Financial Services

Making up for lost time: The race to digitise banks in Latin America

March 26, 2021


Digital banks in Latin America

March 26, 2021

Monica Ballesteros
Project Manager, The Economist Intelligence Unit

Monica is a senior manager at the Economist Intelligence Unit's Globalisation, Trade and Finance practice. She joined the EIU in 2018 and has led several research engagements focusing on the digitisation of finance including the Global Microscope that assesses the enabling environment for financial inclusion in 55 countries around the world.  Prior to her time at EIU, Monica worked in the International Affairs Unit of  Mexico’s Ministry of Finance where she was part of the G20 team. She holds a master’s degree from the Fletcher School of Law and Diplomacy at Tufts University, where she specialised in international finance and economics and a bachelor’s degree in political science from Wellesley College.

Latin America had a late start in the digitisation of financial services but has ramped up its efforts in the past five years, making up for lost time. There is now a bustling ecosystem with over 1,166 financial technology (fintech) start-ups in the region. Governments have also recognised the potential of digitisation and have developed specific regulation to level the playing field between top-tier banks and new entrants. However, banks have faced significant challenges as legacy infrastructure and organisational barriers slow down their digitisation efforts and hinder their ability to cater to lower income customers. 

This report—produced by The Economist Intelligence Unit with the support of Mambu— focuses on traditional banks’ role in the digital transformation of financial services in the region. Based on a survey of 105 banking executives in Argentina, Brazil, Chile, Colombia, Mexico and Peru, the report explores banks’ journey towards digitisation, the role that the Covid-19 pandemic has played in their digital transformation, and the ways in which banks are interacting with the growing fintech sector and have the potential to increase financial inclusion in the region. The survey found that:

  • Digital transformation is well underway: Ninety-eight percent of banking executives say their organisations have a digital transformation strategy, and fifty percent categorise the implementation of this strategy as advanced

  • The Covid-19 pandemic has forced the sector to rethink how it runs its business, but barriers to digitisation persist: Eighty-four percent of banking executives believe that the Covid-19 pandemic has forced the retail banking sector to rethink how it runs its business. However, full digitisation requires broad changes in IT infrastructure and organisational structures that cannot be easily implemented in the midst of a crisis.  

  • Digitisation as a driver of financial inclusion: Beyond the diversification of products and services for existing customers, banks need to focus on increasing their customer base to remain competitive. While 55% of banking executives cite current economic and market conditions as the main challenge to acquiring new customers, their digital counterparts have seen a significant uptick in account opening.

  • Fintechs are complementing traditional banking models. Eighty-seven percent of bankers agree that fintechs are forcing retail banks to rethink how financial services are provided. In particular, fintechs’ ability to leverage digital infrastructures to improve operational efficiencies and lower service fees is highlighting the value of digitisation in driving greater financial inclusion.     

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