The challenge of banking in Latin America: the use of digital channels
Latin American banking entities have advanced important developments in the field of digital banking and mobile banking, but there are still some gaps in the use that customers give these services.
The Colombian National Association of Financial Institutions, Anif, at the request of the Latin American Federation of Banks (Felaban), conducted a survey among the different banks in the region to inquire about trends in supply and demand in digital banking, the strategies in digital transformation and the perspectives and challenges facing the growth of 'fintech'.
In his study "Digital financial services in Latin America", Anif points out that the developments in the digital offer include bank transfers, public service payments and money orders.
53% of banks allow savings accounts to be opened entirely online, a modest figure compared to developed markets such as Spanish, which handles a percentage of 80%. In addition, only 39% have digital elements for other deposits, such as Term Certificates of Deposit (CDT) or Term Savings Deposit Certificates (CDAT).
However, when it comes to electronic products and services to allow transfers in the capital market, the offer is low, since only 12% of the entities allow the purchase and / or sale of shares by digital means and 18% allow access to investment funds through these channels.
"As it was expected, digital users are concentrated in the relatively young population (ages 25-45 years), which gives some hope of greater digital deepening as these users increase their participation in the entire population and expand their wealth-income, ”says the Anif report.
Another issue highlighted in the report is the fact that almost half of Latin American banks allocate between 10% and 20% of their budget to investments in technology and innovation.
Matter of habit
With regard to demand there are also obstacles, since a good part of the clientele continues to favor traditional channels such as physical offices or ATMs. Nevertheless, there is a high use of the internet for banking operations, as reported by 42% of the entities, although only a quarter of them register an intensive use of mobile banking.
Intensive use of digital channels by most customers only occurs in 12% of banks in the region, but also 28% of the sample has digital uses of less than 20% of their clientele. And here too, unsurprisingly, digital customers are concentrated in relatively young ages ranging from 25-35 years and 35-45 years.
The fintech companies continue to generate a true revolution in the banking business. Hence, according to the Anif survey, 39% of banks consider 'fintech' as a risk for their organization, especially on issues related to information security. But also, and on a smaller scale, there is the risk due to the loss of clients and a fall in intermediation margins.
These risks have led financial institutions to develop strategies such as establishing alliances with 'fintech' companies, strengthening their areas of innovation, contracting digital 'outsourcing' services with 'fintech' and even acquiring these companies.
Similarly, banks in the region give priority to the technological aspects of 'fintech' related to digital channels, cybersecurity, data analysis through 'big data' and the organization's digital culture.
Regarding the challenges in the development of digital banking, the the need to make modifications to the regulatory framework, address the issue of cybersecurity and overcome cultural resistance within the banks themselves.
Excerpt from the article published by the website www.bbva.com