Business

A bank without queues: financial services entry into the digital age

Enrique Culebro Karam, President of the Internet.MX Association and General Director of Central Media S.C., discusses the changes in Mexico's financial ecosystem through the movements of players such as Nubank and new solutions like CoDi

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Financial services have been an important part of small and large enterprises growth, as well as social development. Deposit accounts, credit, insurance and savings accounts are part of the services most hired by people, based on data from the Third National Survey of Financial Inclusion (ENIF), held in 2018 by the National Institute of Statistics and Geography of Mexico.

Until then, to manage the hiring of any service in the bank, the presence of the requester was needed. But nowadays, technology solutions are enabling more and more people to access financial services without having to move to a physical agency. With this, a business model based on digital platforms emerges, in which credit is the core business.

But what is happening now with the banking sector and its development on the internet?

Based on the 15th Study of User Habits in Mexico, 2019, there are 82.7 million people connected, of which 58% are engaged in online financial activities, 5% more than last year. The smartphone is the means by which these actions are carried out, of the people who carry out financial activities online, 28% use a smartphone, doing the transaction by the bank application. As is well known, a large part of the traditional industries are facing a process of transformation in which the use of technology is forcing them to adapt to the environment and at the same time, offering them an area in which they can develop innovative ideas, favoring the customer.

Bank vocabulary: from currency to digital money

Current banking operations have created a confusion of terms within the digital world. And it is worth mentioning: crypto-currency, virtual currency and digital money are not the same.

The digital money is the one used for monetary exchange through an electronic platform between two banks through specific currencies (dollar, euro, peso, etc). More specifically: transactions via mobile applications, and purchases over the Internet and through credit or debit cards in a banking terminal at the point of sale. Which means that interbank transfers, online purchases and purchases by cards use that kind of money.

The virtual currency has its origin and usage in the digital world. This type of “money” is present in two kinds; in video games, for transactions like the “V-Bucks” in Fortnite, the “Minecoins” in Minecraft and the “Pokecoins” in Pokémon Go; and through specialized encryption-protected currencies that do not have a centralized issuer and are used to conduct transactions in the digital world – this is what is considered crypto-currency. “Bitcoin”, “Litecoin” or “Dash” are some of the examples.

No more queues, cash and cards

With the increasing use of technology and innovation in banking services, the implementation of products that allow easy access to new customers, as well as simplify transfer, payment and solicitation processes, also opens up many opportunities for service generation. A more competitive market in which, daily, a large number of financial entities and banking information management are created around the world, giving a greater experience to the user. Platforms such as Visa Checkout and Masterpass simplify the payment process for purchases by offering bank data management as a core business, offering the feeling of “protection” as an added value to the business.

The Quick Response (QR) or Near Field Communication (NFC) code reading technologies, which are present in smartphones, are creating large-scale projects so that more people can enter the digital financial world, making purchases without the need of cash or credit/ debit cards. This is the goal of current Mexico’s government, which, alongside with Banxico, is developing the CoDi project (Digital Collections), in which these technological implementations allow Mexicans to become more digital in terms of bank transfers and payments of products, using QR codes and NFC technology. The CoDi system will allow more than 70% of the connected population to benefit, since in the country, 92% of this population has the smartphone as their favorite connection device. With this, commercial and banking establishments will have an important challenge, investing in technology that allows the use of these systems.

Also read: CoDi, How the New Mexican Payment Platform Will Boost Innovation

New players

The opening Internet has brought to the banking system development allowed the entry of new players in the market. Creation of financial companies based on the digital environment – fintechs – and the introduction of other players already developed in this ecosystem, such as Facebook, Google, Apple and Amazon (bigtechs) is provoking in banks a wave of innovation for the development of financial solutions based on user behavior.

In Mexico, access to social networks is the main activity of Internet users (82%). As a result, the implementation of strategies that allow quick and easy access to basic banking operations through these means is becoming a reality. An example of this is the actions carried out in the country by banks Banorte and Santander, with the functionality of Banorte Go, in which interbank transfers of up to 8,000 Mexican pesos can be made through social networks like Facebook, Whatsapp, Twitter, Instagram, and Tinder; and Santander TAP, with a maximum transfer value of 4,000 pesos, available only at WhatsApp. Both solutions are currently enabled for devices with Android operating system.

Regarding the new companies, Mexican market is one of the targets of investors, to develop banking products based entirely on digital. The most interesting case at the moment is the entry of the Brazilian fintech Nubank, which has just entered the Mexican market under the Nu brand, offering financial services that allow users to have greater stability in their finances, besides targeting the talents development with the installation of a Development and Technology Center, which together with the one in Berlin, focusing on infrastructure and data engineering, will seek the growth of Nubank around the world.

Also read: Nubank’s New Move Towards Mexico – What Does This Mean for the Country?

The development of the banking system through the use of the internet and new technologies in Mexico is allowing the inclusion of more people as consumers of banking products, encouraging electronic commerce through data protection and facilitation of payment processes, as well as opening up to new competitors. This brings a broader financial offer, constant innovation in solutions aimed at the best customer experience and the growing habit of this consumer in the digital world through the use of technologies.