The Future of Digital Banking in Latin America: 5 practices transforming the industry

MIAMI, April 16, 2020

According to the latest research commissioned by Mastercard and prepared by Americas Market Intelligence, digital banking is here to stay, and today’s current pandemic is accelerating digital transformation in the financial sector

A new study, “Digital Banking in Latin America” unveils the latest trends and best practices that are shaping the financial industry in the region before COVID-19 and well beyond.  

The Latin America and the Caribbean region, known for undergoing one of the largest digital transformations in the world, continues to balance high-levels of digital adoption with low-levels of financial inclusion.

According to new research data commissioned by Mastercard and prepared by Americas Market Intelligence, 55% of consumers in the region have a bank account and more than half of these consumers are conducting their banking transactions online. While not surprising, these statistics have marked a real trend pressuring banks to move toward a more agile, seamless and digital model. Mastercard’s latest study, “Digital Banking in Latin America” outlines four key trends that are driving future payments and provides a best practices roadmap to achieve this transformation now.

There are Four key trends are shaping future payments which are more relevant than ever as COVID-19 has greatly impacted the way people interact with their financial institutions.

  • The first trend highlights how consumers are demanding better alignment with their needs and values. In a digitally connected world, this translates to efficient and instant access to financial services.
  • The second trend places pressure on financial institutions to refresh their onboarding and overall ease of use. More than ever, consumers want 100% digital bank accounts with zero barrier to entry.
  • Improved customer service is the third trend, which is driving banks to implement artificially intelligent chatbots that help provide a more customized interaction while keeping costs low.
  • Finally, the fourth trend challenges banks to create one simple, digital interface such as an all-in-one app that streamlines the banking experience and digital services like mobile phone top-ups, food delivery apps and others.

“As the global pandemic continues to impact the financial industry as well as consumers’ lives across the Latin America and Caribbean region, there is a real need for both new and traditional banking partners to better support communities everywhere,” said Kiki del Valle, Senior Vice President, Digital Partnerships, Latin America & Caribbean. “The most innovative banks understand that they must embody the values that consumers identify with and create a user experience that reflects their needs now.”

According to the research, there are five best practices that financial institutions should look to activate during 2020 and beyond.

    1. Expanding Beyond Banking: Consumers are interreacting directly with brands more than ever before. Banks are moving beyond financial services, and into commerce, transportation and social media. As a result, banks can no longer operate in a silo. The race for a bank to operate at the speed of life is on and everyone must participate.
    1. Leveraging Artificial Intelligence: While every customer wants to feel special, providing individual attention in a low-cost environment is not always an option. Especially now, in an era of changing staffing structures at most financial institutions due to the COVID-19 pandemic, banks must use tools like chatbots and virtual assistants to help customers navigate through their banking experience.
    1. Moving from Omnichannel to Unichannel: Tolerance for switching across apps and platforms when conducting banking transactions is lower than ever. Powerful, all-in-one banking apps are both the trend and the goal.
    1. New monetization strategies: Paying to pay is going out of style. As previously seen, the downward pressure on banking fees is a powerful trend throughout the region. Alternatively, the single most important revenue stream will be the monetization of customer data. While much still needs to be accomplished in order to make this happen in a safe and secure way, this trend will certainly not disappear in the foreseeable future.
    1. Building Consumer Trust: Trust and security will continue to be the foundation on which the banking industry rests. While traditional financial institutions have spent decades building trust with consumers, new players need to focus on strategies to speed up the trust-building process in the region.

Banks are changing who and what they are as they evolve from brick and mortar institutions to agile, digital partners for consumers. However, the ultimate winner is the consumer who, through this experience, can expect to receive a more flexible, transparent and affordable suite of banking services.

Michelle Muslera

Manager, Communications  |  Mastercard, International Markets (IMK)

About Americas Market Intelligence (AMI)

AMI is the premier market intelligence firm for Latin America, providing powerful market and competitive intelligence-driven insights for companies to succeed in the region. Its industry expertise includes payments, healthcare, logistics, resources/infrastructure, insurance, consumer/retail and more. Its customized research reports deliver data-based clarity and granular strategic direction based on expert sourcing. AMI’s payments practice is focused on helping financial institutions, merchants and others navigate the unique payments landscape in Latin America and compete in a rapidly digitizing environment. AMI consultants are recognized thought leaders in verticals such as e-commerce, mobile payments, digital wallets, online banking, contactless payments and other digital payment technologies.

About the Study

This research conducted to understand contemporary best practices in digital banking in the Latin America and Caribbean region was conducted between October and November 2019. Markets included in this study are Brazil, Mexico, Colombia and Argentina. Methodologies used in this research include a scan of 35 neo and traditional banks in-branch, online and with in-app capabilities. The online survey included 1,200 consumers, including traditional bank customers, neobank customers and unbanked consumers.

Note: The data reported in this study predates the COVID-19 pandemic, but the impacts of the virus across the region are placing additional pressures on financial institutions to accelerate this digital transformation.  Social distancing, the closing of non-essential services and the need to purchase vital items online are testing today’s banking system. Financial institutions that quickly respond and implement more efficient, digital banking systems and solutions will no doubt win the loyalty of more consumers across the region.

About Mastercard (NYSE: MA)

Mastercard is a global technology company in the payments industry. Our mission is to connect and power an inclusive, digital economy that benefits everyone, everywhere by making transactions safe, simple, smart and accessible. Using secure data and networks, partnerships and passion, our innovations and solutions help individuals, financial institutions, governments and businesses realize their greatest potential. With connections across more than 210 countries and territories, we are building a sustainable world that unlocks priceless possibilities for all.