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Retail Banking in Latin America Why digital transformation is taking centre stage

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2 Retail Banking in Latin America

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Retail Banking in Latin America: Why digital transformation is taking centre stage is part of a series of Regional Review publications from Efma, examining a selection of the most prominent developments in the retail banking industry in specific geographies. With comment and insight from a wide variety of regional retail banking experts, this review serves as a forum for industry leaders to exchange ideas, share their strategies, discuss the common challenges they face and shed some light on the ways in which they are driving innovation both within their own organizations and across the wider region. This review brings together some of the best examples of digital transformation taking place across the Latin American region through a mix of interviews, innovation highlights and reports covering topics from mobile banking and branch technology to SME services and fintechs.

Compiled by:

Karla Alvarez Head of content management, Latam, Efma

Boris PlantierContent manager, Efma

Images from...Pablo Garcia Saldaña (p24)www.istockphoto.com

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04 | Efma membership05 | Foreword06 | The whats, whys and hows of successful digitization in

Latin America – Anzen Digital and Citibanamex07 | Commentary: Danny Weber, Anzen Digital

10 | The changing role of banks in Latin America – Banking executives discuss the current state of the industry

12 | Case study: Banco de Crédito del Perú12 | Case study: Banco BHD León14 | Case study: PagBrasil15 | Case study: Original Bank

16 | A reshaped financial services industry – Renata Talarico Petrovic, Banco Bradesco

16 | Case study: Banco Bradesco18 | Fostering financial inclusion in Colombia – Lázaro Ignacio Duque,

Davivienda18 | Case study: Bancolombia20 | Listen to your customers and evolve with their needs – Luiz Carlos

Brandao Cavalcanti Junior, Banco Bradesco

21 | Partnering for success – Paola Fuertes Ceballos, Zyos22 | Providing greater reach – Carlos Ugalde Noritz of Live PayPhone22 | Case study: Banco Neon24 | Giving financial access to neglected sectors – Gonzalo Kirberg, Cumplo

32 | A region worth investing in – Citi33 | Case study: Unicred Integração33 | Case study: Banco Galicia34 | Case study: BBVA Bancomer34 | Case study: Banamex

25 | How digital is changing the face of finance – Argentinian Association of Bank Marketing

27 | The state of play for Latin America in 2017 – Hernan Linetzky Mc-Manus

28 | Case study: Itaú Unibanco30 | What lies ahead for Latin American banks? – Ramón Heredia Jerez,

Digital Bank Latam30 | Case study: Banco do Brasil

INTRODUCTION

ROUNDTABLE

BANKER INTERVIEW

FINTECH REPORT

INNOVATION SPOTLIGHT

REGIONAL OVERVIEW


INTRODUCTION

Becoming a member of Efma offers many benefits. Not only do members gain the opportunity to network with peers and industry experts from more than 3,300 financial services institutions worldwide, they also gain free access to industry-leading research, online portals, events and more.

Plus, as Efma now counts a third of the world’s largest retail financial services institutions as part of the association, becoming a member offers an effective way for banks to boost cross-industry relationships.

When a financial institution becomes a member of Efma, it is provided with a dedicated Efma representative, along with access to customized services. All employees of the organization gain instant access to various online and printed resources via the Efma website. Functioning as a self-service research centre, the website features industry-focused interviews, reports and studies on various topics, as well as the Innovation portal for banking, the Innovation portal for insurance, the SME AppsBank portal and the new Fintech portal.

By tapping into the wide range of studies, benchmarking reports and statistical data, members can increase their understanding of the biggest issues facing retail bankers and insurers, track industry trends and developments across the globe and monitor the progress of other key players. The data, which is regularly updated and supplemented with executive interviews and articles authored by industry experts, also provides an insight into new products, technologies, operational and customer service innovations.

Members are also entitled to participate in various international conferences such as the SME Summit, Distribution Summit, Insurance Summit, Innovation Summit and Efma advisory councils where Efma organizes face-to-face, on-site meetings – as well as virtual think tanks, webinars and presentations. n

To learn more, view www.efma.com/joinefma

Efma membership By becoming an Efma member, retail financial services organizations from across the world gain access to a number of exclusive benefits and networking opportunities

Alain EnaultRegional manager of Southern Europe, Latin America and Africa

[email protected]

Karla AlvarezRegional manager of Fintechs and Latin America

[email protected]

CONTACT US

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Like in many parts of the developing world, digital transformation is beginning to make its mark on banks across Latin America. Smartphone and internet use rates continue to grow at an impressive rate; consumers are becoming increasingly digitally savvy; and yet large proportions of the population still don’t have access to basic financial services – it’s a time of great opportunity for the industry and banks are embracing digital to broaden their reach and serve those that they haven’t been able to previously. In this Regional Review we hear from banks across the region about some of the key challenges they face and why they are prioritising digital transformation and instilling a spirit of innovation across their organisations. We find out how they are taking advantage of technology to create and deliver products and services that optimise their business operations and fulfil their customers’ expectations. This publication includes interviews and insights from more than 20 of the banking industry’s most pioneering leaders in the region. Together, they provide a fascinating outlook into some of the main factors that are driving their decision-making, the initiatives that they are pursuing to grow thanks to new digital strategies and how they are preparing for the future. We also find out more about some of the most exciting innovations in the region, with case studies shedding light on developments around mobile payments and wallets, digital banking services, the increasing role of fintechs, and much more. Thank you to the banks and fintechs who have dedicated time to contribute to this Regional Review for the Latin American region. Their experience and insight is of great value to us all as the entire industry continues on its digital transformation journey. We hope you find this Regional Review an informative and valuable resource.

Vincent Bastid CEO, Efma

Foreword


For the financial services industry in general, when innovating, the word ‘digitization’ entails associated benefits such as more efficient consumption of resources; improvements to business processes (whether financial, commercial, or access to information); and the ability to foster an organization that is less constrained and has vast potential for growth.

As digital or innovation officers we need to become facilitators and providers of digital options, embracing digital freedom as our war chant. Our new job is to provide better options and make sure we always give clients the best and most secure customer experience.

In addition, we now have to consider how to deal with the traditional banking segmentation of clients, which is not aligned to digital. Here lies a fundamental change: the traditional business segments must heed and promote the autonomy of the digital segments, forgetting the traditional schemes of products or banks, thus evolving to a segment-of-one model.

Around 18 years ago we started transforming a long-standing banking tradition by switching one of the most delicate products in Mexico from cash to electronic: the payroll. This is a traditionally growing and recurring income product for bankers, and if not handled with care it may become a serious cause for concern. Unions and government agencies are part of the payroll customer environment and they will not tolerate a problem with employees’ paychecks nor with electronic deposits.

It was precisely at that moment when the digital evangelization began that, as an incentive, we made a commitment to the main clients that it would always be possible to return to cash in case of a major incident with the banks’ systems.

And we faced again one of the biggest villains that works against digitizing: cash.

The same applies to government payments like taxes or fines. Our main customers at this moment will always feel safer with a rubber stamp on a piece of paper.

The real dialogue behind this is the everlasting struggle between physical and digital. A characteristic of the specific trades in emerging markets is the sense of attachment to the physical, a sense of trust and ease that becomes an invisible barrier to the next steps.

In the case of Mexico, we went from trading cocoa beans in the time of the Aztecs to cash. We now dare to suggest that there might be something better, but part of what makes cash so persistent is the fact that it is real and tangible.

Digitizing in Latin AmericaThe digital ecosystem has undergone a significant transformation during the last few years, which has served as a driving force for sectors or verticals to digitally transform. As such, the financial sector is the last of the large verticals to jump on the digitization bandwagon.

From the results of a poll issued by KPMG we know that banks, financial institutions and insurance companies are the businesses most eager to invest in the digitization of their processes. This proves the interest in healthy growth and the full exploitation of the opportunities present in this context within the Latin American region.

The whats, whys and hows of successful digitization in Latin AmericaGabriela Galindo of Citibanamex and Danny Weber of Anzen Digital address the challenges and opportunities of implementing a digital culture in the emerging markets of Latin America

Part of what makes cash so persistent is that it is real

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There’s no secret that fintechs are hot right now, and Latin America is paramount to that with more than 500 fintechs operating in the region. The amount of venture capital money targeting the financial sector is staggering. Every financial brand is trying to invest and be a part of it so that when someone discovers the next consumer payment innovation, they’ll be part of the next credit card business model.

The digitization of the banking system has forced banks to evolve traditional processes. Banks are migrating their processes to digital platforms and making digital an essential tool in the ongoing

improvement of their services, making them more agile and offering better products for users.

Financial institutions are implementing new technologies and changing their operations through new channels, which allows them to create innovative business strategies.

Transactions via electronic banking have grown considerably, despite the fact that the Latin American market is under development. Nevertheless, support from financial institutions and the government is important for the region. This support helps to

One true statement we Latinos live by is that we love our mercados (markets). Even in this age where we have more apps in our phones than are needed or wanted, we still get a kick out of the experience of shopping for a range of products from spices to fidget spinners, street food and clothes.

For us, it’s a given that markets are cash-based economies and we act accordingly, leaving our credit cards at home knowing that they will be of no use.

One of the most unique places in Mexico City is the Mercado de San Juan, known for its exotic dishes like gator burger or crickets, where our digitization exercise took place. One of the shops offers an outstanding number of fine cheeses and cold cuts, tapas and wine, Spanish style. We got there by chance and by word of mouth since our regular apps for foodies had no information. Not only the food but the service was outstanding and we could see how this small business could benefit immensely from having a digital presence on Instagram, Foursquare or Yelp.

And so, chatting with the owner about what a great experience it had been but how difficult it had been to find her shop, I asked if I could take a couple of photos and explained what would happen the second we uploaded them. It would mean that the business card she so proudly handed out to me would be replaced by my review, her valuable collection of cheeses could be showcased for the world to see and, more importantly, the family service values would be out in the open for customers to know about.

As we had this chat while tasting provolone cheese, I saw a deep change in her face and, more importantly, questions started to flow. Was it expensive to upload a picture? Why would people trust what I wrote in a digital review? Why did I trust the advice of strangers? What else could this digital thing do to settle once and for all that her place was the best?

So, we started one of the most eye-opening journeys, digitizing a mercado food shop. She could use her phone to take amazing photos with effects. With WhatsApp, customers could place their orders in advance and just pick them up. In Yelp, people could review her products and services. We then jumped to payment methods: what would she need to accept cards as well as cash? Was she comfortable with the transition and what was stopping her?

One clear issue was how cash made her feel safe and how she felt walking into a bank to deposit the daily income.

It was a very humbling experience, hearing from a potential customer her dreams and expectations, and the clear appetite for digital solutions according to her needs. Not for a second did she doubt her interest in having a foot in the digital arena, nor did the word ‘digital’ come into our conversation. At the end, I had the good fortune to have a new digital user and she was kind enough to give me, as her new teacher, a pound of extraordinary cheese as a token of her appreciation.

This slice of one of my weekends kept me thinking about how we should rank ourselves while carrying the digital flag.

COMMENTARY

How the adoption of digital in Latin America could improve underserved sectors: a mercado storyDanny Weber reflects on how small businesses can take advantage of digital services to widen their reach and access customers that they wouldn’t have been able to before


promote the digital ecosystem and culture among the population in order to increase the number of people with access to financial and technological services, which is still low in the region.

A clear driving force for digital usage is found in the new rates and regulations for digital telephone services for the general population. Once this was a deterrent and clients carefully watched the consumption of each mobile phone data plan unit with a lot of pain. However, today this has become a non-issue, thus reducing the connectivity gap for businesses and entailing a growth and innovation opportunity for financial companies in Latin America as the entire digital wave revolutionizing the life of consumers points to financial operations being made through mobile channels in the short term. Indeed, this is already happening.

Also, a study carried out by Citibanamex in Mexico (Banamex Digital Compass, 2016) shows that access channels to the internet have undergone noticeable changes. The cellular phone has taken an essential role in consumer behavior in recent years, emerging as the main engine for digital contact with 96% of internet access, followed by fixed internet from home and via WiFi at different hotspots. It must also be mentioned that the number of daily hours banked people spend web-surfing in Mexico has reached 230 million (a 25% increase in only a year).

The nine keys for digital success in Latin AmericaThere are a lot of examples of effective digital economies that we could try to clone in the Latin American market to increase the opportunities for development in the digital industry.

Facebook or WhatsApp were not built specifically for LatAm, but their global scope has allowed Latin America to use it massively, with a deeper penetration than developed economies. A great amount of client servicing in the region is delivered through WhatsApp or Facebook Messenger, even via chatbots. Another example is of course Uber and its competitors who not only move people but also deliver food, or even supermarket purchases where client needs them.

With our experience in the digitization of the financial sector, we believe that in order to digitize in a healthy and effective manner in the region, we need to advance:

1. Digital culture: As digitization disrupts society ever more profoundly, concern is growing about how it is affecting issues such as jobs, wages, inequality, health and security. Slow regulations will create painful moments in our progress towards a digital society, but at the end of the road the benefits will be much greater than the imbalances it will temporarily create.

2. Security: This will be a barrier and a facilitator of digital technologies. As we move from the traditional cash/product exchanges in the mercado scenarios to placing a digital order through WhatsApp or a mobile app, fraudsters and criminals will go after the money, designing new schemes to stay ahead of the new businesses. But technology is moving at an incredible speed. Now, through the gathering of digital data, it is possible to have a probability index that a specific purchase, of a specific product, at a specific place, is really being made by the consumer, with the same or better precision than a human validating his/her ID document at that place. That type of convenience will soon overcome the security fears or barriers.

3. Bancarization (access to banking services): This has been increasing as a result of social development, and has been facilitated by the digital platforms adopted by consumers. Nevertheless, we need to attract a greater percentage of the informal economy population and offer them attractive financial services.

4. Reduction in the use of cash: We are moving towards a cashless society. In the not-so-near future, all financial transactions will be recorded in a blockchain-type ledger. The complexities of the financial system such as taxes, rates and cut-off dates will be understood in a manner that is completely different from the current one.

5. Growth/development: We are a region that is growing in all aspects of financial services: banking penetration, branches and digital/mobile users. All KPIs are growing very rapidly, in contrast to other, more developed regions where growth has slowed. For example, in developed economies the physical branch space has been drastically reduced.

6. Credit: Easier access to loans will be essential to the new clients who have no formal historic data to analyze their spending power. The fintechs are working around this issue, and the banks need them to join or continue in that direction.

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7. Financial services/APIs: No doubt it will be necessary to collaborate and allow the new players to uncover or build new types of businesses with those new digital clients, so banks and fintechs will offer financial services as an API very soon.

8. Data exploitation: It will be essential to process the vast amounts of acquired data, to understand the needs of clients and bring relevant offerings to them.

9. Connectivity: No doubt we’re improving in terms of internet access. In Mexico alone, 83% of the population (over 15 years of age, urban and with an ABCD socioeconomic status – or 39.6 million people), have internet access. Monopolies in telecommunications create excessive pricing and delay technology updates. Nevertheless, competition may increase, reducing the obstacles for a digital client to be always on.

As we have mentioned throughout this article, there is great potential for digitization in Latin America, understood as the transformation or reinvestment in technology, business models and processes to drive new value for clients and employees in order to compete more effectively in a digital economy that is constantly changing.

With contributions from different competent entities, we can now embark on increasing and adopting in Latin America the digital culture which has worked in other countries, to develop the market. Purchases through the internet and direct debit payments have become key to successful digitization in the financial industry. Banked consumers or clients are becoming more confident in digital banking.

Most financial institutions already acknowledge the value of their digital channels. They are no longer just ‘alternative’ channels. The majority of financial transactions today are executed through digital channels.

We just need to show a client for the first time the ease of use and convenience of the digital banking channels (web/mobile/wearables/chatbots), so they become interested in the channel, and generate and make recurring use of it. This will happen as long as the institution has an agile and secure experience executing the transactions.

Different strategies are used by different institutions to capture that first use of digital. From discounts and movie tickets to kitchen items, as un-digital or physical as they may be, these generate an attractive incentive for Latin American users.

The growth of bancarization, which has reached its maximum level in the last few years, linked to the use of the internet, brings an increase in ‘banked internet users’ which, in the Mexican market alone, reached 45% in 2016.

There is no doubt we have come late to the digitization game as a market, but we will be a key player in the future of digital financial services. n

Gabriela Galindo is chief innovation officer of Citibanamex Danny Weber is CEO of Anzen Digital


Digital transformation is beginning to have a profound effect on the delivery of financial services across the industry. It’s helping banks more effectively tackle financial inclusion and rethink the way they use their branches. We discuss the latest trends.

How do you think retail banking in Latin America will evolve in the next few years?Héctor Abrego: Retail banking is changing, with customers taking more control of the relationship. They are switching bank more often, buying products from more than one bank and demonstrating a preference for tailored products and services. By 2030, relationships between customers and their banks will look very different from today as technology provides ever greater possibilities to broaden and deepen relationships with customers.

Alberto Del Solar: We must hinge our value proposition on the customer experience. In Latin America, customers are more demanding and have more complex needs. This is because they have more access to information and there is greater competition in the industry. They demand better rates, better fees and better services. They also value convenience, which translates into a digital way of doing business.

Emiliano Porciani: We expect to see greater financial inclusion as well as the digitization of transactions in the retail sector, thanks to the role of fintechs and the likes of Google, Apple, Amazon, Facebook and Alibaba. This will provide a more friendly experience for both buyers and sellers, and the normative/regulatory scenario and taxation system will be aligned to promote digital transactions rather than the use of money in its physical form.

How are new players adding value to financial institutions today?Del Solar: They are improving the customer experience and customer satisfaction by doing things that banks haven’t been able to do. They are revolutionizing the way banks approach product development, IT and even the way banks do business. However, I think that the rise of fintechs is an opportunity and not a threat. Banks will benefit, as will the fintechs themselves who will be able to leverage the banks’ strong brands and large customer bases.

The changing role of banks in Latin America

ROUNDTABLE

Banking executives discuss the current state of the financial services industry in Latin America and outline their vision for the future

Héctor AbregoDeputy CEO of Channels Innovation and Development and deputy director of Electronic Channels at Grupo Financiero Banorte

Ginny de HoyosVice president of marketing Banco General

Alberto Del SolarGeneral manager Banco Hipotecario

Emiliano PorcianiDigital manager Banco Galicia

THE PANEL

Camilo VelasquezHead of Bancolombia Innovation Center Bancolombia

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Camilo Velasquez: Fintechs are solving specific problems for our customers in an exceptional way. Good service is not enough for customers if a fintech is able to offer a memorable experience. As such, financial institutions are becoming aware of the value fintechs offer in terms of customer experience, speed, experimentation possibilities and consulting. On a global level, fintechs have allowed regulation to be questioned or for new regulatory frameworks to be created, which focuses on controlling systemic risks without losing sight of the customer.

What role do you think bank branches will have going forward? Abrego: As part of a bank’s overall omnichannel strategy, the branch has a number of key roles to play. These include: acquiring new customers; protecting and developing the existing customer base; representing and projecting the brand; and generating a return on investment. What’s certain

is that the role of the branch must never be just about transactions… branch networks will be radically transformed into sales and advice outlets.

Del Solar: Branches will survive, but their role will change. I believe that they will become more like advisory centers, where customers will come to get advice about more specialized products and

We must hinge our value proposition on the customer experience

Alberto Del Solar


For 48 hours at the start of every October, Peru hosts the Teleton event to raise funds for rehabilitation centers that help young children and adolescents with motor disabilities. The nationwide campaign is supported by a continuous 48-hour TV show to ensure it reaches as many Peruvians as possible.

Dubbed the ’Bank of Teletón’, Banco de Crédito del Perú (BCP) has supported the charitable cause for many years, collecting funds via its various customer channels. In 2015, when BCP embarked on its enterprise-wide digital transformation, it decided to find a way to use its new channels to increase its support for the campaign and make it as quick and easy as possible for people to give their money. Its solution was the Teleton button.

Integrated into the Banca Movil BCP mobile app, Teleton’s button enables customers to donate money in two simple steps, from anywhere at any time during the two-day event. First, customers choose from several predefined amounts – from US$2 to US$30 – and then they click a button to confirm their donation. Once they have donated, users can click

another button to share a photo and a hashtag to their social media accounts to encourage others to get involved with the campaign.

During the 2015 Teleton TV show, 19,000 people used Teleton’s button to donate almost US$150,000 – around 6% of the total funds – and encourage their friends and celebrities to use Banca Movil BCP to contribute to the cause. This social media frenzy also prompted a 178% rise in the number of average daily downloads of the mobile app over the two days.

CASE STUDY

Bringing mobile donations to the masses

Banco BHD León launched its Financial Inclusion Model (FIM) in 2014 to encourage more people in the Dominican Republic to bank with its organisation and embrace e-money over cash.

FIM allows anyone with a feature phone to open up a bank account, manage their money, save and borrow, and apply for credit all on their device. It aims to get more of the population to join the mainstream financial system, and trust banks with their money.

Key to the initiative’s success was getting potential customers to trust Banco BHD León and know that their money was just as accessible, and held just as much value in digital form than it does in cash. It’s for this reason that FIM assures customers that cash and

e-money are completely interchangeable and is working to ensure that e-money is accepted everywhere. It also offers incentives, such as giving customers access to an emergency credit line – something they wouldn’t get if they remained unbanked.

CASE STUDY

Tackling financial inclusion in the Dominican Republic and beyond

Customers can use the Banco de Crédito del Perú mobile app to easily donate money to nationwide fundraiser

How the Financial Inclusion Model from Banco BHD León is bringing banking services to anyone with a feature phone

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services. These types of products will also be offered by digital channels. With this in mind, I am sure that the footprint of banks will reduce. The branches of the future will be loaded with self-service technology because, in our countries, the penetration of smartphones and the internet is not very high. Not everyone has a device or the internet in their hands.

Velasquez: Branches will not disappear, but they will certainly change their core functions to self-management and digital learning processes. The biggest challenge for financial entities is to prepare ourselves for the conversion of our branch talent, starting with operational and transactional positions and finishing with advisory services. A branch’s future space will bring together the physical and digital, where a community is generated and, to a lesser extent, where transactions are perfected.

Porciani: Branches will survive as long as they continue to add value, support the growth of local

economies and provide bespoke services. We are currently working on developing branches of various sizes that have different specializations according to the environment in which they are located. We are also connecting branches with our other channels to offer a full service which includes remote assistance, helping our customers regardless of their location and time of day.

Branches will not disappear, but they will certainly change their core functions

Camilo Velasquez


Ginny de Hoyos: Bank branches in Panama have and will survive in the mid to long term. Some 15 years ago, banks intended to offer fewer services in their branches, but in actual fact they’ve ended up offering more as new self-service and online offerings have become available. Today, we still open four to five branches per year to reach areas that are not well served.

How are disruptive technologies like artificial intelligence, blockchain and virtual reality being embraced by banks in the region? Abrego: We’re using technology to move from a bank that sells everything to everyone, to one that uses information to prepare offers and opportunities for individual customers – we’re moving to personal banking.

Del Solar: These new technologies have started to blossom everywhere, but in Latin America they are in the very early stages of development. Late last year we became the first bank in Peru to launch a bot to answer our customers. It is powered by Watson and has been very successful. We have also recently launched our innovation center which explores the use of new technologies in financial services.

Boleto Bancário is an official push payment method regulated by the Brazilian Central Bank. It accounts for more than 30% of all online payments in value. There are however several drawbacks to this method, including the fact that merchants and end users struggle with delayed payment confirmations and the lack of a refund option.

It’s for this reason that PagBrasil launched Boleto Express – a new payment method complete with faster payment confirmation and automated refunds. With Boleto Express, once the transaction is confirmed as paid, PagBrasil automatically notifies the receiver. All refunds can also easily be processed via PagBrasil’s API or web portal and are transferred on the same day so that the buyer’s bank account is credited within 24 hours.

Launched at the beginning of October 2014, Boleto Express has received great press coverage from all over the world. And PagBrasil clients benefit from better conversion rates, greater satisfaction and, ultimately, faster payments.

CASE STUDY

Bringing faster payments to customers in BrazilA new payment method from PagBrasil takes the pain out of online payments for merchants and consumers

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Velasquez: Blockchain, artificial intelligence and virtual reality are technologies that must be understood, tested and encouraged by financial institutions because of their economic transformation potential. These three innovations are part of our day-to-day discussions on innovation, regardless of the fact that their mainstream development won’t be generated for another two to five years.

In what ways are banks tackling financial inclusion across the region?Del Solar: Inclusion is very important in Latin America. In Peru, only 40% of the population and 35% of businesses are banked, so there is a huge opportunity there. Banks need to simplify processes and offer digital technology which will allow us to reach customers more efficiently. Joining forces with fintechs will be key. Financial education is also needed. Alongside the government, we can help teach SMEs the basic concept of financial topics. For example,

they need to learn how to separate their business finances from their personal finances, which sounds easy to do but in practice it is not. Several years ago we launched an initiative which is much like a banking 101. It has been very successful and we hope to launch similar initiatives in the years to come.

Porciani: Like in many other countries across the region, in Argentina the banking system is important for the growth of the economy and our sector. Financial literacy, the user experience, and a supportive tax and regulatory environment will need to play a major role if inclusion is to be achieved.

De Hoyos: The industry understands that there are still large groups of people that are excluded from the formal economy and banking system, and should have access to these services. For banks, they represent a new market and together we can help them improve their quality of life. n

Original Bank launched in April 2016 and is the first fully digital bank in Brazil. It has no branches and customers use an entirely online process to open an account – no papers needed and all banking services are available digitally.

In line with its commitment to keeping up with innovations in the market, Original Bank is also the first bank in Latin America to open its application programing interfaces (APIs) to third-party developers. Its aim is to bring fintech speed to service delivery, allowing partners to integrate its financial services with any third-party application, in a fast and secure way.

The concept phase of this project involved a great deal of benchmark research to decide the best overall user experience. Most inspiration came from outside of the bank sector. Developer platforms from Google, Facebook and Stripe were used to understand the most important functionalities and define the best structure for the API documentation.

The project was developed by the bank’s innovation team in partnership with its IT and security teams in

12 months. Today, open banking allows third-party developers to access its API documentation through a dedicated website, use a sandbox for testing and send final submissions for analysis.

CASE STUDY

Moving forward with fintech innovation By opening up its APIs to developers, Original Bank in Brazil is bringing innovative new services to its customers


A reshaped financial services industry

BANKER INTERVIEW

Banco Bradesco’s Renata Talarico Petrovic tells us how she expects the retail financial services sector to evolve in Latin America

While bank branches will undergo physical and technological change in the medium to long term, they will not disappear. That’s according to Renata Talarico Petrovic, innovation executive at Banco Bradesco in Brazil, who says that, despite the migration of most banking transactions to digital channels, physical contact is still very much required when it comes to certain financial decisions.

“Nevertheless, customers have new expectations when visiting a branch,” Petrovic says. “They want help in solving complex problems and appreciate expert advice on particular subjects. When entering a branch, they expect to be immediately recognized and they only want to receive offers of products that are truly relevant to their life events and moments.”

With this in mind, Petrovic believes that, when planning branches of the future, it is essential to think of a combination of digital, human and physical factors. “Even if the amount of physical visitation has reduced, clients expect to be served in an omnichannel manner, depending on the situation,” she says.

The distribution network should also be planned so as to provide service when and where customers really need it. “Living spaces with wi-fi, armchairs, coffee shops and self-service machines are possible solutions in this new model, which propose a paradigm break in the relationship between client and branch,” Petrovic says. “In this way, the client spends

Banco Bradesco has launched the Bradesco Artificial Intelligence (BIA) initiative to harness the capabilities of cognitive computing and artificial intelligence.

The bank has invested in this approach with the aim of providing answers to customer questions in an efficient manner, without burdening Banco Bradesco’s staff.

As part of BIA, the bank has worked with IBM-Watson to create an artificial intelligence model that can provide explanatory answers to operational inquiries about products and services.

To create this first version, approximately 15 people were involved as a core strategic team for the project, as well as 60 content specialists, and hundreds of representatives from the bank’s branch network.

Departments of the bank involved in the model’s development included retail, operations and digital channels, and Banco Bradesco also worked closely with IBM as a strategic partner. The artificial intelligence model took around six months to train before it was ready to run in the first branch.

Today, 1,300 Banco Bradesco branches are using the model and continuously helping to train the system. By November 2017, it is hoped that visitors to all 5,600 Banco Bradesco branches will have access to the solution.

More than 140,000 questions have already been answered by the model, with an average accuracy of 80%, and an average time of response less than 10 seconds.

CASE STUDY

Embracing artificial intelligenceBanco Bradesco turns to technology to improve the way it deals with customer queries without burdening staff

17

their time inside the branch performing banking transactions with comfort and well-being.”

The branch isn’t the only element of financial services to change. According to Petrovic, the growing numbers of partnerships between fintechs and banks will influence the dynamics of the financial market. “These companies have been going through a process of maturing their business models and we can see that from now on there will be a deep collaboration between fintechs and banks,” she says. “We understand that fintechs have the agility to test new business models and, therefore, we want to support this ecosystem and provide an opportunity for these companies to reach our customers and to introduce significant innovations to our way of providing customer service and the offer of new services.

“In our view, each entity has distinct qualities and competitive advantages that enable us to work together in order to best meet the needs of our clients on their financial journey.”

For customers in Latin America, this means greater access to digital technologies. “The popularity of smartphones in Latin America makes it possible for financial institutions, especially retail banks, to intensify the availability of more sophisticated digital applications to an audience which is increasingly open to online banking, especially to mobile solutions,” Petrovic says.

The use of new technologies such as artificial intelligence (AI) and blockchain will also help banks like Bradesco to create a better customer experience (see box on p16 for more on the bank’s latest AI initiative). “We see the application of AI technology as crucial to scale up and add value to the client’s self-service journey, as well as to promote cross- and up-selling, according to the individual profile of each client,” Petrovic explains. “Meanwhile, blockchain and distributed ledger are technologies with a strong potential for innovation, whether incremental or disruptive. In the first case, it can reduce process/back-office costs and increase operational efficiency. In the second case, it allows the emergence of new business models, as already achieved by Bitcoin.”

However, Petrovic believes that some technologies won’t make it through into the mainstream. “From our perspective, virtual reality may not be applicable in the nearer future and will be difficult to be adopted in current business models or to be widely applied.” she says. “We believe that augmented reality (AR) will be more appropriate. Currently, the most obvious applications would be for virtual visits to properties that are for sale, car sales and travel. All of these options, however, need integration with third party APIs or sites – a hurdle that might prevent mass adoption for some time.” n

Renata Talarico Perovic Banco Bradesco


According to the Colombia Banking Association, 28% of the Colombian adult population is unbanked. This needs to change, says Lázaro Ignacio Duque, regional manager for corporate banking at Davivienda in Colombia. Success, he believes, requires the growth of more mobile solutions – much like we’ve seen with the adoption of M-Pesa in Africa.

“In Colombia, despite being a third world country, there are more cell phones than people,” Duque says. “That’s why we’re creating a wide range of mobile solutions to serve the needs of all of our four and a half million customers.”

The DaviPlata electronic wallet is a great example of this. Using the app, customers can transfer

funds from their phone to friends and family, even if they don’t have a Davivienda bank account. “Essentially a key is sent to the recipient, which they type in at an ATM to withdraw funds,” Duque explains. “It couldn’t be simpler.”

The solution has been so effective that it has won multiple awards, as well as a government contract to use DaviPlata to distribute government-to-person payments to more than 900,000 recipients of Familias en Accion, a social safety net program.

It’s also facilitating access to financial services for families in the armed forces. “When serving in the military, soldiers are able to send money via their phones to their families. So, there is a huge social benefit,” Duque says. “An agreement has

Fostering financial inclusion in ColombiaLázaro Ignacio Duque from Davivienda tells us why mobile holds the key to success when it comes to providing financial access for all

Bancolombia has launched a new digital bank to help bridge the gap between traditional financial services and the way that young people use their money today.

The bank saw an opportunity around emerging technologies, and aimed to meet the needs of young people by delivering services in ways that are relevant to them, such as via devices and web services. Bancolombia also has a desire to continuously innovate, and was inspired by companies in other industries, such as Whatsapp, Spotify and Uber.

Named Nequi, the digital bank started as a project lead by Bancolombia’s Innovation Department. 18 months later and the result is a mobile banking platform which meets the needs of young people in a culturally relevant way.

With Nequi, users can open a bank account via their smartphone in less than five minutes. Money can be sent to users’ cell phone contacts, even if the recipient doesn’t use Nequi themselves.

Users can also withdraw money from more than 3,000 ATMs without needing a debit card, and digital payments can be completed in more than 9,000 locations via QR codes. With Nequi, Bancolombia has also become the first Colombian financial institution to use mobile biometric authentication.

Nequi already has in excess of 6,000 users, and going forward, Bancolombia is aiming to grow its user base and ecosystem, as well as improve current services and develop new ones.

CASE STUDY

Catering for today’s customerNequi, a new digital bank set up by Bancolombia, allows customers to open an account on their phone in less than five minutes

19

been made between the Ministry of Defense of the armed forces and Davivienda, who provides them with the DaviPlata service and they are starting to pay through this system. None of those soldiers need a Davivienda account, but the day they decide to open one, we hope it will be with us.”

Another of Davivienda’s popular digital services is its electronic wallet plug-in which makes it possible to access account information through major social network sites. “Currently HSBC and Davivienda are the only banks in the world to offer this service,” Duque says. “Users simply click on the red Davivienda house which appears in their social network. From here they are able to make electronic transfers.”

As well as fostering inclusion, Davivienda’s push on digital services frees up its branches for more valuable clients. “We’re trying to get people to access basic banking services – like checking their balances or transferring funds – through their phones or via their PC at home, instead of coming into branches,” Duque says. “We want branches to be used by people who are looking for more complex products such as mortgages, which require a greater level of advice. Congested branches affect the level of support that can be given to premium customers.”

Looking ahead, Duque is excited about what the future holds for the bank. “We’re establishing ourselves as a pioneer in the industry,” he says. “We’ve recently visited Silicon Valley which was a real inspiration. I’m looking forward to see how we can implement our many new ideas in the months to come.” n

Lázaro Ignacio Duque Davivienda


Banco Bradesco’s Net Company Bradesco app is aimed at large and small businesses. Six years on and it’s proving an invaluable resource for clients. Luiz Carlos Brandao Cavalcanti Junior tells us how it’s making a difference.

Can you tell us more about the app?The Net Company Bradesco app was launched in September 2011 and was initially directed at large companies, allowing them to view balances and authorize transactions. Then we focused on public small and medium enterprises (SMEs) to provide an efficient solution for digital inclusion.

In September 2014, we provided our clients with two alternative solutions within the same application. One is for large enterprises, with which they can review balances, make withdrawals, approve transactions and deposit checks without the need to go to a branch. The other is for SMEs, and includes all the benefits of the full version, but additionally allows customers to request loans and schedule transactions.

In just one year, we managed to design, develop and offer an application that made total sense to our customers. The app offers a new level of innovation and includes key features that help facilitate the daily activities of our customers.

What challenges has the app overcome since it was first launched? One challenge was engaging the various departments of the bank that all had different views. This naturally added to the complexity of the project. However, with the commitment of the multidisciplinary teams across all levels of the project, we were able to meet expectations and provide a new channel of interaction for SMEs.

What advice would you give to a bank looking to build an SME app? The most important thing is to understand the main needs of the audience. Pay attention to the user experience and take advantage of application development best practices. This helps to create an

app that is easy to use and, therefore increases the likelihood of customers wanting to use it.

It’s also crucial that real customers get to test it first. Validate the features that meet your needs, and then draw on the insights presented by your customers. This approach has helped us to continuously improve the products and services we deliver.

What does the future hold for the app?This application is an organic, ‘living’ structure, and so it must be constantly updated. Whenever we act, we do so on three converging fronts: to evolve the services we already have in place; to identify and implement features that meet new demands; and to monitor major technological developments and market trends. New services implemented since its launch include the ability to request and unlock checks, and upgrading how users access their account and security key. We have also made other updates, including the ability to automatically schedule direct debits, registration and sharing features, credit cards with balance services, withdrawals and investment consultations. n

Listen to your customers and evolve with their needsLuiz Carlos Brandao Cavalcanti Junior, departmental director at Banco Bradesco, explains how the Net Company Bradesco app is improving the way it serves SMEs

Luiz Carlos Brandao Cavalcanti JuniorBanco Bradesco

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Given the digital transformation that the financial sector is undergoing, effective partnerships between start-ups and banks are key to success. Start-ups offer skills which are difficult for big corporations to provide – skills such as agility, newness and energy. Start-ups also have deep knowledge in several customer segments untapped by banks.

Overall, start-up companies are focused on providing added value to customers on a daily basis, without working within established constraints. They’re focused on solving real world problems using innovative methods. The outcome of this process, mixed with the power and strength of an established financial institution, will lead to disruptive innovations that create a win-win relationship benefiting all three entities.

While the benefits of this sort of collaboration are many, challenges remain. Fintech companies often struggle to break the paradigm that banks can only work with other big companies. Banks are accustomed to dealing with other big players in the tech market, and must be convinced that another pattern can also be rewarding.

Those that do acknowledge this are reaping the rewards. A great example of this is Davivienda, the third biggest bank in Colombia, which has

joined with a start-up to develop a private social network for people who live in the same area named ‘edificiosDavivienda’. This has introduced an entirely new revenue stream to the bank.

It’s clear that banks are coming to realize that the only way to survive in this new tech age is to provide services which add value to traditional financial products. Retail banking in Latin America specifically will become a factory of solutions for specialised customer segments, which will transform the industry as we know it.

One area that needs particular work is meeting the needs of the unbanked population. The average Latin American consumer still does not rely on a bank to hold their money. They are missing out on opportunities that the financial system can offer. At the same time, financial services have a big challenge to design products which fit the needs of these people. This is where fintechs can help. They are tackling a variety of markets and are providing solutions to empower Latin American competitiveness, which will bring substantial value to the table when partnered with banks. n

Paola Fuertes Ceballos is founder of the Colombian business Zyos

Partnering for success

FINTECH REPORT

Paola Fuertes Ceballos of Zyos explains why the transformation of the retail financial services landscape in Latin America relies on effective collaboration


A start-up on its own will find it difficult to succeed in today’s financial services sector. Banks, meanwhile, are cumbersome and find it very difficult to develop new and fresh ideas that are applicable to the banking environment and business. This is where fintechs add real value – value that cannot be bought. The genius, passion and ideas coming from a small start-up company can provide invaluable contribution to a bank and its services. The value they add can be the difference between being a leading bank or a laggard in the market.

To succeed in this regard, trust must be established. Banks always require security when launching a product to market, which is why they will always demand a mature and highly tested

product to support. However, fintech solutions are often unproven experiments, which is why fintechs need to make a tremendous effort to gain support from a financial entity.

Get it right, and the opportunities are huge. The area of financial inclusion in particular is generating a lot of interest from fintechs due to the enormous growth opportunities that this market represents.

The challenge is how to achieve this financial inclusion? On the one hand there are fintechs who have been able to generate technological devices in which banks are completely excluded from business, such as electronic money and recharging systems.

Providing greater reachCarlos Ugalde Noritz of Live PayPhone explains the value that start-ups can bring, especially when it comes to financial inclusion

In January 2015, a Brazil-based company introduced Controly, a service that enabled customers to purchase goods using a prepaid card linked to a virtual account and a financial management mobile app. After eight months, the company decided to become a bank to provide more solutions to its customers, and six months later, Banco Neon was born.

Created for millennials, Banco Neon is a fully digital bank that enables customers to use their smartphones to open an account, check their balance, transfer money to friends via Facebook or WhatsApp, manage their savings, make payments and more.

To open an account and acquire a Visa Quick Read debit card, the customer securely sends a photo of their identity document, registers a numeric password and their fingerprint, and takes a selfie for facial recognition purposes. Whenever they make an online purchase, the bank’s security and authentication service automatically requests a real-time selfie from

the customer’s phone and compares it to the original photograph. If they match, the transaction is completed.

It takes less than four minutes to open an account, and customers do not need to visit a branch or pay monthly fees and annuities.

Less than 48 hours after Banco Neon launched, the 5,000 accounts it had made available were taken, and a month later, there were 20,000 people on its waiting list.

CASE STUDY

A digital bank for millennialsBanco Neon in Brazil brings a fintech mindset to banking with digital services that appeal to today’s customers

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On the other hand, there are fintechs who leverage a business model that becomes more profitable as the bank manages to achieve greater banking penetration in the market. Such is the case of Live PayPhone, a payment application that, thanks to its technological model, replaces the use of plastic cards and POS to carry out payment transactions. This allows banks to quickly enter markets it normally wouldn’t be able to reach, because it removes the main entrance barriers: fraud risks and elevated costs of equipment, communications, support, etc.

These types of solutions don’t only enable the formalization of those using it, but also allow banks to introduce micro credit, and therefore delay cash payment times. This generates real benefit to companies and countries because of the increase in the speed of money flow and the increase of transactions in the market.

Solutions like this, which foster symbiosis with banks, have the potential to change the world as we now know it. In my personal opinion,

retail banking will develop in proportion with the widespread growth of digital payments because, as this gets introduced to the market and becomes increasingly expanded and made available to everyone, credit and micro credit businesses will be able to expand like never before.

The exponential increase of electronic commerce, along with the use of micro credit, will become the main source of commercial transactions. This, along with the acceleration of money in the market, will increase the growth of domestic consumption and therefore the economic growth of the countries, which in turn will promote an increased acceleration of consumption and the credit cycle. This will then generate much more business for the new banks, leading to greater liquidity and finance sources for the productive system and a substantial improvement in the quality of life for companies. n

Carlos Ugalde Noritz is CEO of Live PayPhone in Ecuador


Fintechs are complementary to the traditional financial services industry. We can bring innovation and cutting-edge technology, enabling different services that provide greater value to users.

In the case of collaborative financing platforms like Cumplo, we give financial access to currently neglected sectors, like SMEs. By connecting loan applicant companies with a network of investors through our online platform, we lower process times and costs, and achieve better access to capital and better interest rates for SME companies.

Despite our success, there is a certain reluctance towards anything that breaks the traditional scheme, especially the collaborative models looking to cut the middle man from the financial system. We are often considered a ‘disruptive’ industry, when the truth is, the focus is not banking or competing with financial institutions. Instead, the focus is on end users. It’s about giving these people, especially in neglected sectors, value in order to democratize the

financial system and make this industry more accessible and transparent.

Looking ahead, banking is going to be forced to see the fintechs movement’s technology and innovation as pivotal to the transformation of the industry, especially in terms of its access and its costs. Without a doubt, new alternatives of financing and investment will become relevant, such as crowdfunding platforms.

Fintechs offer innovative technological solutions which enable greater transparency, streamline processes, and provide autonomy to users through greater empowerment.

We are facing a phenomenon that is only beginning in Latin America, where today’s access to capital is not democratic, cheap or accessible for all. Fintechs are at the crux of changing this. n

Gonzalo Kirberg is general manager of Cumplo in Chile

Giving financial access to neglected sectors Gonzalo Kirberg says that fintechs are making the financial industry more accessible and transparent

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The finance sector is changing, and words like digital transformation, innovation and collaborative economy are being heard more and more in the head offices of key financial institutions in Latin America.

The digital revolution is forcing banks to rethink every aspect of their business, from expectations of providing more personalized customer support, to how customers think banks should be.

We believe that in the coming years, the democratization of technology (growth of smartphone and internet penetration), changes in consumer habits and growth in the banking population will make Latin American banks go through a deep internal transformation to adapt to this new competitive scenario and defend their market share.

Discussion and communication is moving towards organizational changes, which indicates that the convergence to digital banking is growing stronger. Notice that customer

experience management, digital transformation or innovation is not uncommon in many of the major banks in the region.

We estimate this transformation to last for a few years, filled with challenges ahead, but also opportunities for those banks who have prepared themselves for this new digital world.

Nothing is set in stone on how this transformation will occur; each financial institution shall have to define its own strategic

How digital is changing the face of financeLeaders of the Argentinian Association of Bank Marketing provide their perspective on the future of finance across Latin America

Latin America is becoming fertile ground for fintech growth

REGIONAL OVERVIEW


plan. It requires cultural changes, new knowledge and skills that banks must incorporate into their organizations.

Certainly, the role of physical branches will change in the years to come, moving from a transactional model to one that is geared more towards customer advice. To do this, they will need to work on re-engineering internal processes to make them simpler and faster, as well as improve the customer experience. Digital channels will allow banks to operate at all times, from any location, able to complement the work that is performed at the branches.

Latin America is becoming fertile ground for fintech growth too. Many innovation groups and new fintechs have cropped up in Mexico, Brazil, Colombia, Chile and Argentina. The FinTech Radar from Finnovista showcases the dramatic growth of fintech start-ups in Colombia, where at least 70 innovative companies were identified in sectors such as payments and remittances, loans and financing. In Brazil, the FintechLab includes more than 130 projects on its radar, in sectors such as financial management, loans, financing, insurance, Bitcoin and blockchain. In Argentina, Fintech Radar found 60 start-ups focused on digital financial services.

It should be noted that collaboration between banks and fintechs is progressing in different ways, namely strategic relationships or alliances, incubation programs, venture capital funds or directly through purchases of all or part of fintech organizations.

Some banks in the region are openly calling for developers to participate in fintech competitions or hackathons, where they are given particular industry challenges to solve. In the not too distant future, we should expect to see more banks open up their technology platforms through open application program interfaces (APIs).

Banking penetration levels in Argentina are still low compared to other countries in the region and the rest of the world.

When investigating the main reasons for limited banking in the country, a lack of confidence in banks and their agents stands out as a key factor, with many having doubts regarding money safeguarding, commissions and the complexity of payment processes. On the other hand, there is a considerable proportion of potential customers who report not having all of the required documentation to open an account, or the fact that a poor credit history is holding them back. n

Global banking penetration ratesArgentina and Bolivia lag behind when it comes to tackling financial inclusion

Source: World Bank

Argentina

33%

63%68%

31%

Brazil Bolivia Eurozone

98% 99%

USAChile

100%

Switzerland

27

In 2016, economic growth in Latin America declined by 1.4% from the previous year, and poverty rates rose for the first time in several years. Four countries on the continent saw a fall in their gross domestic product (GDP) – Argentina, Brazil, Ecuador and Venezuela – mainly affected by the price of their raw materials and structural weaknesses.

This year, the economies of Latin American countries and the Caribbean are expected to improve, albeit marginally. The World Bank estimates a modest growth of around 1.2% – lower than the growth prospects of more developed countries. But it is good news, since the prolonged economic slowdown was putting socio-economic development at risk in countries across the region.

Regional economic growth will depend on external factors, and populist and protectionist temptations will also need to be tackled. While

still facing these challenges, Latin America is also exposed to new opportunities, such as the growing interest from Europe and Asia, who are looking to strengthen their ties with the region.

A key challenge for Latin America is to break the traditional export matrix based mainly on the sale of raw materials. The aim is to boost the value of its products and, as such, grow its economy. This will better position it to face a world where investment levels are low, international trade growth is in decline, debt is high and productivity is stagnant.

No sector is as highly exposed to economic cycles as the financial sector. The largest banks in the world lost many millions of dollars in market capital during 2016. But perhaps due to a history of instability, Latin American banking is used to economic fluctuations and is better adapted to handle this.

The state of play for Latin America in 2017Hernan Linetzky Mc-Manus, an independent consultant for Efma, discusses what’s happening across the Latin American economy and how this is affecting banks


Each financial system has its own characteristics, where regulation and size are the most important elements. However, the Latin American banking system has several elements in common, and up until now there has been a trend towards consolidation of the financial system in the region, especially with banks that have a strong international presence.

In many respects, 2017 could be a transitional year for the region. Banks on the continent have been forced to face up to the reality of slower economic expansion due to a reduction in global prices for raw materials, which has been the case for around four years. Meanwhile, Argentina and Brazil have undergone political and economic crises and fallen into recession.

Latin American countries’ decline in GDP has weakened the operational environments and asset quality of regional banks, which has created challenges for regional financial systems that have been growing significantly. These challenges come from a decrease in credit as well as the obligation for credit risk to be managed better. Essentially,

slow growth and higher credit reserves, translated into higher provisions and reserves, has put pressure on banks’ profitability.

Looking ahead, there are several elements that will affect regional banking prospects, such as new immigration regulations and commercial protection in the US, which will hurt Mexico and Central America, both in terms of remittances and the flow of foreign investments. Compliance requirements are another element having an impact, which has put pressure on the world’s banks to cease relationships with banks in the region. The economic situation in China and Europe, alongside economic uncertainty following the new administration in the US, are also key factors that will affect the global price of raw materials and subsequently the growth of Latin American countries.

In Argentina, there have been regulatory changes when it comes to the maximum limits and floors in deposit rates, which has favored banking in a more competitive environment. However, a system needs to be built that encourages more of the population to use banks.

Faced with a high number of customer complaints and incomplete sales, Brazil’s Itaú Unibanco decided to review its contract formalization process and found that it was complicated for customers to sign and finalize contracts. Customers had to come into the branch to manually sign contracts with the help of a bank manager, or print, sign and courier their finalized contracts to the bank, usually via motorcycle.

To make processes more efficient, Itaú Unibanco developed an online Remote Formalization process that would enable customers to complete contracts of a high value from any location. Now, bank managers can discuss a proposal with customers via the telephone and then the client can use a digital channel to confirm the proposal using their password.

Moving the formalization process to online channels has boosted efficiency, increased the number of completed contracts, and improved customer

satisfaction levels. It has also reduced the time and costs associated with visiting branches or printing and couriering documents. During a pilot, the bank achieved a 56% conversion rate on sales.

Currently, Itaú Unibanco offers an online formalization process for 10 products.

CASE STUDY

Simplifying contract approvalsItaú Unibanco in Brazil moves its contract formalization process online to improve customer satisfaction and boost efficiency

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The deep recession in Brazil has prevented faster recovery, and banks have rather moderate profits to show for it, seeking a gradual return to greater growth as the economy begins to show signs of improvement.

Chile has not escaped this trend either. Without economic growth, the banking system could have issues. There could be some impact on the implementation of the Basel III regulation and its effect on capital requirements.

According to World Bank estimates, Colombia should grow by 2.5% in 2017, which is more than double the projections for the rest of the continent, which will undoubtedly favor banking in that country. However, Fitch Ratings downgraded the country, which could result in insufficient capital, which would eventually lead to devaluation and regulatory changes.

Finally, for Peru, this year sees a better outlook for banking, after reaching its lowest point in 2016.

And yet despite all of this ‘noise’, Latin America still has a solid banking system that continues to

grow, albeit at a slower rate compared to previous years. Banks in the region face unavoidable hurdles: to encourage greater financial inclusion, to endeavor to reduce the use of cash by developing alternative means of payment, to pay closer attention to computer security and to increase competitiveness through the incorporation of new players in the market, thus favoring efficiency and promoting greater access to banking services. n

Hernan Linetzky Mc-Manus is an independent consultant based in Chile

Latin America still has a solid banking system that continues to grow


2016 saw an influx of major technology projects from banks across Latin America. Big technology updates, core banking overhauls, omnichannel solutions and digitization projects took a significant portion of the yearly budgets. However, the vertigo of the digital revolution, changing user behavior and increasing pressure from non-banking entities are forcing financial companies to make a much deeper change in their internal processes.

Moreover, fintechs are becoming allies in Latin America, allowing traditional banking services to be complemented by a more innovative digital offer that has greater connection with customer needs.

According to our projections, in 2017 we will see a series of actions taken by banks operating in

this region, in order to face the challenges of the digital revolution:

E-wallets and mobile payments: 2016 was the year when several of these solutions were launched and we expect this trend to continue with the appearance of more applications and the increase in use of those that already exist. A challenge in all Latin American countries is the consolidation of a mobile payment ecosystem which allows people to make their day to day payments from their checking or debit accounts, without the use of credit cards and its consequent collection of commissions. There are countries like Chile, with a high banking rate, where it is expected that the prepaid industry will develop in 2017, which will allow other non-banking players to enter into the financial system.

What lies ahead for Latin American banks?As companies like Uber, Airbnb and Spotify become increasingly present in our lives, banks across Latin America are having to reassess their digital operations in order to meet customer expectations. Ramón Heredia Jerez tells us more

Recent estimates suggest that only 24% of financial transactions in Brazil take place in traditional channels. Customers are increasingly migrating away from the ATM and branch, towards online and mobile. With this in mind, Banco do Brasil deemed it necessary to take a proactive approach to meeting customer needs and offering the best possible customer experience.

Taking inspiration from 100% digital companies like Amazon and Netflix, Banco do Brasil has developed a solution that embeds analytical and business intelligence to automatically adjust offers for each individual customer – creating a completely personal offering. This personalization of offers has three pillars: customer, product and channel. 360 sub-segments based on behavior, income and life stage were created and distinct combinations of products were developed for each sub-segment. Through

historical analysis of transactional data on channels, product-product affinity scores were determined.

The combination of these analyses creates offers that have a high likelihood of conversion on each channel. The project’s success to date has been extraordinary. In just three months, the solution has increased the conversion success rate, having generated nearly US$1 billion in investment product volumes and about US$70 million in loans.

CASE STUDY

Personalized next best offer for digital channelsUsing analytics, Banco do Brasil is bringing personalized offers to its customers, and is seeing impressive results

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Chat bot and communication via social networks: Customer service and the continuous response to people is one of the key challenges for a service-based industry, such as banking. To meet these needs, banks are incorporating chat solutions with responses based on human operators, such as Banco Santander’s solution in Chile. Another example is solutions connected to automatic bots that can sustain a conversation with the client, without the intervention of a human from the bank, such as the solution Arturito from BCP Bank of Peru. Another important trend in this regard in 2017 will be the increasing presence of banks with transactional services in social networks.

Biometrics: Biometric solutions will deepen their presence in financial services this year. The use of fingerprint or face biometrics for enrollment and validation of transactions is already being used by the first banks in Latin America. Biometrics reduce friction in user enrollment processes, replacing the signature of physical documents with lean, and in some cases immediate, digital processes. In Argentina, Banco Supervielle implemented biometric identification technology to improve its customer service model and avoid fraud. It also deployed a biometric solution based on fingerprint readers for access to safety deposit boxes.

Banking API platforms: As a way to respond to customer demands and connect banks to the digital places where people are living their daily lives, Latin American banks are incorporating APIs into their systems, allowing them to connect services from their legacy systems to their ecosystem of external solutions. This is an important option to generate new types of income for banks and respond better to the threat of non-bank actors.

Hackathons and open innovation labs: We’ll see many more hackathons in 2017. These have enabled Latin American banks to reach the start-up ecosystem and allowed developers to provide solutions to financial institutions’ challenges. In 2016, Banco Galicia in Argentina, Banco BCI in Chile, Grupo Aval in Colombia and Banco BNB in Bolivia carried out successful hackathons.The creation of open innovation laboratories will also proliferate, allowing banks to attract, select and integrate fintech solutions to their business.

Blockchain: During 2017 we will see the creation of the first blockchain laboratories by banks

in Latin America. During 2016, these types of labs only really existed outside of the traditional financial system. Several solutions were created in terms of Bitcoin and blockchain for the operation of smart contracts and processing of digital currencies. We will see these same technologies inside banks, with laboratories that will allow these solutions to be tried and tested.

Transformation and digital culture: The incorporation of all these new technologies will be of no use if they do not go hand in hand with a cultural change. Banking employees must finally respond to the needs of clients via digital transformation. The incorporation of new knowledge, such as Lean Start-up, Agile, Scrum and Design Thinking among others, will be key to achieving this in Latin America. n

Ramón Héctor Heredia Jerez is director of the Financial Innovation Ecosystem at Digital Bank Latam


In October 2016, global bank Citi said that it would be investing more than US$1 billion in its Mexican business, historically known as Banco Nacional de México or Banamex. The investments, which will be completed by 2020, are a further sign of Citi’s commitment to Mexico – adding to its pledge to invest more than US$1.5 billion in the country back in 2014.

As part of its investment program, the bank also confirmed that Banamex will be known as Citibanamex going forward.

“Citibanamex has and always will be the Banco Nacional de México,” said Michael Corbat, CEO of Citigroup. “These investments in Citibanamex reaffirm our commitment to Mexico and our confidence in its prospects. Our goal is nothing less than to create a state-of-the-art bank in Mexico, fully focused on delivering a richer, smarter, more intuitive experience to everyone who does business with us.”

The investments are focused on five key areas:

Digital banking: Consistent with Citi’s ‘Mobile First’ approach, Citibanamex’s investments are designed to create the best virtual banking experience in Mexico. This effort will include improvements and new services and interfaces for Bancanet, MobileApp and Wallet.

Improvements to technology platforms: Citibanamex will increase its focus on cloud-based solutions; optimize its payments infrastructure; and improve process automation to make interactions between customers and the bank more intuitive and efficient, with enhanced quality and security standards.

Branches: Citibanamex will invest in its branch network and create digital branches that offer high-level, personalized advice and smart banking technology. The vast majority of the first 100 digital branches will be launched in Mexico City, Guadalajara and Monterrey. Additional

improvements will be made to modernize Citibanamex’s entire branch network.

ATMs: Citibanamex will add 2,500 new ATMs to its network across the country. 1,500 of these new ATMs will be capable of performing an expanded set of services, including check deposits and payments.

Targeted solutions for key customer segments: Citibanamex will improve its offerings for different customer segments. Citibanamex Priority customers will have access to exclusive areas in branches and call centers to get specialized advice and financial products. Small and medium business clients will be offered access to a specialized team with in-depth experience in this area and products and services tailored to their needs. Corporate clients with an

international focus will have an enhanced ability to tap into Citi’s global and regional capabilities to access the financial markets and to implement credit solutions, treasury and foreign exchange solutions. In addition, Citibanamex will introduce a financial inclusion area to address the unique needs of those who have not previously used traditional banking services.

Jane Fraser, CEO of Latin America for Citi, said: “Citibanamex will honor our rich history in the country while acknowledging that together we offer more talent, experience and ideas that will help enable economic growth and progress.” n

A region worth investing in

INNOVATION SPOTLIGHT

Citi is investing more than US$1 billion in its Mexican business to deliver exceptional customer experiences and to provide expanded offerings to clients

Our goal is to create a state-of-the-art bank in Mexico

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In a world where individualism prevails, Unicred Integração was motivated to conduct a social experiment to encourage collaboration. Therefore, it created the concept of ‘collective change’, encouraging bus passengers to leave any spare change behind at a bus stop so that the next passenger could easily make up their fare.

The initiative was publicized extensively on YouTube and Facebook, encouraging replication in other cities.

The results were fantastic. The general public of Brazil reacted very positively and integration and cooperation between people increased. Significant media coverage of the initiative by major newspapers in Brazil, teamed with social media

interest, led to the project being adopted in both Mexico and Portugal.

Looking ahead, Unicred Integração hopes to use the project as the basis for similar initiatives at parking meters or in supermarkets.

CASE STUDY

Making good use of spare change

Banco Galicia developed Buenos Negocios, an open collaborative community comprising customers and non-customers, to help more than 100,000 small and medium-sized enterprises (SME) customers capitalize on new business opportunities and improve their management skills. Buenos Negocios has two main integrated components: the buenosnegocios.com website, and the Encuentros Buenos Negocios events program.

The website features more than 800 pieces of content created by more than 100 specialists, as well as information on events and forums to encourage discussions. Today, the site has more than 20,000 registered users and registered 8,000 SMEs, and attracts more than 70,000 visits per month in Argentina, and more than 350,000 from SMEs worldwide.

To date, Banco Galicia has welcomed a total of 10,000 people (70% clients and 30% non-clients) at 13 Encuentros Buenos Negocios events in five major cities. Each one-day event opens with a presentation

showcasing SME success stories, and also includes multiple training sessions and networking opportunities.

Buenos Negocios has created more than 1,500 business opportunities valued at US$10 million for Banco Galicia’s SME customers. The platform has a 74% net promoter score, almost double the score for Banco Galicia’s traditional SME services (35%).

In future, Banco Galicia plans to expand Buenos Negocios to offer zero-rate loans for customers to hire consultants, and to provide a new feature so SMEs can get free advice on various topics. It will also develop referral groups for in-branch customers.

CASE STUDY

Empowering SMEs to grow

How a social experiment by Unicred Integração in Brazil allows bus passengers to help out fellow travelers

Over 100,000 businesses are benefiting from an information sharing community set up by Banco Galicia in Argentina


Recognizing that customers often are fearful of entering their debit and credit card information online, BBVA Bancomer became the first bank to commercially implement technology that replaces static three-digit security codes with a dynamic CVV/CVC (the number in the signature area on the back of a payment card) that changes every 20 minutes.

Designed to protect against card-not-present fraud, the use of dynamic CVV2 ensures transaction authentication by the issuer, releasing the acquirer of chargebacks. Overall, this generates a much easier and more secure way to pay.

“Mobile banking and e-commerce are expanding rapidly, but lack of trust can prevent some customers from embracing it,” said Hugo Najera Alva, general director of digital banking at BBVA Bancomer. “Our long-time partner Gemalto helped us quickly

implement ground-breaking dynamic CVV/CVC technology and the response thus far has been outstanding: in the first weeks of the project we already have more than 100,000 active users.”

CASE STUDY

Countering the threat of fraud

Around 38% of Mexico’s population now use mobile devices to access the internet, communicate with colleagues and friends, take photographs, read news and much more. Recognizing that mobile is the country’s fastest growing channel, Mexican bank Banamex decided to develop an app to enable customers to quickly complete basic financial transactions via their mobile devices.

Launched on both Android and iOS in 2013, App Banamex gives customers more control over their banking experience. The app allows them to pay bills, check their balance and complete other basic transactions whenever and where is most convenient for them, rather than having to wait in long queues in a bank branch. To work the app, users simply need to enter their account number and password.

Following the launch, Banamex carried out a marketing campaign on banamex.com and its social media sites, which prompted a 78% increase in the number of users.

Today, 200,000 customers use App Banamex as their main banking platform and the number of transactions has risen by more than 200%. Banamex plans to continue updating the app to provide the best possible customer experience and encouraging its clients to carry out basic banking tasks using mobile, rather than its physical branches or online channels.

CASE STUDY

Putting banking in customers’ hands

BBVA Bancomer in Mexico combats fraud by finding a more secure alternative to the security codes on the back of cards

Over 200,000 customers in Mexico use the app from Banamex to manage their finances

GET INSPIRED AT EFMA EVENTS

Efma l 10 Boulevard Haussmannl 75009 Paris l France l Tel:+33 1 47 42 52 72 l Fax:+33 1 47 42 56 76 l [email protected] l www.efma.com

NIF/TVA: FR 41 784 856 239 l N° SIREN: 784 856 239 l Code APE: 9499

28 September 2017Banking Innovation Forum Toronto - www.efma.com/innobank17

8-9 March 2018Bank + Fintech Conference New York - www.efma.com/bankfintech18

16-18 May 2018Channels & CX ForumLondon - www.efma.com/channelscx18

23-24 October 2017Innovation Summit: Artificial Intelligence Rome - www.efma.com/innovation17

25 October 2017Efma-Accenture Distribution & Marketing Innovation Awards Ceremony Rome - www.efma.com/innovationawards17

26-27 October 201745th Congress : Banking TransformationRome - www.efma.com/congress17

8-9 November 2017Retail Banking Summit in AsiaSingapore - www.efma.com/asia17

13 February 2018Dubai Banking Innovation Dubai - www.efma.com/dubai18

2017 2018

June 2018SME Summit Paris - www.efma.com/sme18

June 2018Affluent & Private Banking Summit Paris - www.efma.com/affluentprivate18

June 2018Insurance Awards CeremonyParis

35

GET INSPIRED AT EFMA EVENTS

Efma l 10 Boulevard Haussmannl 75009 Paris l France l Tel:+33 1 47 42 52 72 l Fax:+33 1 47 42 56 76 l [email protected] l www.efma.com

NIF/TVA: FR 41 784 856 239 l N° SIREN: 784 856 239 l Code APE: 9499

28 September 2017Banking Innovation Forum Toronto - www.efma.com/innobank17

8-9 March 2018Bank + Fintech Conference New York - www.efma.com/bankfintech18

16-18 May 2018Channels & CX ForumLondon - www.efma.com/channelscx18

23-24 October 2017Innovation Summit: Artificial Intelligence Rome - www.efma.com/innovation17

25 October 2017Efma-Accenture Distribution & Marketing Innovation Awards Ceremony Rome - www.efma.com/innovationawards17

26-27 October 201745th Congress : Banking TransformationRome - www.efma.com/congress17

8-9 November 2017Retail Banking Summit in AsiaSingapore - www.efma.com/asia17

13 February 2018Dubai Banking Innovation Dubai - www.efma.com/dubai18

2017 2018

June 2018SME Summit Paris - www.efma.com/sme18

June 2018Affluent & Private Banking Summit Paris - www.efma.com/affluentprivate18

June 2018Insurance Awards CeremonyParis

Efma is a global non-profit organization, established in 1971 by banks and insurance companies, that facilitates networking between decision-makers. It provides quality insights to help banks and insurance companies make the right decisions to foster innovation and drive their transformation. Over 3,300 brands in 130 countries are Efma members.

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Learn more www.efma.com

Retail Banking in Latin America Why digital transformation is taking centre stage

July 2017

Retail Banking in Latin America - Efma Regional...4 Retail Banking in Latin America INTRODUCTION...

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