Driving digital innovation in Latin America: Find balance and opportunity

Digitalisation is coming to the forefront in Latin America. In our last blog, we sat down with Compass Plus LAC representatives, Carlos Seer and Rafael Marinho, to discuss their thoughts on digitalisation efforts in the region, and how financial institutions (FIs) were approaching the challenge head on. For this part of our Driving Digital Innovation two-part blog series, we look at how the region is regulating such innovations and where FIs can go from here.

 

  • Carlos Seer, AVP & Business Development Director, LAC
  • Rafael Marinho, AVP & Sales Director, Brazil

 

How do you find the right balance between digital innovation, security and regulatory requirements?

CS: In order for FIs to achieve the perfect balance, having the best anti-fraud technology is crucial. Ultimately, the best way to achieve the optimum customer experience will always be achieved by seamless cooperation, from everyone involved. 

RM: I often find that regulatory requirements can drive innovation, and vice versa. For decades, Brazil has had a heavily regulated banking and financial market, led by its Central Bank. This set up covers aspects such as cybersecurity laws and regulations, data protection, corporate governance, litigation and compliance, among others. Having this kind of structure in place provides a solid foundation for a healthier, more innovative digital financial market.

 

What are the biggest opportunities for FIs in the region?

CS: The challenges around the unbanked population certainly remain some of the biggest we face. However, it is important not to lose sight of existing FI customers, all with varying needs and expecting the latest and very best services. Being able to continuously improve their experiences with new and improved products is key to keeping business successful, while welcoming new customers and increasing financial inclusion.

On one side you have FIs which rely on microcredit, so in essence the goal of these organisations is to promote financial inclusion for a certain segment of the excluded market with products (microloans) specifically aimed at them.

On the other hand, more traditional FIs have made it part of their strategy to assist governments in implementing welfare programs and similar initiatives, allowing them to use the vast infrastructure at their disposal. We see this more and more in government-owned banks rather than in private institutions.

RM: I believe digital wallets, QR code payments, AI and instant transfers will shape the landscape of Brazil’s payments industry in the near future. These will all play a part in boosting cooperation between issuers, acquirers and domestic card schemes. There is a group of market trends for FIs nowadays, which is being led by fintechs like Nubank, for example. These companies are changing the way we bank and our financial behaviour. Fintechs are offering fast, reliable and low-cost financial services to all demographics. Features like digital wallets, QR code payments, virtual assistants, AI, combined in super apps are key building blocks for industry wide transformation, right across the globe. In Brazil specifically, the cherry on the cake will be the upcoming instant payments regulation, to allow payments to be made between individuals and merchants (physical or virtual), immediately, without the need for a card scheme or card brand. Additionally, instant payments will further add to the expansion of the digital financial services industry globally.