cl@b 2017: Latin American banking, on the road to digitization

Both large and small Latin American banks have to take advantage of fintech’s capabilities in order to remain competitive in an increasingly globalized world. This is the undoubtable task of the financial institutions in the region, according to the participants of the first cl@b 2017 conference, which opened yesterday in Miami.

Fintech entrepreneurs, banking executives and participants in today’s plenary sessions all agreed that digitization is now the greatest challenge facing Latin American banks of all sizes and the area where all focus should be directed. cl@b president Gustavo Vega Villamil explained that although the development of fintech in Latin America has been slower than in other places, the region has not been sitting on its hands and is now seeing significant activity in various countries, such as Colombia.

In this regard, Giorgio Trettenero, Secretary General of Felaban, believes that in order for Latin American banking to be completely digital, “it has to be more flexible and take advantage of the capabilities offered by fintech. The technological revolution, the Internet, mobile telephones and even the U.S. banking crisis have contributed to the emergence of this unique opportunity to take the digital leap.”

During this process, David Schwartz, President of FIBA, stated that banking should stop focusing only on the concern that fintech companies are stealing business segments from them, and instead start looking for partnerships and integrating fintech capabilities into their own activities because technology is very expensive. According to Schwartz, “one of the major problems of banking is its high costs” and fintech has found the way to reduce them through the solutions it has developed, therefore it is crucial that companies start to collaborate”.

However, the speakers added that Latin America faces another barrier to digitalisation, which is perhaps ever greater: cultural change. Paraphrasing the guru Chris Skinner, Schwartz, from FIBA, stated that it is already taking place, “but it is important that all companies think like a technological company. Those who think like traditional banking services companies have got a big problem”, he said.

The representatives of Feleban also took advantage of the opportunity to request efficient regulation of the fintech sector that sets out clear operating standards and that accounts for the risk entailed in the activities they carry out.

Innovation, but always disruptive

Innovation was the afternoon’s protagonist at the conference, with a panel on how financial bodies, technological companies and start-ups are tackling this discipline.

Fernando Moreno, head of Global Business Development in NDB, from BBVA, explained that the Group tackles innovation from two angles: firstly, with a transformation dimension seeking to change the business, and secondly, from a disruptive angle, taking advantage of the capacities that the fintech ecosystem has to offer. An example of this is the recent acquisition of the Mexican start-up Openpay. “Innovation alone is not enough; you have to adopt a more aggressive mentality”, he stated.

In this regard, Moreno pointed to several factors that require this approach to be adopted. Firstly, people are now demanding an optimum “user experience” in all areas of their lives, whether they are banking customers or not. They are users of services such as Uber and Amazon. Secondly, technological giants are already venturing into banking and have the advantage of having lots of information on billions of customers. Finally, technology as we know it today has the potential to change the entire financial industry.

Pete Steger, from Kabbage, explained that for his start-up, innovation means detecting unmet needs, specifically in the automation of processes (loans for SMEs) and data analysis, with a better user experience, and sharing that solution with financial bodies.

The speakers were asked where innovation in financial services is heading, and they all agreed that it will only work by being focused on the customer. For Alejandro Picos, from Paypal, innovation will mainly be “AI-driven” (promoted by artificial intelligence), as well as the development of previously unimagined products and services. Steger, from Kabbage, warned that using innovation to produce the same products is not innovative. In his view, “we have to change the fundamentals of the product or service at its core”. In this sense, Fernando Moreno, from BBVA, stated that the Group is already working on a start-up with a completely new proposal, which will offer banking services to expats, a segment comprising 50 million people around the world.