2020 Foresight: Post Office Financial Services

Product Code: VR0914MR Published Date: April 2013

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TABLE OF CONTENTS

TABLE OF CONTENTS 1 Executive Summary ...... 7 2 Overview of Global Postal Financial Services ...... 9 2.1 Snapshot of Financial Offerings by Postal Operators in Key Countries ...... 13 2.1.1 Post office saving schemes ...... 13 2.1.2 Money remittance services ...... 14 2.1.3 Insurance ...... 14 2.1.4 Mutual funds ...... 14 2.1.5 Investment and consumer credit ...... 14 2.2 Market Liberalization and Organization ...... 15 2.2.1 Competition and privatization in postal services ...... 15 2.2.2 Organizational and legal structure ...... 16 2.2.3 Business models adopted by post offices for financial inclusion ...... 18 2.3 Best Practice Case Studies ...... 20 2.3.1 Liberalization of the German postal network ...... 20 2.3.2 Symbiosis between post and bank: correspondent banking in Brazil ...... 21 2.3.3 Japan Post – the difficulties of reform ...... 24 3 Opportunities in Global Postal Financial Services ...... 26 3.1 Opportunities by Product Portfolio ...... 27 3.2 Opportunities through Strategic Alliance or Partnership ...... 29 3.3 Opportunities in the Unbanked Sector...... 31 3.4 Opportunities in Other Channels ...... 33 4 Market Dynamics and Emerging Opportunities in Developed Markets ...... 34 4.1 Canada ...... 34 4.1.1 The postal operator ...... 34 4.1.2 Key statistics ...... 34 4.1.3 Key financial services and customer segmentation ...... 37 4.1.4 Key product and market development strategies ...... 38 4.2 France ...... 40 4.2.1 The postal operator ...... 40 4.2.2 Key statistics ...... 40 4.2.3 Key financial services and customer segmentation ...... 43 4.2.4 Key product and market development strategies ...... 44 4.3 Germany ...... 46 4.3.1 The postal operator ...... 46 4.3.2 Key statistics ...... 47 4.3.3 Key financial services and customer segmentation ...... 50 4.3.4 Key product and market development strategies ...... 51 4.4 Italy ...... 53 4.4.1 The postal operator ...... 53 4.4.2 Key statistics ...... 53 4.4.3 Key financial services and customer segmentation ...... 56

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TABLE OF CONTENTS

4.4.4 Key product and market development strategies ...... 58 4.5 Japan ...... 58 4.5.1 The postal operator ...... 58 4.5.2 Key statistics ...... 59 4.5.3 Key financial services and customer segmentation ...... 61 4.5.4 Key product and market development strategies ...... 63 4.6 South Korea ...... 65 4.6.1 The postal operator ...... 65 4.6.2 Key statistics ...... 65 4.6.3 Key financial services and customer segmentation ...... 67 4.6.4 Key product and market development strategies ...... 69 4.7 Switzerland ...... 71 4.7.1 The postal operator ...... 71 4.7.2 Key statistics ...... 71 4.7.3 Key financial services and customer segmentation ...... 75 4.7.4 Key product and market development strategies ...... 77 4.8 The UK ...... 79 4.8.1 The postal operator ...... 79 4.8.2 Key statistics ...... 79 4.8.3 Key financial services and customer segmentation ...... 82 4.8.4 Key product and market development strategies ...... 83 5 Market Dynamics and Emerging Opportunities in Emerging Markets...... 85 5.1 Australia ...... 85 5.1.1 The postal operator ...... 85 5.1.2 Key statistics ...... 85 5.1.3 Key financial services and customer segmentation ...... 88 5.1.4 Key product and market development strategies ...... 90 5.2 Brazil ...... 91 5.2.1 The postal operator ...... 91 5.2.2 Key statistics ...... 91 5.2.3 Key financial services and customer segmentation ...... 94 5.2.4 Key product and market development strategies ...... 95 5.3 China ...... 96 5.3.1 The postal operator ...... 96 5.3.2 Key statistics ...... 96 5.3.3 Key financial services and customer segmentation ...... 99 5.3.4 Key product and market development strategies ...... 100 5.4 India ...... 102 5.4.1 The postal operator ...... 102 5.4.2 Key statistics ...... 102 5.4.3 Key financial services and customer segmentation ...... 105 5.4.4 Key product and market development strategies ...... 106 5.5 South Africa ...... 108

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TABLE OF CONTENTS

5.5.1 The postal operator ...... 108 5.5.2 Key statistics ...... 108 5.5.3 Key financial services and customer segmentation ...... 110 5.5.4 Key product and market development strategies ...... 112 6 Appendix ...... 114 6.1 Methodology ...... 114 6.2 Contact Timetric...... 114 6.3 About Timetric ...... 114 6.4 Disclaimer ...... 115

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LIST OF FIGURES

Figure 1: Post Offices’ Financial Services in Key Countries ...... 13 Figure 2: Legal Status of Postal Operators ...... 15 Figure 3: Business Models Adopted by Postal Operators ...... 19 Figure 4: Market Structure and Liberalization of the German Postal Network ...... 20 Figure 5: German Postal Market, 2010 ...... 21 Figure 6: Banco Postal Brazil’s Business Model ...... 22 Figure 7: Privatization of Japan Post ...... 24 Figure 8: Key Opportunities in the Postal Financial Sector ...... 26 Figure 9: Key Product Portfolios of Postal Operators ...... 27 Figure 10: Postal Partnership With Government To Provide Social and Welfare Payments ...... 32 Figure 11: Key Target Customer Segments and Product Offerings of Canada Post ...... 38 Figure 12: Key Product and Market Development Strategies of Canada Post ...... 38 Figure 13: Key Customer Target Segments and Product Offerings of La Banque Poste ...... 43 Figure 14: Key Product and Market Development Strategies of La Banque Poste ...... 44 Figure 15: Key Products and Services Offered by La Poste’s Postal Bank...... 45 Figure 16: Key Customer Target Segments and Product Offerings of Postbank ...... 50 Figure 17: Key Product and Market Development Strategies of Postbank...... 51 Figure 18: Key Customer Target Segments and Product Offerings of Post Italiane ...... 56 Figure 19: Key Product and Market Development Strategies of Post Italiane ...... 58 Figure 20: Key Customer Target Segments and Product Offerings of Japan Post ...... 62 Figure 21: Key Product and Market Development Strategies of Japan Post ...... 63 Figure 22: Key Customer Target Segments and Product Offerings of Korea Post ...... 68 Figure 23: Key Product and Market Development Strategies of Korea Post ...... 69 Figure 24: Key Target Customer Segments and Product Offerings of Swiss Post ...... 76 Figure 25: Key Product and Market Development Strategies of Swiss Post ...... 77 Figure 26: Key Customer Target Segments and Product Offerings of the Post Office ...... 82 Figure 27: Key Product and Market Development Strategies of the Post Office ...... 83 Figure 28: Key Customer Target Segments and Product Offerings of Australia Post ...... 88 Figure 29: Postbillpay Payment Methods ...... 89 Figure 30: Key Product and Market Development Strategies of Australia Post ...... 90 Figure 31: Key Customer Target Segments and Product Offerings of Banco Postal ...... 94 Figure 32: Key Product and Market Development Strategies of Banco Postal ...... 95 Figure 33: Key Customer Target Segments and Product Offerings of China Post ...... 99 Figure 34: Key Product and Market Development Strategies of China Post ...... 100 Figure 35: Key Customer Target Segments and Product Offerings of India Post ...... 105 Figure 36: Key Product and Market Development Strategies of India Post ...... 106 Figure 37: Key Customer Target Segments and Product Offerings of South Africa’s Postbank ...... 111 Figure 38: Key Product and Market Development Strategies of South Africa’s Postbank ...... 112

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LIST OF TABLES

Table 1: Number of Post Offices per Region in 2011 ...... 11 Table 2: Examples of Privatized Postal Banks ...... 16 Table 3: Overview of Canadian Postal Statistics ...... 34 Table 4: Overview of French Postal Statistics ...... 40 Table 5: Overview of German Postal Statistics ...... 47 Table 6: Overview of Italian Postal Statistics ...... 53 Table 7: Overview of Japanese Postal Statistics ...... 59 Table 8: Overview of Korean Postal Statistics ...... 65 Table 9: Korea Post – Number of Partner Financial Institutions ...... 69 Table 10: Korea Post – FRPF and Public Bonds (KRW Billion) ...... 69 Table 11: Overview of Swiss Postal Statistics ...... 71 Table 12: Overview of UK Postal Statistics ...... 79 Table 13: Overview of Australian Postal Statistics ...... 85 Table 14: Overview of Brazilian Postal Statistics...... 91 Table 15: Overview of Chinese Postal Statistics ...... 96 Table 16: Overview of Indian Postal Statistics ...... 102 Table 17: Overview of South African Postal Statistics ...... 108

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EXECUTIVE SUMMARY

1 Executive Summary

Globally, postal services play a key role in providing access to basic communication and transaction services. The worldwide postal infrastructure has been shrinking for over two decades, in terms of both outlets and numbers of full-time staff. At the end of 2011, the total number of post offices stood at XXX,XXX of which XXX,XXX were staffed by officials of the designated operator and XXX,XXX were managed by people from outside the designated operator. Mail volumes under pressure The traditional letter post service is under pressure from new technology, including the internet and (increasingly mobile) telephone services. Rising numbers of consumers and businesses are sending and receiving bills and invoices via the internet and making payments online or by telephone, instead of using post office services. The substitution of paper-based bills and statements, and bill payments by check, has been a key phenomenon for over 10 years. Postal operators expanding financial services to become self-sufficient and curb declining profits With the decline in mail volume, post offices are looking at opportunities to support themselves and compete with other operators, both in the postal and financial sectors. Operators are becoming increasingly involved in providing or expanding their range of financial services, either to increase revenue or due to pressure from governments to increase access to basic financial services. With millions of people regularly visiting and using post offices, postal operators are looking to make additional use of their extensive retail presence and trusted brands. In 2011, financial services accounted for XX.X% of postal operators’ total income. Market liberalization gaining pace With the decline in traditional mail volumes and postal operators scaling down their branch networks and workforces, market liberalization is gathering pace. Many governments favor increased competition in the postal sector, signaling the end of many postal monopolies. Through their origins as government agencies or institutions, public postal operators have traditionally had a monopoly on letter post services. Reserved services in some countries also include parcel delivery up to certain weight limits, and some payment services. These monopoly or reserved services were generally seen by awarding governments as compensation for the fulfillment of universal service obligations. Some governments are also looking to at least partially privatize the public postal operator, while others are choosing to sell off individual divisions, such as logistics services, parcel delivery or courier services, and financial services. Postal operators well placed to seize opportunities in the financial sector Capitalizing on its large network, easy accessibility and trust among customers, postal operators across globe are targeting unbanked and rural populations, SMEs, self-employed professionals, young consumers and senior citizens with financial products such as savings accounts, insurance, pension payment services, remittances services, loans and wealth management products. The major opportunities in the postal financial services sector are: Facilitating remittances from workers abroad, mobilizing savings through savings schemes for remittance recipients, and using those savings funds to provide microcredit or microfinance to entrepreneurs. Using relationships with major billers to offer bill payments over the counter and through other channels, such by telephone or online. Alternative payment channels such as mobile banking and prepaid cards. Global post office networks are well placed to take advantage of these, given their existing role in bill payments. Alliances with financial institutions or retailers to increase the coverage and breadth of financial product offerings. Serving unbanked populations.

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OVERVIEW OF GLOBAL POSTAL FINANCIAL SERVICES

2 Overview of Global Postal Financial Services

Introduction Postal services play a key role in the daily lives of billions of people around the world, ensuring access to basic communication and transaction services. At present, the vast postal services market faces major challenges and significant opportunities driven by four key issues: universal postal services and new technology, the high cost base, market liberalization and competition, and privatization. The Universal Postal Union The Universal Postal Union (UPU) is the primary international organization representing the interests of and facilitating cooperation between postal operators. The UPU was formed in 1874 and became a specialized agency of the United Nations (UN) in 1948. It is headquartered in Berne, Switzerland. The UPU summarized the “essence” of its mission as “to encourage the sustainable development of an efficient and accessible Universal Postal Service to facilitate communication between the people of the world”. Focusing, in particular on the X billion people in the world who do not have access to financial services, the UPU aims to provide low-cost, highly efficient services to the unbanked and underbanked. UPU membership is open to any member country of the UN, or to sovereign nations outside the UN that obtain the approval of two-thirds of UPU members. In 2011, the UPU had XXX member countries. In practice, the UPU’s membership is dominated by government-owned postal operators offering services to the general public, or public postal operators. The activities of the UPU are governed by its constitution, to which amendments can be made in the form of additional protocols. The provisions related to operation and application of the constitution of the union are listed in its general regulations. The Universal Postal Congress takes place at every five years and is the supreme authority for the UPU. Amendments to the constitution can only be made at congress, while regulations are revised after each congress. Congress also approves strategies for the UPU and its members. In recent years, the congress has tended to focus on legislative issues and formulating strategy and policy. It has delegated operational activities to the council of administration, which continues the UPU’s work between congresses, supervises its activities and studies regulatory, administrative, legislative and legal issues, and the Postal Operations Council, which addresses the operational, economic and commercial aspects of the international postal service. These councils, which comprise elected member countries, meet each year. The UPU has a focus on social responsibility, and has made several investments, notably in Sub-Saharan Africa, over the past decade aiming to fill the gap in communications and financial services in a number of developing countries. The postal services market Most public postal operators are required to provide a basic level of postal service, ensuring universal access to basic communication and transaction services. However, operators are struggling to fund these services as they cope with a high cost base and the impact of new technology. Mail volumes under pressure The traditional letter post service is under pressure from new technology, including the internet and (increasingly mobile) telephone services. Rising numbers of consumers and businesses are sending and receiving bills and invoices via the internet and making payments online or by telephone, instead of using post office services. The substitution of paper-based bills and statements, and bill payments by check, has been a key phenomenon for over 10 years.

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OVERVIEW OF GLOBAL POSTAL FINANCIAL SERVICES

2.1.1 Business models adopted by post offices for financial inclusion Postal financial services business models differ based on national, political, social and economic development levels. Traditionally, postal financial services were administered by respective countries’ government postal departments, and this model still exists in countries such as Kuwait and Yemen. Over the years this model has evolved, and in most countries public postal operators (PPOs) have been established as state-owned legal entities. Under this structure, postal financial services are often handled through one or a few operational units and managed by PPOs as government finance vehicles, generally outside the scope of financial sector policies. The figure below depicts some of the prevalent business models of postal operators:

Figure 1: Business Models Adopted by Postal Operators

Source: Universal Postal Union and Timetric analysis © Timetric

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OVERVIEW OF GLOBAL POSTAL FINANCIAL SERVICES

2.2 Best Practice Case Studies 2.2.1 Liberalization of the German postal network Market structure before liberalization and introduction of postal policy in Germany German postal operator Deutsche Bundespost held a monopoly for commodities weighing less than XXkg through the Postal Act of 1969, which also made universal service mandatory. The process of liberalizing the German postal market began in the 1980s, and in 1984, the monopoly from the express market was removed and opened up to competition.

Figure 2: Market Structure and Liberalization of the German Postal Network

Source: Timetric analysis © Timetric

Reforms and phasing out of the monopoly In 1989, Postreform I divided Deutsche Bundespost into three state-owned companies: Postdienst (postal services), Postbank (financial services) and Telekon (telecommunication services). The three departments remained within the Ministry for Post and Telecommunications until 1994 when Postreform II allowed the privatization of the enterprises. As a result, Deutsche Bundespost Postdienst became a joint stock company: Deutsche Post AG.

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OVERVIEW OF GLOBAL POSTAL FINANCIAL SERVICES

2.2.2 Japan Post – the difficulties of reform Japan Post is one of the largest financial institutions in the world. It was relaunched in April 2003 as an independent public corporation. The Japanese government began the 10-year process of privatizing Japan Post in April 2007 by separating the corporation into four companies, each operating one of Japan Post’s key services: Postal services (Japan Post Network Co., Ltd.) Over-the-counter network services (Japan Post Service Co., Ltd.) Postal savings services (Japan Post Bank Co., Ltd) Postal life insurance services (Japan Post Insurance Co., Ltd.) These companies, were given the option of dividing their businesses by region, and had to operate under a government-owned holding company during the transition period before full privatization.

Figure 3: Privatization of Japan Post

Source: Timetric analysis © Timetric

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OPPORTUNITIES IN GLOBAL POSTAL FINANCIAL SERVICES

3 Opportunities in Global Postal Financial Services

The post office is one of the largest, most widespread and trusted retail networks, with around XXX,XXX outlets worldwide. It provides many consumers, especially those in poorer, more isolated areas, with access to basic government, communication and postal services. Postal services worldwide annually process and deliver an estimated XXX billion letter-post items and X.X billion parcels. Yet postal operators must balance the crucial role of the post office in fulfilling universal service obligations with the need to improve the efficiency of post office operations and the potential to maximize the potential of post offices as retail outlets. In many countries, the scale of the post office network compares favorably with the entire bank branch network. With the decline in mail volume, post offices are looking for other opportunities to sustain themselves and compete with other operators, both in the postal and financial sectors. The core services of all post offices are postal services such as the acceptance of letters and parcels for mailing, and the sale of postage stamps. Postal operators are, however, updating their branch offerings to generate much-needed extra revenues, while the link between post offices and traditional postal services is growing weaker; in many countries consumers can obtain postage stamps in other locations such as other retail outlets and at ATMs. With rare exceptions, post offices are owned by the government and are a key channel for distributing information about or providing government services. Many post office operators have agreements with national or local governments to provide services such as accepting government fees or license payments, accepting applications for passports, and providing other government services. Key opportunities that post offices have in the financial sector include the following:

Figure 4: Key Opportunities in the Postal Financial Sector

Source: Timetric analysis © Timetric

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OPPORTUNITIES IN GLOBAL POSTAL FINANCIAL SERVICES

3.1 Opportunities by Product Portfolio Postal operators across worldwide are targeting unbanked and rural populations, SMEs, self-employed professionals, young consumers and senior citizens with financial products such as savings accounts, insurance, pension payment services, remittances services, credit loans and wealth management products.

Figure 5: Key Product Portfolios of Postal Operators

Source: Timetric analysis © Timetric

Post offices to cash in on growth in prepaid cards Prepaid cards are one of the fastest-growing payment card categories. The increased use of prepaid cards by governments to distribute social security payments, alongside the growing adoption of this platform by banked customers and growth in the prepaid gift card and travel card market is expected to propel the growth of prepaid cards issued across the world at appreciable rate. The global potential for prepaid cards is immense; the category valued US$X.X trillion in 2012 and is projected to record a strong CAGR of XX.X% over the forecast period 2012–2017 to value US$X.XX trillion in 2017. Australia Post is targeting unbanked and young customers with its Load & Go reloadable Visa Prepaid card, which enables users to shop online or at retail stores.

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OPPORTUNITIES IN GLOBAL POSTAL FINANCIAL SERVICES

Post offices offering microcredit to rural and underprivileged sections of society With the aim of developing financial inclusion for underprivileged and unbanked sections of society, postal operators in many countries are offering microcredit products. China Postal Savings Bank started issuing microloans in 2008, taking advantage of its extensive network cities, towns, and rural villages to position its microcredit product to rural and lower-income people. By 2010, the postal savings banks’ microlending services had reached every city in the country, and X,XXX county towns and principal villages. A total of X,XXX service points extend microloans. In 2010, the bank extended loans to nearly X million rural households, with an average loan size of CNYXX,XXX. Of the total loans extended, XX% were in rural areas and counties, and XX% were in cities. In some countries, postal operators are unable to obtain a banking license due to regulatory complications, and offer microcredit instead. Postal operators in Benin, Togo, Burundi, Bhutan, Laos and Tunisia offer microcredit to customers. Postal banks offering wealth management services to diversify their portfolios Postal banks are looking to diversify their product and customer portfolios, and are offering wealth management services as well as traditional financial services such as savings accounts, insurance and deposits to strengthen their positions in urban markets and attract wealthy customers. In May 2012, Japan Post Bank launched a member’s-only internet investment trust service, YuchoToshin Web Premier Services. The service allows members to conduct transactions online, and purchase XX new exclusive investment trust products in addition to the existing products handled by Japan Post Bank. China Postal Bank also offers wealth bonds and has a wealth management business with five main product lines, Wealth creation series, the Tin Fu series, the Fortune series, the Golden Seed series and the Golden Apple series, to meet different consumer risk preferences. Money transfers key to post offices’ profitability The payment of pensions and allowances and the provision of basic, usually cash-based, payment services such as postal money orders and bill payments, form the core of many postal operators’ financial services. Currently, XXX of the UPU’s XXX member operators offer money-transfer services, with over XX offering some form of electronic money-transfer service. Remittances play a pivotal role in the economic development of a migrant’s country, and postal operators play an important role in the distribution chain. There is, however, still huge scope to further develop a transparent, secure, simple, cheap and quick solution for money transfer. Postal operators offer e-payment services to pay utility bills Some postal operators provide e-payment facilities for utility bills. India Post offers e-payment solutions which allow the collection of money, such as telephone or electricity bills, examination, university or school fees, and taxes, on behalf of any organization. The collection is consolidated electronically using web-based software and payment is made centrally by check from a specified post office of the biller's choice.

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OPPORTUNITIES IN GLOBAL POSTAL FINANCIAL SERVICES

3.2 Opportunities through Strategic Alliance or Partnership Legislative changes have made it easier for postal operators to create specialized subsidiaries and form alliances or partnerships with private sector organizations such as financial institutions, and to respond more rapidly and effectively to emerging market opportunities. Postal operators that offer more sophisticated financial products usually need to enter into an alliance or partnership with a financial institution. These alliances range from simple sales or distribution agreements from third-party financial products, through agreements for the provision of own-branded financial products by postal operators to joint ventures. While some postal operators can go it alone, there remains huge potential for partnership between postal operators and financial institutions, even in markets where postal operators and postal banks already offer a range of financial services. Such alliances could produce major financial rewards for the partners. They could also deliver social dividends, ensuring that as many people as possible have access to basic services, encouraging economic growth and development, and transforming the fortunes of many. Partnering with banks to offer financial services Postal operators can develop and offer financial services and products directly, or through alliances with financial institutions. Many postal operators are also being urged to offer basic financial services such as payments, savings and microfinance to combat social and financial exclusion, particularly in poorer countries, or to better serve more remote geographical areas and isolated social groups. The potential for partnerships between postal operators and financial institutions is even strong in markets where postal banks already offer financial services. Major banks in the UK such as Bank of Ireland, Barclays, Halifax, HSBC and Lloyds have formed partnerships with the UK’s Post Office to offer financial services Post offices forming alliances with retailers to increase accessibility and market financial products A growing number of convenience stores, hypermarkets and supermarkets are offering postal services, either through limited service agreements (such as Japan Post’s agreements with convenience store chains to install post boxes and facilitate parcel pick-up in stores) or through agreements to operate postal agencies, including the UK Post Office’s agreements with franchise partners, which are mainly convenience stores such as Spar and Londis, and La Poste’s Pointe Poste agreements with local retailers in suburban and rural areas of France and its distribution partnerships in urban areas with tobacconists, hypermarkets and supermarkets. Postal operators are keen to make the most of customer traffic by modernizing post office networks, redesigning branches, changing product and services offerings, and modernizing customer service to enhance customer experiences. Many postal operators offer additional products and services, especially related to postal services such as stationery, greeting cards, periodicals, books and telecommunications products and services (including mobile telephone top-ups and calling cards). Many also offer ticketing services, including lottery tickets and travel and entertainment tickets. Some postal operators have gone further and developed new retail concepts offering either different types of products or offering a one-stop-shop concept. Postkantoren, the joint venture between TPG Post and Postbank in the Netherlands, offers the products and services of each owner, as well as other products and services such as telecommunications products, travel and event ticketing and lottery tickets. Its Bruna subsidiary operates a chain of book stores. Swiss Post and New Zealand Post have developed different categories of postal outlets. Swiss Post operates three categories of service outlets, ranging from P, small post offices offering postal services and limited postal account access, to PPP Post centers, large post offices with longer opening hours offering a wide range of financial services, including financial consulting services.

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OPPORTUNITIES IN GLOBAL POSTAL FINANCIAL SERVICES

New Zealand Post’s agency-operated Post Centers offer a limited range of postal services, while its Post shops offer a wide range of postal, financial and event ticketing services. Some PostShops operate as franchised Books and More outlets, offering a combination of postal services and retail products such as books, home entertainments and stationery. Postal operator are aligning with insurance companies to offer insurance products Many postal operators offer agency banking or insurance services. In many countries, postal operators are engaged to collect premium payments and pay out claims. However, in some countries post offices also sell policies to clients and gather necessary documentations for claims. India Post is one of India’s largest providers of life insurance, offering seven life insurance plans. A number of European postal operators have formed joint ventures with insurance companies to offer own-branded insurance products. La Poste’s Sopassure joint venture with Caisse Nationale d’Epargne (CNE) owns a major stake in CNP Assurances, whose life insurance products La Poste sells through its post offices. It also operates a joint venture with CNP Assurances, called Assurposte, which underwrites the personal risk insurance products marketed by La Poste. The German Talanx group has insurance joint venture operations with Deutsche Postbank in Germany and, through its subsidiary insurance company HDI, Magyar Posta in Hungary. The alliances enable Deutsche Postbank and Magyar Posta to offer a range of life and non-life insurance products. Some postal operators sell own-branded insurance and retirement savings products in partnership with insurance companies and other financial institutions. These include One Direct-branded products offered by Ireland’s An Post, Care for Life insurance launched by Singapore Post and a number of products offered by Post Finance in Switzerland. Others act as sales and distribution agents for third parties. Since 2004, Russian Post FSUE (began selling the property insurance policies of the insurance company Rosgosstrakh, which is part-owned by the federal government, through post offices. The insurance policies are aimed at medium and lower-income earners and a simplified issuance process has been developed for sales by specially trained post office employees. Customers have the option of home delivery of policies by postal carriers. Postal operator forging global alliances to deliver competitive product and services Postal operators around the world are forming global alliances in order to service their customers, primarily in the area of remittances. Poste Italiane has entered into a partnership with Egypt Post to establish a new money transfer service between Italy and Egypt. The service uses secure money transfer technology developed in collaboration with the UPU and e-payment company Eurogiro. This partnership is expected to benefit more than XX,XXX Egyptian people living in Italy. Brazil Post has entered into a partnership with the Philippine Postal Service, PHLPost, to launch a new electronic international money order service between the two countries. Partnering with postal agents to offer financial services According to the UPU, only XX% of sub-post offices, also known as postal agents, offer financial services. Postal agents tend to have deeper penetration in rural areas, and provide a strong opportunity to access the rural population. In Brazil, Banco Postal has launched a new project to use its network of X,XXX postal agents to offer financial services. Banco Postal plans to offers basic transactions such as bill payments, verification of account statements, and opening of bank accounts through these postal agents. It also plans to upgrade its services by offering loans, savings and deposit services on behalf of Banco do Brasil.

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OPPORTUNITIES IN GLOBAL POSTAL FINANCIAL SERVICES

3.3 Opportunities in the Unbanked Sector Post offices have acted as many governmentss financial inclusion arms. In most countries around the globe, post offices offer basic domestic and international money orders, which are important means of payment in rural areas. They also offer basic savings accounts and savings bonds on behalf of the national treasury, which in many cases are the only savings instruments available to low-income and rural populations. Post office can bridge the gap between banked and unbanked According to 2012 World Bank Findex study, around X.X billion adults around the world did not have an account with a financial institution, and most of the X.X billion unbanked adults belonged to underprivileged sections of society. Around half of the world’s population does not have access to affordable, quality financial services such as loans, savings accounts, insurance and payment services. Post offices have the potential to bridge this gap, as many post offices offer savings account which are easier to open and maintain than a normal bank account. According to the UPU, around X billion people in more than XX countries are banked through postal systems. According to the IMF, there are XXX,XXX postal contact points in the world, in comparison to XXX,XXX bank branches and ATMs, and UPU figures indicate that XX postal operators worldwide held X.X billion savings and deposit accounts in 2010. Hundreds of millions of people worldwide who do not have bank accounts use post offices to make and receive basic payments such as domestic and international transfers, government payments and utility payments. Postal Savings Bank of China has around XXX million customers, for example, while Brazil’s Correios, in partnership with a local bank, has around XX million accounts. Namibia’s postal bank serves around XX% of the country’s population, and India Post covers risks for XX million people through its postal life insurance policy, and also holds XXX million savings accounts. Opportunities in social welfare and security payments A key role of many post office networks is the payment of social security and pension benefits. When welfare recipients do not have bank accounts, or live in remote areas without easy access to a financial institution or simply prefer payment in cash, the post office is a vital link. The proportion of pensions and allowances paid electronically into financial institution accounts is forecast to increase, and some governments are also promoting the use of postal banks or savings accounts to accept electronic payments of pensions and allowances in order to reduce costs.

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OPPORTUNITIES IN GLOBAL POSTAL FINANCIAL SERVICES

3.4 Opportunities in Other Channels The development of new technology has enabled postal operators to expand their distribution strategies to include remote channels, including call centers, automated telephone communication and the internet. Telephone and online channels have allowed postal operators to offer new variations on existing services, such as selling stamps and other postal products through post office web sites or offering access to postal savings and bank accounts via the internet and telephone or mobile banking. They have also enabled postal operators to offer new products and services, such as electronic bill presentment and payment, and value-added services such as package tracking. In order to maximize the potential and of these channels, postal operators need to pursue a multi-channel strategy covering post offices, postal carriers, sales forces, the internet and the telephone and mobile phone channels. Many have increased the range of services they offer through post office networks and their other distribution and service channels. Mobile banking Post offices around the world are looking to take advantage of mobile banking opportunities. For instance, Postal Corporation of Kenya (PCK) has signed an agreement with Airtel to offer Airtel Money services in its branches. Most postal operators have become cash merchants for mobile banking operators. For instance with the development of its electronic funds transfer system (EFTS), Bangladesh Post is able to connect rural post offices by mobile network, enabling it to serve rural populations more effectively and allow quick domestic remittance services. In partnership with Vodafone, Italy’s Poste Italiane has become a mobile virtual network operator (MVNO), which allows it to use the MNO physical telecom network and offer its own voice, data and value-added services over the network. PosteMobile takes advantage of the wide spectrum of financial products offered by Poste Italiane to provide its customers with mobile banking and mobile payment services. By linking their PosteMobile SIM cards to their postal bank accounts or Postepayprepaid cards, customers can engage in a number of financial services using their mobile phone as an access point. In particular, PosteMobile customers can make transfers to other Banco Posta accounts, or any other bank account, recharge a prepaid card from their postal bank account, transfer money from one prepaid card to another, send money abroad to their families, or purchase products and services from the Banco Posta bank account or the prepaid card22. French postal operator La Poste offers a range of mobile applications such as apps to track post and packages and manage postal savings accounts

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DYNAMICS AND OPPORTUNITIES IN EMERGING MARKETS

4 Market Dynamics and Emerging Opportunities in Emerging Markets

4.1 Australia 4.1.1 The postal operator Australia Post emerged as a separate entity in 1975 when the Australian federal government separated responsibility for the telephone and mail services by dividing the Postmaster General’s Department into the Australian Postal Commission (Australia Post) and the Australian Telecommunications Commission (now Telstra). Under the Australia Postal Corporation Act 1989, Australia Post became a government business enterprise (GBE), with a charter to operate commercially. It is self-funded and may reinvest its profits or return them as dividends to the government. Under the Act, the market for domestic delivery of letters weighing XXXKg or less, or priced at less than AUDX (US$X.XX) is reserved to Australia Post. In return for this limited market protection, Australia Post must fulfill a set of community service obligations (CSOs), which require it to provide an accessible, affordable and reliable letter service to all Australians, anywhere in the country. The postal administration operates three distinct business units: letter delivery, parcel delivery and logistics, and retail and financial services. 4.1.2 Key financial services and customer segmentation Australia Post has the largest physical retail distribution network in the country and has a mandate to maintain a minimum of X,XXX outlets, including X,XXX in rural and remote areas. Australia Post has X,XXX Licensed Post Offices (LPOs), which make up two-thirds of its retail network. Postal financial services Australia Post offers array of products and services to serve the financial needs of senior citizens, young consumers, SMEs and travelers.

Figure 6: Key Customer Target Segments and Product Offerings of Australia Post

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Banking services The Bank@Post agency banking service allows personal banking customers of more than 70 financial institutions, including the Commonwealth Bank of Australia, NAB and St George, to make transactions such as deposits and withdrawals at their local Australia Post outlet. Australia Post also has a partnership with Rural Bank to service clients in rural areas Bill payments Postbillpay, Australia Post’s bill payment service facilitates consumer bill payments over the counter at retail outlets, by telephone and online at over X,XXX Australia Post retail outlets across the country. All the postal operator’s bill payment partners offer over-the-counter bill payments. Bill payments in person can be settled by money order, cheque, in cash or via the post office’s agency banking service giroPost (Bank@Post since November 2005). The banking service itself has not changed; Bank@Post allows customers to make deposits, withdrawals, credit card payments and account balance enquiries with a range of banks, credit unions, building societies and other financial institutions. Payments by telephone or online may be settled via credit card or registered savings/cheque account. While growth in the total number and value of Postbillpay transactions has slowed, the continued strong growth in the telephone and online channels indicates a shift away from in-person payments. The decrease of Postbillpay transactions and telephone bill payment transactions was largely as a result of some major billers opting to provide their own internal bill payment solutions. Australia Post also offers electronic bill presentment services and biller-branded telephone and internet bill payment services based on the Postbillpay infrastructure. In February 2004, Australian Gas Light Company (AGL) was the first to launch a biller-branded internet bill payment system with Australia Post.

Figure 7: Postbillpay Payment Methods

Agency banking services Australia Post offers agency banking services for both personal and business customers, enabling them to make new account applications or access accounts for basic transactions at participating financial institutions. The card-based, PIN-authorized personal banking service, giroPost (since 2005 called Bank@Post), was launched in July 1995, and by the end of 2012, there were more than 3,200 post office outlets providing the service. Customers can make deposits and withdrawals from their accounts at all outlets, as well as account balance inquiries and payment of credit card bills with some financial institutions. Some financial institutions also enable consumers to apply for new accounts via Bank@Post. Commonwealth Bank of Australia (CBA) customers can also carry out passbook transactions at Australia Post outlets without online terminals.

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Money transfer services Australia Post offers domestic money orders, Western Union international money orders and money transfers, American Express Travelers Cheques and foreign exchange services. Insurance Australia Post office provides travel and car insurance. The travel insurance plans include: International Comprehensive Plan: This plan provides cover to lost luggage and theft, travel disruptions, cancellations and medical expenses. International Basic Plan: This plan provides coverage or unexpected medical costs and personal liability. Domestic Plan: This plan provides cover for travel within Australia and includes covers for rental car excess. In cooperation with A&G Insurance Service, Australia Post also provides car insurance, including comprehensive car insurance which includes cover for loss or damage of car through accident, fire or theft, and damage to someone else's property, and third-party property fire and theft. Prepaid cards Australia Post provides a range of prepaid cards, including the Load&Go Reloadable Prepaid Visa card, and prepaid gift, online shopping card and travel cards

4.1.3 Key product and market development strategies This section discusses the marketing and product strategies adopted by the postal operator to attract new customers and retain existing ones.

Figure 8: Key Product and Market Development Strategies of Australia Post

Using the largest network of retail outlets in Australia to sell financial products and services Australia Post has an extensive retail network of X,XXX stores. It operates through XXX corporate outlets, X,XXX licensed and franchised post offices and XXX community postal agencies across metropolitan, regional and remote regions. Australia Post serves around XXX million customers each year and provides access to a range of products and services including collection of general merchandise, mail and parcel lodgment, and financial and identity services on behalf of more than XXX businesses and government agencies.

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Digitalization of services to serve customers more efficiently With customer preferences shifting towards digital channels, the overall footfall in retail outlets has declined. Australia Post has, as a result, launched a number of online services including foreign currency ordering, which can be collected at a local post office. Many customers can now also download and complete the relevant third-party forms and visit one of its retail outlets to complete the required in-person identity check. As a result, Australia Post’s retail business registered a growth of around X% in 2012 as compared to previous year Distribution partnership with Rural Bank Australia Post has formed a distribution partnership with Rural Bank, a wholly owned subsidiary of Bendigo and Adelaide Bank. As a result of this partnership, customers will be able to open Rural Bank deposit accounts at X,XXX post offices across the country. Around XXX post offices will also offer Rural Bank loans through dedicated Rural Bank Business Development Managers. Tapping the unbanked and youth through the Load&Go reloadable Visa prepaid card The Load&Go reloadable Visa prepaid card was introduced by Australia Post in November 2011. The card does not require any personal details, and customers can shop online or at retail stores. It is also an ideal ’pocket money’ option for young people. Load&Go is available in more than X,XXX outlets in Australia.

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APPENDIX

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APPENDIX

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