partners or provide different types of rewards. "We have all seen how effective loyalty programs are with the consumer market," says Martin. "Now, businesses can develop programs with benefits like a pricing discount on certain purchases from selected vendors."

Another trend is the growing use of paperless reporting solutions. "Already our customers in Mexico and Brazil have the choice of completely electronic solutions," Martin says. "That's a response to a clear demand from many of our customers."

For mid-size and small businesses, American Express is also developing informational tools, such as comparing actual purchases with industry benchmarks. This can help show a company how well it is positioned with its peers or demonstrate the value of its pro-approved spending program.

American Express' Corporate Card program simplifies expense management by providing the controls and tools growing companies need to manage spending and drive savings to the bottom-line. For more information, visit www.americanexpress.com.

TRADE FINANCE OPPORTUNITIES ON THE RISE WITHIN REGION

Latin America's economies are expected to strengthen in 2006, creating new opportunities for international trade, according to David Konfino, president, International Division, Regions Bank.

"We see continued improvement throughout the region, opening the door for U.S. companies to export a growing volume of goods to Latin America, and for banks in the region to finance that trade," Konfino says. "We also expect the United States, especially South Florida, to continue to be a haven for Latin American capital, driving demand for private banking and wealth management services."

Konfino notes that close to 40 percent of all U.S. exports and imports are generated in the 15-state region covered by Regions Bank, one of the nation's leading financial institutions with an International Division located in Coral Gables.

Within Latin America, the banking industry has been characterized by extensive merger and consolidation activity in recent years, notes Konfino, a former president of the Florida International Bankers Association (FIBA). The investment in the region by European banks has also led to a stronger and more sophisticated regional banking system, he adds.

"Latin banks today are more demanding in their correspondent relationships," Konfino says. "They generally want fewer but deeper relationships with U.S. banks. Because of ongoing regulatory requirements and the need to invest in new systems and technology, the larger U.S. banks have expanded their international activities."

Regions Bank provides direct lending to its correspondent banks in Latin America, helping them finance their customers' import-export needs. "We have many vehicles available, including U.S. Export-Import Bank (ExIm) programs for medium-term financing," Konfino says. Regions Bank also supports its correspondent institutions with non-credit services, such as clearinghouse and cash management services.

"Regions Bank has a 30-year history of correspondent banking relationships with financial institutions all over the world," Konfino says. " The bulk of our relationships are in Central and South America and the Caribbean, the largest export destinations for U.S. products.

To serve its U.S. customers, Regions Bank has also built strong relationships with Asian banks, and provides credit facilities to facilitate imports from the Pacific Rim. In keeping with the global nature of today's trading patterns, Regions Bank is expanding its correspondent relationships with banks in eastern European nations as well.

Regions Bank is also active in structuring transactions for correspondent banks seeking longer-term or non-traditional financing. "For example, a bank that receives large volumes of remittances may need to borrow against the future flow of those funds," Konfino says. "We help banks arrange those transactions and syndicate them on the secondary market."

Regions Bank can also structure transactions in the project finance sector, such as loans that may be securitized with future export flows. "We see this financial services sector as a growth opportunity for banks in the region, as Latin borrowers become more sophisticated and seek out non-traditional financing arrangements," Konfino says. "We team up with our correspondent banking partners and help them with these types of capital transactions."

Regions Financial Corporation--formed by the merger of Regions Financial Corp. and Union Planters Corp.--is one of the top financial services providers in the United States, with $85.3 billion in assets as of June 30, 2005. For more information, visit www.regions.com.

Latin banks seeking global investment options for their clients

To serve a growing number of individual investors, Latin American banks are looking for easier, more efficient access to top money managers around the world.

By offering more investment choices--including programs once reserved exclusively for ultra-high-net-worth individuals --Latin banks and investment advisors can reach out to a larger market and potentially expand their customer base.

"Latin American investors are increasingly seeking greater transparency, objective professional advice and access to a global array of investment options," says Mark DeSario, CEO, Overture Financial Services, in New York.

Overture Financial assembles global asset management platforms that financial institutions can use to invest their own capital, or that of their clients. "We empower these institutions to provide their clients with cost-effective, conflict-free, performance-driven solutions on a global basis," says DeSario. "Our intelligent, open-architecture platform offers managers access to an industry-leading portfolio management system."

Led by an experienced team of investment professionals, Overture Financial Services, and its investment advisor subsidiary Overture Investments, have developed a sophisticated technology platform that will allow individual clients to access separately managed accounts (SMAs).

According to investment analysts, over the next five years, SMAs are projected to outpace the growth of recently more publicized hedge funds. "The significant growth potential of SMAs is a result of their ability to overcome many of the intrinsic limitations of mutual funds, given the higher degree of transparency that characterizes Separately Managed Accounts," says Mohammad Baki, Overture Financial's President.

"Historically, only wealthy individuals with more than $500,000 in investable assets could utilize SMAs to achieve better portfolio diversification," says Baki. "Today, our platform enables investors with as little as US$50,000 to $100,000 access to SMAs to achieve a comparable level of diversification."

Rather than being limited to a relatively small selection of proprietary mutual funds, Overture Financial's open architecture provides ready access to a global network of investment professionals. It also allows access to different asset classes in all currencies rather than solely dollar-based investments--a clear benefit for many Latin clients. "Although individuals may have US dollar-based portfolios, there can be strategic advantages to adding foreign currency denominated investments to their asset allocation," says Peter Stanyer, Chief Investment Officer, Overture Investments.

Overture Financial's intensive manager search and selection process also allows financial institutions to pick the best money managers for their clients. "The goal of our research team is to provide an ensemble of managers who excel in different asset classes and geographic locations," says Paul Polries, Managing Director, Overture Investments.

Headquartered in New York, with offices opening in Miami and Philadelphia, Overture Financial Services and Overture Investments utilize some of the finest talent and expertise in the industry. They offer clients turnkey and state-of-the-art investment platforms that allow for risk-based portfolio construction, using top-performing institutional money managers. Overture Financial's plans of expansion also include future locations in London, Dubai and Geneva.

Cesar Murillo, Overture Financial Services' Head of Sales, Americas, explains that these platforms provide a service that would otherwise require a major investment on the part of financial institutions to build themselves. "Latin America is a key strategic market for Overture Financial, and we are committed to providing Latin American financial institutions with customized state-of-the-art solutions that will enable them to better serve their clients." For more information, visit www.overturefinancial.com.

Cesar Murillo

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New York, New York 10036

Main Line: 1 212 999 7100

Direct Line: 646-239-9000

CONTAINING THE COST OF U.S. HEALTH CARE BENEFITS

In the coming year, Latin American organizations will need to offer attractive benefits programs to recruit and retain talented executives. At the same time, they must strive to contain the cost of their health care insurance, especially when covering their employees traveling abroad.

"One of the clear regional trends is a rise in international business-related travel, particularly to the United States," says Mark Jardin, Aetna Global Benefits vice president and head of the global insurer's PASSPORT TO HEALTHCARE[R] program, which provides access to quality health care in the United States. "As a result, companies, as well as their employees need to be prepared for an unexpected medical emergency."

Many executives in Latin America, especially expatriates, look to the United States as a source for health care. Statistics from the U.S. Bureau of Economic Analysis show that non-U.S. residents spent approximately $2 billion on U.S. healthcare services in 2002. "That includes the costs of checkups and elective procedures, as well as emergency medical services while traveling," says Jardin. "From a company's perspective, the cost of that U.S. care relative to health care costs in the home country can be staggering."

The challenge Latin American companies face is how to offer the most comprehensive benefits packages to their managers, at a competitive price. "These executives and managers are expecting a high level of health care services, which includes access to care in the United States," Jardin adds.

For 30 years, Aetna Global Benefits (AGB) has provided international health benefit products and services to support multinational employers. As part of that offering, Aetna's PASSPORT TO HEALTHCARE[R] provides Latin American companies, governments, insurers and other organizations with convenient access to a U.S. network of quality providers, while managing the costs of that care. For more information, visit www.aetna.com/agb or call 888-800-888-1748.

GREATER PORTABILITY OF BENEFITS ACROSS BORDERS

Portability of benefits is becoming an increasingly important consideration for Latin American companies, according to Todd A. Hancock, managing director, Goodhealth Worldwide-Americas, in Miami.

"When a multinational manager is transferred from one country to another, that person's health insurance and other benefits should follow along," says Hancock, "For Latin American companies--including family-owned enterprises-- being able to offer portable benefits is an important aspect of attracting and keeping skilled managers. Companies should not have to offer their executives a new package every time they move."

One solution is a global health insurance program that covers senior managers regardless of their location. "Goodhealth Worldwide focuses on this market," says Hancock, "with comprehensive plans that include wellness components, coverage while traveling and medical evacuation should it be necessary."

In the past decade, international health insurance has grown from a niche concept to a mainstream market, adds Hancock. "This type of coverage provides greater peace of mind. A traveling executive can concentrate on business, knowing that if medical assistance is needed, a support network is already in place."

A leading provider of international private medical insurance, Goodhealth Worldwide is part of the Primary Group, which manages premiums in excess of US$1.2 billion with 13 locations around the globe. Based in the United Kingdom, Goodhealth programs provide access to quality medical facilities worldwide and allow claims top be settled quickly, efficiently and locally. For more information, visit www.goodhealthamericas.com.

ENHANCING WORKFLOW PROTECTING DATA

Enhancing workflow automation and ensuring digital data security are two of the most important technology issues facing Latin American financial institutions.

"Cost-effective workflow solutions will vary among organizations, but typically include the use of multifunctional products (MFPs) that combine functions like printing, copying, faxing and scanning is the trend," says Alfonso Posada, associate director of sales, Information Systems Division for Latin America, Sharp Electronics Corporation. "One of the biggest cost areas in the technology sector is managing the cost associated with traditional printers. We consult with our clients to analyze their situation and present a total cost of ownership (TCO) with complete solutions to identify the true cost of document production."

Deploying MFPs in a financial institution involves more than just a hardware purchase, Posada adds. An integral part of an institution's data network, MFPs offer cost-saving features and better management controls. For instance, managers can carefully monitor the usage of MFPs, control the distribution of documents, and archive that information. MFPs also have time saving features. "A bank's IT manager today can remotely manage thousands of printers and MFPs located in branch offices," Posada says.

But because MFPs are part of the network, safeguards must be put in place to protect confidential data. "It's vital for a bank's customers to feel confident that their information is safe at all times," says David Olarte, senior product and solutions manager, Sharp's Latin America Group. "Banks can put security processes into place and receive a certification that customer data is always in safe hands."

Color printing functions, with their ability to produce corporate stationery, present additional challenges, according to Olarte, such as ensuring that no one can steal company letters electronically or modify their contents.

Because MFPs are information hubs, Sharp is a pioneer in focusing on these types of security risks, says Olarte. "A company might invest in firewalls and user authentication, but if the MFPs are not protected, you may be leaving a 'back door' open to intruders," he adds. "Our products contain the tools necessary to reduce those security risks." For more information, visit www.sharpsec.com.

BANKS DEPLOYING IN-BRANCH MOBILITY SOLUTIONS

Many Latin American banks will be implementing growth strategies in 2006. In many cases, in-branch mobility solutions can help to improve customer service while stabilizing or reducing ongoing staffing costs, says Vanderlei Ferreira, Brazil country manager, Symbol Technologies, Inc.

One of the keys to building customer satisfaction is reducing wait times within a bank branch. By installing a wireless "hot spot" in the branch, a banker with a laptop or PDA can approach customers in line and immediately provide some types of services, such as paying a bill or updating account information.

This mobility approach would also allow the bank to provide a secure, private area for VIP customers who could bring in their own laptops and make financial investments, check email or connect with their office networks.

With this type of mobility solution, a bank could open smaller new branch offices, reducing costs while still offering a high level of customer service--especially during peak usage periods.

"Then, if the branch is not crowded with people, a banker can use the same equipment for other activities, such as asset management or office material requisitions," says Ferreira. "Overall, a mobility solution involves a minimal investment compared with adding a staffer or an automated teller in the branch."

Outside the office, a banker could take the same "rugged" laptop or PDA to breakfast or lunch or even a client golfing outing. If the customer is interested in a loan, insurance or investment product, the banker can use the device's wireless connection to take immediate action.

Symbol Technologies is a recognized worldwide leader in enterprise mobility, delivering products and solutions that capture, move and manage information in real time to and from the point of business activity. Symbol's products and solutions increase workforce productivity, reduce operating costs, drive operational efficiencies and realize competitive advantages. For more information, visit www.symbol.com.

MANAGING DOCUMENT FLOWS CAN BOOST EFFICIENCY

Latin American banks are increasingly turning to electronic documents, rather than paper. However, effective workflow management of those documents is necessary to lower operating costs, improve employee productivity and ensure smoother communications, according to Michael J. Mathe, vice president international, Electronic Imaging Division, Toshiba America Business Solutions, Inc.

"Electronic solutions allow banks to improve both the speed and the accuracy of delivering documents," says Mathe. "In today's business world, you want to be sure the right information goes straight to the source--you can't afford to make mistakes."

In many cases that means using multifunctional products MFPs to scan in a paper document, and route it to the proper banker for review or revision. Then the document can be sent out via email or fax, or simply printed out if a paper copy is necessary. "It's a faster, more efficient approach than relying on a courier or hand-delivery service, the traditional methods in Latin America," says Mathe.

Today's printers, copiers and MFPs also include productivity-enhancing features like automatic service calls. Mathe says Toshiba's products automatically send an email message to local distributors and dealers when they need service or maintenance. A technician can then respond quickly, reducing potential downtime.

MFPs, particularly when deployed as part of a single-vendor solution, also reduce the need for storing supplies, such as toner or ink-jet cartridges. "It's easier to control costs and know exactly what supplies are being used," Mathe adds.

For more information about Toshiba America, visit www.toshiba.com.

CONVERGYS: SUPPORTING THE TELECOM SECTOR

In the next few years, Latin America's telecom sector will see significant changes. The convergence of voice and data networks will allow telecom operators to offer "one-stop" services, reducing customer costs and accelerating the offering of new services.

Convergence will also help cable, wireless, wireline and Internet service providers (ISPs) to simplify their offerings and present consistent plans in different geographic locations, according to telecom experts.

But despite all these changes, one basic rule still applies: Take care of your customers or your competitors will. By providing effective business support systems (BSS), Convergys helps telecom companies deliver better service, enhance profitability and launch complex service packages, says Roberto Atyde, Latin America marketing director.

"Our main focus in Latin America is billing, as part of our comprehensive array of BSS services, which also include human resources and customer care solutions," says Atyde. "Our Infinys billing solution allows operators to follow the latest market trends, and adopt more flexible business models."

Billing support is one of the fundamental needs in the Latin American telecom sector, especially with the ongoing consolidation process. "In the case of a merger or acquisition, we help the combined company develop one package solution rather than having two processes in place. This simplified approach also allows telecom providers to implement consistent billing procedures for each of their regions."

Infinys is able to support all of a telecom operator's BSS needs, including customer service management, activation management, mediation management and partner relationship management.

Convergys also offers comprehensive customer care and contact center services. The Ohio-based company employs more than 63,000 people in contact centers, data centers and offices in the United States, Canada, Latin America, Europe, the Middle East, and Asia. For more information visit: www.convergys.com (English); www.convergys.mx (Spanish) or www.convergys.br (Portuguese).