The digitalization of banking is a phenomenon that has been growing strongly. Even many of the banks have felt threatened by Latin American startups that want to offer diverse alternatives to the millennial market.
To clarify the current situation, Dr. Elisa Piedrahita, dean of Financial Engineering at the Piloto University, answers some questions about new technologies in the financial sector.
How is Latin America currently in the implementation of new technologies in the banking and financial sector with respect to the region?
Since 2015, Latin America began an important process for the massification of the digital industry and the strengthening of the IT information technology industry through the creation of the Vice Ministry of Digital Economy. According to the Observatory of Digital Economy, the leadership of the implementation of new technologies is headed by the large companies in Latin America, since they have a high accumulation of intangible capital that is represented by the high skills of their collaborators in the digitalized environment. Regarding the banking and financial sector, the use of new technologies focuses on the creation of new channels that benefit the service and the customer experience.
What is one of the biggest challenges involved in the implementation of these new technologies?
The biggest challenge in Latin America is to improve the banking coverage of the population. According to figures from the Banking Association of Latin America (Asobancaria), of the 49.6 million citizens, only 26.6 million are banked. Therefore, we hope that the leadership of the national government in the implementation of its orange economy policy will improve this figure.
What will happen to those banks that do not adopt these new technologies?
Banking entities that do not adopt new technologies in their processes will no longer participate in the new global economic development derived from the advancement of ICTs. According to Marc Andreessen, creator of one of the first Internet browsers in 2011, no sector of the economy would stop participating in the digital economy, and this is how we see in the world the emergence of new companies such as Uber, Waze, Airbnb and the Goldman Sachs Marcus online bank.
Is Latin Amerrica ready for a banking revolution? How should this process be carried out?
Yes, since the country is making important efforts to participate in this revolution, through the creation in August of 2017 of the Vice Ministry of Digital Economy and the Vice Ministry of Connectivity and Digitalization; and the existence of the Fintech business association “Latin America Fintech”, which promotes technological and financial innovation in the country with the support of more than 90 companies and associations such as the Chamber of Commerce of Bogotá.
Regarding the process that must be carried out for the banking revolution process, it must have the integration of all sectors of the economy, that is, the national government, the corporate sector and the education sector. Likewise, we must take into account the experiences of the leading countries in the world in the field of digital transformation, such as Brazil, Mexico, China, EE. UU and Germany.
What are the pros and cons of the implementation of these new technologies in the sector?
The effects of the implementation of these technologies are always positive, because their main objective is always to generate a better service to society.
How is cybersecurity in Latin America in the financial transactions segment?
Cybersecurity in Latin America for the financial transactions segment is currently regulated by the Financial Superintendence of Latin America, through the Cybersecurity Circular that was issued last June. This regulation requires that entities in the financial sector implement mechanisms such as:
i) Implementation of double authentication factor for the execution of monetary and non-monetary transactions.
ii) Maintain a record of transactional habits per user to distinguish legitimate and fraudulent activities.
iii) Offer different methods of payment to users through online channels.
What do you think are the most common mistakes that banks make in terms of digitization?
The most common mistakes made by banks to make a disruptive digitalisation innovation focus on not taking advantage of the previous experiences of other entities in the sector.
Personally, I consider that the implementation of digitalization processes in the country requires greater coordination among the agents that participate in the private and public sector. Additionally, it is important to involve the education sector, under collaborative alliances that allow for the broadening of traceability and the impact on society of this wave of technological revolution.