2016 saw an influx of major technology projects from banks across Latin America. Big technology updates, core banking overhauls, omnichannel solutions and digitisation projects took a significant portion of the yearly budgets. However, the vertigo of the digital revolution, changing user behaviour and increasing pressure from non-bank actors 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.
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.
Biometric solutions will deepen their presence in financial services this year. The use of fingerprint or face biometrics for enrolment and validation of transactions is already being used by the first banks in Latin America. Biometrics reduce friction in user enrolment 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.
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 Startup, Agile, Scrum and Design Thinking among others, will be key to achieving this in Latin America.