Re-evaluating credit metrics would increase post-paid base, says Serasa Experian

Implementing a positive credit bureau (“Cadastro Positivo”) in Brazil could allow mobile operators to double the amount of current post-paid users, credit information firm Serasa Experian reported in a release.

According to Serasa Experian, implementing the bureau would bring the number of post-paid users to 36.1% of the total, compared to today’s 17.4%. The firm said that the current low numbers in the post-paid segment are due to limited ways of measuring credit capacity. As such, due to the limited tools that mobile operators have in reviewing individuals’ debt capacity, many customers who apply for a post-paid line are rejected.

There are an estimated 174mn cell phone customers in the country, the majority of which pay higher pre-paid rates.
By implementing the positive credit bureau, two regions – the north and northeast – would benefit the most, according to Serasa Experian. The number of post-paid users would quadruple to 4.13mn and triple to 13.1mn, respectively, the firm said.

“Mobile companies battle it out to win new clients, but they don’t have any way of re-distributing the current base,” said Serasa Experian president Ricardo Loureiro. “But the Cadastro Positivo could encourage change, with more quality revenues for the operators and better services offered to the end-user.” The company also made note of the World Bank study that every 10-point increase in broadband penetration brings a 1.3% boost to GDP.

The Cadastro Positivo is a method of analyzing a person’s historical and current portfolio in debt repayment to banks and retail stores, and in payment of basic services (electricity, water, telephone, gas). The current method just analyzes non-payment of debt, which according to Serasa Experian is “overblown.”

The bill introducing the positive credit bureau faced major changes in the lower house of congress, where it was passed in May last year. However, the bill went to the senate with changes that were widely criticized in the banking industry as making a positive credit information bureau unworkable. It has been stuck in the senate since then.

Serasa Experian has released other research which suggests that a well-functioning positive credit bureau could reduce non-performing loan ratios by as much as 45%, and increase consumer credit provision by up to 1tn reais (US$522bn).