Forum mobile: Technology first, finance after

The Forum Mobile+ that took place in Sao Paulo was composed by two days of panels. The first day focused on mobile commerce and the second one more on mobile finance with a specific day dedicated to “bots”. I will talk especially about the mobile finance journey. However, I want to mention that the mobile commerce evolves very fast as new technologies appear and related fraud processes become more complex. Putting both subjects at the same conference implies that e-commerce and fintechs share technologies and learnings and that’s why in the future the frontier between both of them can be blurry.

fintechbrasil

The mobile finance day started with a presentation of fintechs. The panel was made up of fintechs from different areas and stages of growth and therefore with different strategies and challenges to approach. The audience was mainly represented by big and medium companies from financial services, IT and ecommerce. They were very involved in the discussion with several questions. This shows the latent curiosity to learn and discover what makes the success and uniqueness of the fintechs. Among the speakers we had: Neon Bank (a Brazilian Digital Bank with focus on millennials), Easy Invest (an online stock broker), Guiabolso (financial management app), Youse (first online insurance that sells customized products with focus on millennials) and Acesso (a prepaid card).  During the conversation, all the fintechs mentioned how they use technology, the relationship with their clients and the internal culture that they create within their companies. Several compliance questions were asked by the audience. All the fintechs are aware of regulation and stick to the current rules. Nevertheless, they are also active in this domain being in contact with the regulator when it is needed. When asked about the CTO in each startup, the answers were very different. For some of them, the position of CTO does not exist because they believe in a horizontal organization and each project manager is a sort of CTO. For others, the startup has a CTO in the organization but the process to find him was very long. The CTO is a key player in the fintech so it required a lot of effort to find the right match. The CTO can be at the top but he has to be actively involved in all the IT projects. The CTO can also be onboard since the beginning and committed to the project despite pivoting. The example of the CTO, shows that there is no winner model to be the most efficient. However, what can be a challenge and one of the founders mentioned is where to find the right people that excel on development and technological knowledge. The scope of research is not anymore one city but around the country and may be in some years fintech will start hiring abroad.

 bancointermedium

Banks had also a word to say during this event. In Brazil, there was a strike of banks that last one month in september. During this time, bank branches were closed by consequence customers had to use the digital apps and internet of their banks. Santander, present at the event, said that the number of users of digital banking  increased of 100% during the strike. Ironically, the strike helped to educate customers to use more digital banking and therefore go less to the physical agencies. Giving that this is the trend, banks focus on developing products that will be part of the digital life of a customer (Uber, facebooks, Airbnb, Ifood…). Can we imply that agencies will disappear soon? According to Santander, the agencies will play another function to be closer to the client and offer specific and customized products. Banco do Brasil, agreed with Santander on these points. The difference is that the effects of the strike were not so impactful for them because their customers were already very digital. In addition, he highlighted that every innovation for the final user implies also innovation inside. For Banco do Brasil, a historic institution, that can be a challenge. However they managed to create an internal innovation culture that has already showed results.

Banco Intermedium also went on stage at the vent. Banco Intermedium is a 100% digital bank whose clients do not pay any fee to have a bank account either to use basic services. Supermarkets do not require an entrance fee but they do earn money with the products sold inside… a bank should follow the same model. That is the proposition of Banco Intermedium: to democratize banking for all the users and with the time maybe other banks will follow.

With a strong trend of digital dominance within financial services, we would think that digital currencies will also gain strength. However, OKI, ATM machines producer, pointed out that the use of physical currency has not decreased so far, conversely it is only growing. As an ATM producer, it has to modernize its products for example OKI launched a recyclable ATM machine that was very useful during the strike period. The company knows that at some point physical money will stop circulate as it occurred in Scandinavian countries, however in Brazil the phenomenon has not started yet.

Now, let’s have a look at the Bots experience day, a new trend that seduces companies with a customer service. Bluelab claimed the difficulty to hire the service of robots because the billing can be tricky. False accuracy (the customer got the information requested after a long message difficult to read) and false retention (interaction with robots were so inefficient that the customer preferred to drop it and go for human contact) corrupt the results of the bots performance. Companies need to define concrete KPI to assess the real results  of the bots and therefore paying the right amount for the service. During the event, Facebook mentioned that  1000 out of 30.000 chatbots created for Facebook messenger were from Brazilians in order to show the increasing involvement of the country in this technology. One interesting example is the bot of Banco Original. During the day of launch, the bot managed to answer 84% of the questions with success and with one month on the air, it has attended more than 80.000 clients.

clearsale

These 2 days put ahead the technology as key actor of the transformation of e-commerce and financial services. In a fintech, the technology is a team of people who knows to code, who follows the new trends, who needs to learn everyday… who loves what they do to create disruption. On the other side, with contant innovations, technology is also the share of the budget that will constantly increase (infrastructure, softwares, high level employees…). Technology, you don’t need to be fancy, but efficient …very efficient.

 

 

Looking for a space to innovate…Banks are available

During my trip to Mexico, I had the opportunity to visit some innovation spaces opened by banks. Several banks praise the collaboration with fintechs and that’s why they decided to dedicate specific areas to work together.

BBVA is considered as the friendliest bank with fintechs and one example of this close relationship is the opening of several Innovation Centers in the world starting by Madrid in 2011. In Madrid, the BBVA Innovation Center has an area named “the Living Labs” where the bank presents its most innovative products to the public. The building organizes events related to new technologies, fintechs and entrepreneurship, these ones opened to everybody. Beside, the innovation teams of the bank do also work in this place. Being in Mexico, I went to the BBVA Bancomer building in Mexico DF, to visit the “Piso 33”, or “Floor 33th” the innovation center of Mexico. This floor was opened in January 2016 to follow the innovation models of the other BBVA subsidiaries. Several events are organized with fintechs and entrepreneurs. The space is inside the headquarter of the bank allowing the employees to attend the events or workshops at any time. I was there the day before the final of the Latin American Open Talent, and I could see the commitment of the international and local executives of the bank to know better the fintechs. This type of interaction brings more empathy and learnings for both sides.

 

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BBVA Innovation Center

 

Banregio Bank, a Mexican regional bank, with focus on services for small and medium-sized companies had also inaugurated a “laboratory” to interact with startups. The goal of the bank is to define a new way to work and provide new products that can involve startups, the small and medium sized companies and the bank. Banregio Labs wants to connect the startup ecosystem with the financial services industry offering a space to work for the startups, training and connections.

In August 2016, Gentera opened an innovation lab to interact with fintechs. Gentera is the group behind Compartamos Bank, the largest microfinance bank in Latin America. Fiinlab, the name of the lab, intends to incubate fintechs and work with all the actors of the ecosystem in one place. The space is in the same building of the headquarter therefore constant interaction with the employees of the bank is encouraged too. Being a group that believes and promotes financial inclusion, Fiinlab’mission is to find and share new innovation business models that mixed with technology can create impact on society.

 

fiinlab

Fiinlab

 

When comparing with Brazil, I realized that financiaI institutions that bet on physical spaces to interact with fintechs took a different approach.

Itau Bank and Redpoint Eventures inaugurated a building of five floors, named CUBO to be close to the startups. The building is a coworking space for startups, not only fintechs. Several events are organized at the building to promote innovation and entrepreneurship. Some other companies as Saint Gobain, Accenture, Mastercard among others did a partnership with CUBO to approach the startups that work there. As any resident of a coworking space, the startup pays a monthly rent at the CUBO. The building is far from the headquarter. CUBO has become a reference point for the Brazilian entrepreneurship gathering several members of the ecosystem in one place.   

The insurance sector is also betting on innovation spaces. Porto Seguro, the biggest insurance company of Brazil created an accelerator program named Oxigenio. To accelerate these startups (somehow related to the insurance market), Porto Seguro built an exclusive area for them to work.  The residents of the building share the space with employees of Porto Seguro that are opening a startup. To transform the area in an innovation spot, several events about entrepreneurship and innovation are organized to for the general public.

 

oxigenio

Oxigênio Aceleradora

 

In fact, there is no a unique winning shot to be the best in innovation and that’s why banks try several alternatives to test which will be the best way to learn, to breathe and to swallow innovation. It is interesting the different models that we have in Latin America and as any “startup project” , these models should pivot and bring more innovative structures in the future.

Do banks earn money with these initiatives? It is not evident because they cannot measure if there is an additional revenue coming directly from these projects. However, they set KPIs about the impact that they are creating in the fintech environment (for example number of startups incubated, additional investments during the period of incubation, new partnerships …). In other words, the return of these investments (dedicated buildings, organizing events..) is taken by the entrepreneurs and the fintech environment. These initiatives boost opportunities for Fintechs to do networking, to meet investors, to create partnerships and find new clients.

 Banks, you are doing more than collaborating, you are putting the bricks and reinforcing the columns of the fintech ecosystem…that’s why the bank-fintech relationship is more than complicated.

 

bbva1

BBVA Innovation Center

 

 

Are you ready to be the bank of the future?

Last week, I attended the AIM Banking Brazil 2016 event that gathered banks and financial institutions of the country. During three days of conferences and workshops, the speakers triggered the audience to think about what could be the bank of the future.

Brazil is a big digital country. The internet penetration in 2015 was around 66% (source:internetlivestats.com). In 2020, GSMA forecast 72% of smartphone penetration in the country. More alarming, Brazilian population is addicted to smartphones: two in five would rather give up electricity and water than their device (source:emarketer.com).

How should banks respond to this social transformation? The AIM conference tried to provide a light to understand step by step what will be the bank of tomorrow.

First of all, let’s talk about Banco Original, the first 100% digital bank in Latin America. The bank has become an example of how a bank can disrupt the market. Banco Original deals with its clients without paper or doing lines in agencies because all the operations can be done online by cellphone or with a computer. Officially launched in March 2016, its first marketing campaign showed Usain Bolt to defy the public about how original can they be. The bank has an innovation lab that follows the last trends in technology and products. The head of innovation of the bank Guga Stocco, who has not a financial services background, pointed out that innovation today comes from all the sectors and any new actor as a coffee chain for example can become a direct competitor of a bank one day. The launch of Banco Original had also created disruption because at the same time regulation was updated by the Central bank of Brazil allowing to do the entire opening and closing process of a bank account by internet. This is an example that the local regulator is aware of the new trends of technology and it is willing to evolve. Financial institutions (banks or fintechs) have the responsibility to guide the regulator to accept new solutions that will boost innovation and at the same time protect the client and the economy.

AIM_BancoOriginal

 

Banco do Brasil, the oldest bank in the country and controlled by the Brazilian government, presented its innovation case too. Created a year ago, the innovation department has already created disruption within the historic institution. The team started slow and had some difficulties at the beginning but with the time they settled new methodologies and creative processes to change some internal practices and thus the culture of the bank. Innovation is not only about the final product for the client but how the bank works on the delivery of this one. Banks are starting practicing design thinking or lean startup methodology with new projects …But can a bank pivot quickly? As a startup?

Proactivity and allowing themselves to make mistakes are some new practices that banks have to learn. For that, the market designed some approaches to “learn innovation”:

  • Co-working space/incubators: Itaú opened the CUBO in Brazil, a co-working space where the startup community gathers. For the bank, this is an opportunity to have an overview and be close to a boiling local startup ecosystem.
  • Accelerator programs: Bradesco created the InovaBra Program two years ago. During 10 months, a group of 10 startups will work with the bank to improve their MVP. Startups have access to the resources of the bank and the bank learns about their technology and the way they work thanks to continuous interaction between both sides along the program.
  • Corporate Ventures: Santander created Santander InnoVentures. It is a fund that helps fintech companies grow from a very early stage (i.e. seed) to a more mature stage. So far there is no investment in Latin America, only in the US and Europe. In Brazil, Bradesco has recently announced the creation of a venture to invest in fintechs.
  • Acquisition: The most active bank in the world with acquisitions is BBVA who recently acquired Holvi, a Finnish online only bank. The integration process is still in process so the results of this type of relationship are still under assessment.
  • Innovation Labs: Banco do Brasil and Banco Original have decided to create their own innovation lab. All the innovation process are led from the own teams of the banks.

There is no evidence of a better approach, that’s why some banks bet on several options at the same time.

Whereas the innovation topic arises in the conversations, there is an expression that is repeated, “user experience”. All the revolution of the innovation leans on who is your customer and what can the bank do to create a unique relationship.

Let’s start with millenials…

They are a generation that today doesn’t trust banks, believe in sharing economy and prefer to spend most of the time in social medias. They were born with technology and they live for technology. For them, time is shorter because there is so much information available on the network. Artificial intelligence or virtual realities were concepts that belonged to movies some time ago and today are a reality. Millenials love technology but they also need to feel special. Nubank, one of the most successful fintechs in Brazil, is loved by the millennials. In addition to its great user experience, Nubank managed to provide a “cool” call center that provides customized attention to its clients. Google wallet is arriving this year in Brazil and millennials will certainly be the first adopters. The big challenge for the bank is how to hook this generation that breathes technology and innovation and tends to claim “I don’t need a bank”.

Another group of the population that cannot be neglected is the low income people. Despite their income situation, they do have a smartphone and most of them do not have or use a bank account. Innovation also means financial inclusion for a part of the population that most banks preferred to forget so far. Vivo (mobile company) launched Zuum, a pre-paid bank account that gives you a debit card and allows doing some financial transactions (transfers, payments…). All the transactions can be performed with a mobile.  Zuum has just started in the country but is growing fast and has a great potential for the coming years (40% of the population of Brazil is unbanked).

Once you know well your customer, you develop a friendly technology to deliver a product or service for a low fee. The kings of this know-how are the fintechs. Imagine a picture where several bees (call them fintechs) can hurt a gorilla (call it bank)… Several debates exist about the potential of fintechs to compete against banks. Let’s be realistic about one point, the fintech world is not easy either.

AiM_Guiabolso

 

GuiaBolso and BankFacil participated to the event presenting their business case and sharing the challenges that they have to face every day. Guiabolso was born with the purpose to help a Brazilian population that does not know how to manage its money and gets constantly indebted without any control or education. On the other hand, Bankfacil realized that interests in Brazil are incredible high compared to other countries and identified other alternatives to offer cheaper lending products (lending with warranty) that can alleviate the debt burden of the population.

Both fintechs claimed that the relationship with banks is not always easy because some banks do not see/share potential opportunities that could beneficiate both of them. From their side, they are always opened to have a conversation with banks because some interesting partnerships can be created. Compared to a bank that has so much capital, a fintech needs to hunt for investments at the same time that they develop their services, and certainly that is the most difficult part of any startup. Today, these two startups have gathered a group of mentors and investors that believe in their projects putting them as strong representatives of the Brazilian fintech world.

What have fintechs created within the financial services that make them so appealing?

Fabricio Dore, an innovation leader highlighted three structural changes that fintech set and is revolutionizing the banking world: the user is king (user experience empowerment), digital is the new identity of banking and the power of network (facility to connect with other startups/fintechs). The opened question for the audience was what are you doing to stop being a bank? My answer: follow fintechs.

During these days, I met people from technology, marketing or business representing a financial services institution. In fact, when dealing with innovation these three departments need to work together. Some organizations created the role “Chief Digital Officer” to be in charge of the digital initiatives. With the time, we expect that the Chief Digital Officer and the CEO will be the same person. Because digital won’t be an arm of banking, digital will be banking.

The main sponsor of the AIM conference is Technisys. I wanted to write a note about Technisys too because it is a Latinoamerican company that is spreading innovation in technology within the financial services community. Technisys powers Latin American banks to deliver digital services though all the channels. Founded in 1996, it has strongly grown with big clients including Citibank, Banco Itaú, Banco Estado de Chile and Banco Original among others.  Technisys was ahead of its time when it introduced the concept of omnichannels and digital and today these are the main services required by all the banks. Technisys is strongly involved in solutions and projects about innovation for banks. We consider him as a strong ally in the construction of a new environment of financial services in Latin America.

In Brazil, big banks have already started to position themselves developing digital products and looking for interact with fintechs. During the last World Economic Forum in Davos, international organizations debated about the future of the financial services system talking about fintechs and blockchain in front of an audience composed of worldwide bank CEOs. This was an awaken moment for the CEOs to really understand and follow the evolution of technology to define the future of banking.

The audience of the AIM Banking Brazil event was compound by big, medium and small banks…Each of them have to assess how to approach the innovation and the technology evolution because the path to the digital transformation will depend on the culture of the bank, the customer profile and the risk appetite of the organization.

The cards are on the table “digital is the future”, unfortunately there is no a unique way to arrive there but several combinations that need to be defined according to the strategy. Looking for a tip…Imagine what can convince a client to claim in all the social networks “I love my bank”.

Great event AIM and Hanson Wade!

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Accelerator programs of Banks: Let’s be friends

The press likes to write about the complex relationship between banks and fintech companies. Are they friends or enemies? It depends, so they are just “Frenemies”.

Instead of digging into this debate, I would like to talk about the friendly side of this relationship: incubator and accelerator programs led by banks.

Besides money, fintech business owners look for efficiency in their operations and opportunities to make their business grow, especially when they are at early stage. With the incubator and accelerator programs, banks become the “partner” who trains, mentors, tests, funds and supports young fintech companies.

Banks have expertise with solid departments dealing with matters where fintech startups are still learning (for example; time management, marketing research, financial planning, governance and regulations).

Let’s be aware banks also represent money. They can be future direct investors or can introduce influential capitalist people and seed investors. On the other hand, they can also become future customers with a national or even international scope.

Banks environment is the best “test kitchen”. As a fellow of an incubator/accelerator program, you will be surrounded by different type of populations ready to test your prototypes and give relevant feedbacks to improve your products.

Finally, networking is key as always. During the entire incubator / accelerator program, the fellow will be in contact with several executives from the bank but also to their network. Moreover, banks select exclusive mentors from the own organization or from the startup environment to go along the fellows during this process. Let’s remember that after the closing of the program, a fellow can always contact them for other matters and may be new opportunities can emerge.

These initiatives are quite famous among big international banks in the US, Europe and Asia. But, what is happening in Brazil?

Bradesco, one of the top banks of the country was the pioneer in Brazil to get involved in the startup world. The bank opened its doors to confront the challenges of innovation and digital revolution. Thus, it launched in 2014 the first edition of InovaBra, an accelerator program with duration of 10 months. In its first edition, 8 companies were selected out of 553 applicants. Today these companies are doing business with the bank. Some of them as Queroquitar.com.br and Qranio.com are also disrupting the current Brazilian startup ecosystem.

After these successful and inspiring stories, now it is time for the second edition.

To be part of the program, the applicant doesn’t need to be a startup that offers financial services. InovaBra is looking for disruptive startups with new business models and new user experiences that can be linked to Bradesco environment.

The accelerated startup will follow an integration process since the beginning, being in contact with several divisions of the bank and different levels of management. After that, there will be a process of experimentation and validation of the prototype to finally define the involvement with the bank.

The application for the second edition is already opened and goes until December 22th 2015.

For further information, please go to http://www.inovabra.com.br

As mentioned at the beginning of this text, to be part of an accelerator program led by a bank will be very positive. Only being part of the selection process will bring more experience to the founders, because it will be very competitive.

Entrepreneurs, click on the link and apply!

Investors keep an eye on the companies selected because they will shake the Brazilian ecosystem soon.

Inovabra