The definition of Credit-An intellectual discourse from Brazil.
The definition of Credit-An intellectual discourse from Brazil.
Credit is part-and-parcel of the North American society. Whether a student wants to get a school loan, or get a consolidation school loan, whether someone is shopping for secured loans, whether someone is seeking a personal home owner loan, whether someone who already has a home is looking for a home loan to remortgage, whether someone is looking for a refinance a home equity loan, whether someone is looking for a loan to finance the purchase of a vehicle, your credit history remains the most important criteria in determining whether or not your application for the loan will be successful.
In this blog we look at an intellectual's perspective of the what credit is, its history in Brazil, and the impact on the economy by the various methods of offering credit. In this period of a credit crunch not only in North America, but world wide, there may be some lessons for us.
For the sake of those who are new to this series of blogs, an introduction to the purpose of these series of blogs is given in small print below. If you are a returning visitor, you can skip the small print below and jump to the main article.
Introduction-The American way of life in Brazil
Other than the world's fascination with Brazilian soccer players, Brazil is assumed to by most people to be an underdeveloped 3rd world country. In truth Brazil is South America's largest economy, having advanced industries, and is now considered an emerging economy rivaling China, India and Russia. Not only that, the Brazilian lifestyle has been, unbeknown to most people, a typical western, if not American, in flavor, as we will see.
Brazilians love watching imported television shows and movies translated to their official language, Brazilian Portuguese. Imported television shows have had a significant influence on Brazilian culture. The influence of American TV in Brazil has resulted in Brazilians participating in culture that is considered predominantly American. For example, Brazilian children now participate in Haloween on the same day it is held in the USA. Brazilians also love their Internet. For example, Orkut, a social networking website initially targeting the American audience, now derives over 70% of its traffic from Brazil. All major search engines and social networking groups, including Google, Yahoo, MSN, Youtube, Myspace and Facebook have a presence in Brazil. Instead of using dot com, sites in Brazil often use a dot com dot br configuration, for example http://www.google.com.br/. Often, instead of using www as a prefix, sites in Brazil will use br, for example, br.myspace.com rather than http://www.myspace.com/.
In these series of blogs, we will try to bring out the Americanisms of life in Brazil. We will translate articles touching the everyday lives of Brazilians and see the similarities to their American counterparts and the common problems they share: buying a car, buying a house, choosing a good school, getting loans for education(get student loan), having to get a bank student loan consolidation, buying life insurance(get cheap life assurance quote online, just like Americans), get auto insurance online, dealing with remortgage problems such as shopping for good rates, getting loans to refinance the home(refinance a home equity loan), difficulties in acknowledging mesothelioma(Brazil is one of the world's largest producers of absestos, and acknowledging that a miner is a potential mesothelioma patient is opposed actively by many trade unions), etc. In short, these series of blogs will try to bring out the American way of life in Brazil that that is not documented well by the main stream media.
The original article below was written by Márcio Marcondes and can be found at http://www.varejista.com.br/novo_site/desc_materia.asp?id=18993,.
The Portuguese text is printed in blue, and the English translation of a phrase appears directly below.
Marcio Marcondes
by Marcio Marcondes
Inicialmente vamos analisar a origem da palavra Crédito: É derivada do latim, Creditu, que significa confiança. Agora vamos analisar a história da prática do Crédito pelo Varejo:
First we are going to analyze the origin of the word Credit: It is derived from the Latin word Creditu, which means confidence. Now let's analyze the history of the practice of retail credit.
Voltando às origens do negócio Varejo, lá nos tempos em que nem existia moeda, os negócios eram realizados na base da troca, o Escambo. Desde este tempo o Varejo já praticava o Crédito, onde após uma troca com valores reconhecidamente diferentes, sobrava um saldo para uma das partes, representando um Crédito para quem trocou possuindo a mercadoria de maior valor.
Returning to the origins of retail business, in the days in which there were no coins, business was carried out on the basis of exchange, barter trade. In this period retail already used credit, where after the exchange of goods of values recognizably different, there remained an outstanding balance on the part of one side of the trade, representing credit to the person who exchanged the goods that had the merchandise of greater value.
Após o implemento do conceito de Moeda, passou-se a praticar o Crédito através das Cadernetas, oportunidade em que o Comerciante demonstrava claramente confiança em seus fregueses, gerando um vínculo e fazendo com que sempre voltasse em sua Loja.
After the introduction of the concept on currency in the form of coins, they started to practice credit by using notebooks, an opportunity in which the business person demonstrated unreserved confidence in his clients, creating relationships and ensuring that the clients would always return to the business person's store.
Nesta época já se utilizava um conceito que só agora esta sendo aplicado: o RFV (Recência, Freqüência e Valor). A Recência era garantida pela necessidade do Pagamento, a Freqüência pela comodidade e o Valor pela satisfação gerada pelo Conhecimento que o Comerciante tinha do comportamento de compras do Cliente.
In this period they already used a concept that is only now beginning to be applied, RFV(Recency, Frequency and Value.) Recency is guaranteed by the necessity of payment, frequency by the convenience and value through the satisfaction derived through the knowledge that the business owner had of the buying habits of the client.
Nos tempos modernos, com o crescimento e importância que o negócio Varejo alcançou, foram sendo criadas novas técnicas, sendo uma delas o Crediário. Este negócio passou a ser tão importante, que alguns Comerciantes mais abastados criaram Financeiras, após ter percebido que o Crédito por si só era um grande negócio, podendo ser praticado em grandes volumes, bastando para isto ultrapassar as fronteiras da sua Loja, oferecendo os Serviços a mais e mais Comerciantes.
In modern day, with the increase of the importance that retail business has attained, new techniques have been created, one of them being sold credit. This business became so important that some of the wealthiest business people created financial institutions, after having realized that credit in itself was huge business, which could be carried in large volumes, being sufficiently large to expand the reach of their businesses, offering services to even many other business people.
Porém a adesão a este modelo ainda era modesta, pois as grandes cadeias de Lojas não o utilizavam, optando em operacionalizar o seu próprio crédito, pois isto lhes rendiam um grande volume de Receitas, além de ajudar na fidelização dos Clientes.
However, the adoption of this model was still rather modest, because the biggest business networks did not use this service, opting to create their own credit, because this gave them a lot of revenue, besides helping maintain customer loyalty.
Como todo Empresário que investe em algum negócio tem como meta aumentar o seu valor, estas financeiras encontraram uma nova forma de financiar vendas para o Varejo, mesmo que estes não contratassem o seu produto.
Just as every business person who invests in some business has as an objective to increase its value, these (sold credit) financial institutions found a new way of financing sales through retail, even though the buyers of the sold credit did not purchase their products.
Foi então que foram lançados os Cartões de Crédito, focando o Consumidor, oferecendo vantagens significativas para os que preferissem comprar em Lojas que aceitassem o pagamento em Cartão. Este negócio cresceu rapidamente, ganhando escala internacional, surgindo então as bandeiras de Cartões de Crédito, apoiadas por grandes campanhas de Marketing.
It was then that credit cards were launched, targeting the consumer, offering significant advantages to those who preferred to purchase in stores that would offer payment by credit. This business grew rapidly, gaining international scale, and thus ushering the dawn of the age of credit cards, backed by large scale marketing campaigns.
Como o custo destas operações pulverizadas é muito alto, a saída foi aumentar muito o número de Clientes, além da criação de novos modelos, gerando assim novas receitas, como a cobrança de Taxas de Administração dos Comerciantes, Anuidade para os Usuários, venda de seguros, cobrança de juros maiores que o praticado no mercado, estimular a rolagem das dívidas através da modalidade de Crédito Rotativo, inclusive fornecendo limites que estimulavam claramente o atraso, gerando grandes receitas de Encargos (multa e mora).
As the cost of these operations in small scale is very high, the solution was to increase significantly the number of clients, apart from the creation of new business models, as such generating new revenue; for example the charging of interest on administration services offered by the business person, annuity fees for the user of the card, the sale of insurance, charging interest higher than the market rate, stimulating the state of debt by means of rotative debt, including limits that clearly stimulated delayed repayments, generating a lot of revenue from missed obligations(penalties and late fees.)
Todas estas iniciativas foram bastante significativas, mais ainda existia uma grande parcela de Crédito sendo negociado diretamente pelos Comerciantes. Foi então que nasceu o movimento conhecido como Re-Engenharia, preconizando que as Empresas deveriam dedicar todos os seus esforços ao objetivo final do seu negócio, terceirizando as atividades que não estavam relacionadas ao seu Core Business.
All these initiatives were quite significant, but there still existed a major portion of credit being directly negotiated by the business community. It was then that the concept known as re-engineering was born, proposing that businesses should dedicate all their efforts to their main objective of their business, and outsourcing the activities that were not related to their core business.
Este movimento chegou ao Varejo e identificou que Crédito não era o seu negócio. Várias empresas, principalmente aquelas tocadas por Administradores Profissionais, aderiram ao modelo e terceirizaram suas áreas de crédito. Algumas inclusive viraram financeiras ou de propriedade de uma. No meu ponto de vista, o princípio básico do Varejo passou a ficar comprometido: A Confiança no Freguês.
This concept extended to retail and identified that credit was not their core business. Several businesses, mainly those involving administrative professionals, adhered to the model and outsourced their business units of credit. Some including previously created financial houses or some form of property. In my point of view, the basic principle of retail became compromised: trust of the customer.
Muitas vendas foram perdidas, pois dependiam de Créditos que não foram concedidos, pois este trabalho é realizado de forma fria e o mais automática possível pelas Financeiras, que praticamente utilizam a mesma técnica: a do Credit Escore.
Many businesses collapsed, because they depended on credit that was not granted, because this work is carried out in a cold-hearted manner and the most automated way possible by financial houses all which used practically the same technique: that of credit score.
Cada venda destas, perdidas individualmente, pareciam representar um risco a menos, porém quando este volume passava a ser muito alto, o varejo ficava sem caixa, tendo que recorrer exatamente a este setor financeiro, que o atendia com empréstimos valorizando este fato como parceria. Várias empresas foram à bancarrota, entre 1995 e 2000 foram mais de 120, só no ramo de eletro-eletrônicos.
Each of these sales, lost individually, seemed to represent less risk, however when the volume became large, credit retail remained without any suppliers, having undone exactly the same financial sector that attended to businesses taking advantage of this fact as business partners. Several businesses went bankrupt; between 1995 and 2000, just in the Electrum electronics industry alone, 120 went bankrupt.
As que se mantiveram fiéis às origens do Comércio não só sobreviveram como cresceram e hoje estão posicionadas entre as líderes em seus segmentos, como é o exemplo das Casas Bahia, Lojas Gabryella, Lojas Dadalto, entre outros.
Those that remained faithful to the original principles of retail credit not only survived but also grew and today are positioned among the leaders of their segments, such as the example of Casa Bahia, Lojas Gabryella, Lojas Dadalto, among others.
O Negócio do Varejo não pode ser apenas Comprar e Vender, cada vez mais percebe-se a necessidade do oferecimento de Serviços aos Clientes, potencializando a sua presença nos Pontos de Venda, gerando assim novas Receitas, que são muito importantes para a manutenção da Rentabilidade dos negócios.
The business of retail cannot only be buy and sell; more and more one realizes the need to offer services to the client, using the potential of the client's presence at the points of sale, generating in this manner new revenue, that is very important for the preservation of business retainability.
Com a competitividade acirrada e a carga tributária crescente, Empresas do Setor de Varejo sentem-se obrigadas a buscar estas Receitas, principalmente porque são classificadas como não operacionais. Este é o melhor momento para que retornemos às origens, somando nossa experiência com as tecnologias atualmente disponíveis e focando a operação no Cliente, não apenas na concorrência.
With increased competition and increasing taxes, businesses in the credit retail sector sense an obligation to seek out this source of income, especially because the revenue from this sector is classified as non-business operations. This is the best moment in time for us to return the origins of retail credit, combining our experiences of the past with the available latest technology and focusing on the business operation that is the client, and not only on the competition.
Márcio Marcondes
Palestrante, Consultor e Presidente da Electronic Market Solution
email: marcio@ems-private.com.br
By Márcio Marcondes
Speaker, Consultant and President of The Electronic Market Solution.
email:marcio@ems-private.com.br
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Labels: bank student loan consolidation, consolidation school loan, credit, home equity loan, home loan remortgage, home owner loan
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