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

Senior manager, Policy and Insights

Monica Ballesteros is a senior manager in the Policy & Insights team at Economist Impact. Monica works with clients in the private and non-profit sectors to answer some of the critical economic and public policy questions facing our world. At Economist Impact she has led several bespoke research engagements that aim to promote more inclusive financial and digital ecosystems, including the Global Microscope which assesses the enabling environment for financial inclusion in 55 countries around the world. Monica has over 10 years of experience as a communications and research professional. Prior to her time at The Economist Group, Monica worked in the International Affairs Unit of Mexico’s Ministry of Finance and Public Credit, where she conducted research on financial policy and regulation as part of the country's G20 task force. She also worked as an account manager in one of Mexico’s most prominent consulting firms, where she designed and implemented communications, crisis management and corporate responsibility strategies for multinational corporations in the retail, infrastructure, insurance and energy sectors. She holds a master’s degree in International Economics from the Fletcher School of Law and Diplomacy 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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