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.

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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.

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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.

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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.

 

 

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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.

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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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