The Portuguese voice in Eurogiro – their focus and expectations
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Interview with Mr André Gorjão Costa, Board member of Eurogiro A/S from CTT – Correios de Portugal since May 2013
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Mr André Manuel Pereira Gorjão de Andrade Costa, CTT Portuguese Post has been a Eurogiro Board member since 2013, but his organisation has been with Eurogiro since 1997. CTT is one of the classical European Postal organisations servicing the public with cash face-to-face payments business and having a long tradition of postal cooperation. Its business is diversified into 3 business units: Mail, Parcels and Financial Services, having experienced a strong growth in the latter over the past 3 years, currently representing more than 30% of Group’s EBITDA.
André Gorjão Costa is Chief Financial Officer of the CTT, and has previously worked with Santander in Investment Banking and Structured Finance both in Portugal and abroad. He was also a professor of Strategic Planning at Nova School of Business and Economics, the leading business school in Portugal and amongst the best in the world (Financial Times ranking). In this interview, André Gorjão Costa shares his views on the payments market, the opportunities of Posts and why CTT collaborates within Eurogiro.
The European payments market has changed immensely since CTT joined Eurogiro. How do you see the role and opportunities of CTT in the European payments market today?
CTT is the leading provider of postal and parcel services in Portugal, and also has a relevant position in the financial services industry with a strong cash face-to-face payments business in post offices and also a 4,000 Payshop agents network.
The European payment landscape is evolving very quickly, driven by the willingness of the European Commission to eliminate the barriers to cross-border transactions inside the European Union, with even more focus on the Eurozone. I have participated in the 1st quarter of 2015 in a conference organised by Western Union about “The EU Regulatory Framework – A Driver or a Barrier to Payment Innovation?” where these ideas were discussed between several parties.
The role of a company like CTT, with its two core networks – distribution and retail – is the fulfillment of the digital economyin all its areas: e-commerce parcels delivery, physical support to the digital economy in our post offices and participating in all forms of payments solutions to support seamless transactions and a strong customer experience. The payments market is changing – this change is driven somewhat by new technologies but mainly by changing consumer habits and trends, which means that we will need to adapt ourselves.
The strength of a company is not measured by its size or economic power but by its ability to adapt to the new market trends, just like “Darwin’s Theory of Evolution of the Species”. It is this competitive advantage that is creating new leaders in each industry.
Eurogiro connects a variety of financial institutions; among these many postbanks and posts like CTT. What do you see as the most important benefits for postal organisations of Eurogiro membership?
Eurogiro connects several institutions that want to have a relevant role in the payments industry, mainly regarding cross-border transactions and remittances, from postal operators to banks. The affiliation to this network is a competitive advantage to each member since it gives them more reach (opportunity to connect easily to various world economies) compared with that of their local competitors. In an economy that is becoming ever more global and without frontiers, Eurogiro plays a very relevant role in connecting very different players from within the payment industry, with very different levels of business expertise and IT capabilities where they can have a very simple and straightforward platform to enable the link with the Eurogiro community.
Everyone speaks about the digital economy but the physical one will play a very relevant role in the fulfillment of the transactions carried out in the digital world. For instance, you may do all the money transactions through internet-related platforms (home banking, applications, and mobile wallet) but if you want to have physical cash you will need to go to a branch of a bank or a post-office to obtain it.
I would say that several members do not take full advantage of the capabilities that Eurogiro offers because they sometimes delay IT investment or some necessary adjustments they need to implement or, for example, they delay the build of a connection with other members to start a payments corridor. Part of the work that still needs to be done is to push for a stronger member internal support to promote effective and efficient utilisation of the Eurogiro network and services by its members.
For instance, in East Asia and the Pacific region, remittances are projected to grow 7% in 2015 to exceed $ 127 billion, which means that the market size is very important and still partially unattended.
The payment industry is experiencing increased competition from known and new providers. How do you see the role of new types of payment providers in connection to Eurogiro?
The Eurogiro community is unique and is very difficult to replicate in the short term. It took several years to connect so many countries, geographies, cultures and companies under a common ground of understanding.
Nowadays Eurogiro needs to work internally to absorb, adapt and develop: (i) absorb the new market trends in the payments and money transfer businesses, (ii) adapt its business model to grow with these trends and always focus on delivering value/service to its members and (iii) enhance its offer and the services rendered in a seamless way enabling all its members to take advantage of it and to grow more as financial players.
Africa is becoming more and more important in the global payments market and Portugal and indeed CTT has rich African contacts. How do you see this market developing in the future and how could Eurogiro take a constructive role?
Africa is a region with several opportunities to grow its payments industry, enabling several countries to migrate to the new more sophisticated payment solutions like the mobile wallet, virtual money and others, without needing the strong and complex investment required for the traditional payment instruments (ATM’s, wire transfer, etc.). The political complexity of the region brings a new challenge since there are several different levels of development amongst African countries and a clear distinction between north and south.
Portugal has close cultural, political and also economic relations with some African countries (the PALOP organisation, involving the Portuguese speaking countries in Africa) which may allow CTT to have a disproportionately higher contribution for the development of Eurogiro in this region. Remittances to Sub-Saharan Africa are expected to reach $34 billion in 2015 and represent a relevant part of GDP for some countries and a source of foreign exchange reserves in others.
Eurogiro is a community that includes a very diverse group of member organisations. What do you see as the most important priorities to keep Eurogiro and our service offering valuable to members?
Reach, flexibility, simplicity and innovation.
Reach: enlarge the number of members, namely within the developing countries of Asia and Africa. For that, a seamless process of integration of the Eurogiro IT platform always needs to be a priority
Flexibility: we need to understand the diversity of our members, (e.g. geographically) and their business models, in order to adapt our offer to suit all off them in the best way possible, without compromising the value of a common standard.
Simplicity: the world is becoming more complicated with each day and companies and individuals look for solutions that may simplify their daily routine. Any developments need to have this in mind.
Innovation: Eurogiro needs to take advantage of its large community to always offer them the best solution in the market, following the value creation trends and capturing any disruptive innovation that may arise in the future.
CTT has been a member of Eurogiro for almost two decades. How has your organisation taken advantage of your membership in Eurogiro so far and what are your expectations for the next 2-3 years?
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Eurogiro helped CTT to develop its payments business by connecting to several regions of emigrants living in Portugal. Before we had a partnership with Western Union, Eurogiro was our sole way to make money transfers to several parts of the world. However, the value of Eurogiro for us was also the opportunity to upgrade and understand the market dynamics in meetings with other members, like the Annual Community Meeting. In 2013 CTT won an award for its contribution to Eurogiro but our commitment to its community had a lot to do with developing business opportunities cross-border, enlarging our geographic scope.
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For the next 3 years I believe that Eurogiro will need to move faster in upgrading its offer driven by the fast market dynamics of innovation. There are more and more disruptive technologies being developed that a community like Eurogiro can make a success and a market standard, not needing to innovate but to adopt from the start-up companies that are better suited to perform the (IT) development process. So, we need to be the promoters and supporters of these new ideas, evaluating their intrinsic value for our community and their ability to be game changers.
The value of Eurogiro has been detailed in previous questions. Now, we need to put together the strengths of Eurogiro with the new technologies for the payments and remittances industries to deliver more value to our members.
CTT has recently created postal bank, Banco CTT, in an environment in the banking industry that is quite adverse. Why do you see an opportunity for Banco CTT in the Portuguese banking landscape?
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CTT has been a provider of financial services in Portugal for more than 100 years, having in some periods held an innovative role in the market. A good example was the development of a postal payment system for electronic tolls, where you only need to register your license plate in our app for mobile phones and you will know the amount of your payments outstanding and you can also get an instant code to pay that amount at an ATM machine. Therefore, financial services is embedded in the DNA of CTT and, in 2013, the management defined that we had to develop our 2 growth levers: (i) the Parcel business driven by the e-commerce development, and (ii) the Financial Services business, enlarging the number and type of financial services offered, considering even a development of a postal bank.
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After an in-depth market study, we understood that, not only did we have a potential low cost business model (supported by our retail network) to be able to compete in the market, but also that the opening of a postal bank was viewed positively by the population. We believe that the turbulence within the banking industry in Portugal will bring an opportunity for fast growth of Banco CTT. Our offer will be based on simplicity, trust, transparency and value for money (low-cost) supported by a modern web-responsive internet banking and mobile banking, not forgetting our extensive coverage of all the country with our post offices.
Finally, how would you like to influence the future of Eurogiro?
Given my role as CFO of CTT, a full time job, I focus my role as a non-executive board member of Eurogiro in supporting the strategic definition and ambition of the community for the future, in this challenging, fast-moving and demanding market environment, promoting the development of a larger member community and the adoption of new payment solutions without impacting the levels of service that our members require.
The new market framework will bring opportunities for Eurogiro to be part of the transformation that will happen in this industry. Putting together the knowledge about the most innovative solution (IT solution providers) with Eurogiro, a large and diversified payments/transfers network, may open considerable opportunities to develop and consolidate a new market standard for this industry. I recall that it is not the most advanced technological solution that always succeeds but the one which is adopted by the consumers/users. We saw this phenomena in several industries and development models, like the SEPA system for banking transfers in Europe, a solution less developed than others existing in some of the European countries.
Now Eurogiro needs to find the right partner to combine efforts to capture the full value of this market and its community, delivering more value to its members. It is moving from a Distributor/Integrator to an Integrator/Disruptor model, building a more valuable network.
In order to bring more value to our members we need to rethink the service levels whilst at the same time maintaining the high levels of quality. The transformation process needs to be achieved together with its community (members) in order to maximise the value for all members, which, ultimately, is the reason that Eurogiro exists.
By André Gorjão Costa [email protected]