Thursday, January 27

Latin American Consumers Demand More Digital Services From Banks, Americas Market Intelligence Study Reveals

According to a study by Americas Market Intelligence, commissioned by Backbase Latinoamérica, online banking services are no longer sufficient to satisfy today’s Latin American banking consumer.

From a onboarding faster, improved banking functionalities and non-traditional services, the Today’s Latin American consumer seeks a consistent digital financial experience from start to finish.

Considering that many consumers still use traditional banks as their main provider of financial services, 81% are aware of the existence of native digital banks (neobanks and fintechs) and 45% already use them to meet specific service needs.

The study on “future-proof” banking in Latin America analyzes the evolution of trends, preferences and expectations of 700 consumers from seven Spanish-speaking countries, including Argentina, Chile, Colombia, Costa Rica, Mexico, Panama and Peru.

The report also contains opinions from the directors of digital and retail banking at five central banks in the region.

“It is clear that consumer expectations are in a state of constant evolution. To remain competitive, traditional banks are tasked with avoiding the use of legacy technology in silos to facilitate faster go-to-market strategies, “he said. Ethan Clark, Area Vice President for Latin America and the Caribbean at Backbase.

“With the right resources and partnerships, banks will be able to anticipate, rather than react, to consumer demand. In addition, moving towards a platform of engagement banking it will allow banks to maintain their core banking systems while acquiring access to the latest digital technologies, functionalities and best practices ”.

The main trends of the study are:

Accelerating the adoption of digital banking: With the restrictions stemming from COVID-19, consumers were suddenly forced to shop online and handle money digitally between friends and family, necessitating the opening of a bank account. In fact, Latin America has seen the highest growth in bank account penetration in the last ten years. AMI estimates that in 2020 alone, Latin American banks accelerated their digital plans by at least 24 months, and in some cases, much longer.

Onboarding and digital origination experience: Penetration of digital account opening increased to 60% among consumers last year, indicating an aggressive trend toward online customer acquisition. Across the various markets surveyed, an average of 42% of consumers claimed to have opened a bank account online. While Panamanians (60%) were more willing to adopt the onboarding digital, Mexican consumers (23%) lagged far behind.

Although the interviewed banks said they had enabled the onboarding digital for the first time in 2020, its processes still need to be refined. Of the 42% of consumers who opened an account online, 28% said they were forced to visit a physical branch to complete the process.

To offer a onboarding digital comprehensive with maximum privacy and security, the adoption of innovative technologies, such as biometrics, connections via APIs with national identity registries and the ability to capture digital signatures is essential.

Another concern shared by consumers was the duration of the process of onboarding digital.

Just over a quarter (28%) of those surveyed said their online account opening experience was less than five minutes, with Peru (44%) and Mexico (32%) leading this category.

In contrast, respondents from Chile (21%), Colombia (24%), and Costa Rica (21%) stated that the process lasted 20 minutes or more, which is above industry standards.

Consumer expectations about digital banking: Although the most common online banking operations are transfers, payments, and balance inquiries, 54% of digital banking users say they would like additional functionality on their banking platforms. Some of the more advanced services that consumers expect are real-time transfers to other banks, international transfers, automatic recurring payments, and payments via a mobile wallet and QR code.

Another relevant trend that the study shows is that Latin American consumers are looking for digital platforms that satisfy multiple needs simultaneously, expecting something more than the banking operations offered by their banks.

For example, when asked what additional services they would like to get, respondents expressed interest in shopping platforms, of which 72% showed interest in online portals to use their loyalty points or receive special discounts, and the 61% expressed interest in a web portal to buy online.

Another two-thirds (65%) asked for tools to help them save money and optimize their finances, and 40% were interested in social media and online food delivery services.

These expectations represent a challenge for traditional banks. Although banks were able to accelerate their digital initiatives during the pandemic, they are struggling to adapt to the ever-evolving needs of the Latin American consumer. Its time to market lags significantly behind North America, Europe or Asia and, most importantly, relative to your competitors fintech locales.

The rise of neobanks and their market penetration: In today’s market, traditional banks are often perceived as more secure, which is why 99% of respondents use traditional banks as their main provider of financial services. However, the new digital players are becoming much more than an accessory in the financial life of consumers, responding to specific needs such as facilitating transfers and instant payments. In addition, neobanks and fintech they are offering other banking services normally expected from traditional banks, increasing competition and pressure to accelerate time to market.

When asked to compare these disruptors to their current financial service provider, the majority of respondents indicated that they found these digital actors easier to use (59%) and more convenient (55%).

The perception of native digital actors varies according to generational groups. The majority (75%) of 18-21 year olds find these companies more attractive than traditional banks, compared to 48% of people over 36 years of age.

There are also differences in behavior, preferences and perceptions between those who are satisfied with the digital banking experience of their banks and those who are not.

Satisfied customers (82%) consider their online experience to be very secure and are willing to expand their relationship with the institution. On the contrary, the dissatisfied and neutral group rates the security of their online banking platforms as very risky and is not interested in innovative solutions from their bank.

This shows that a positive digital banking experience is critical for banks to attract and retain new customers.

The study concludes that future-proof banking in Latin America is essential for the long-term viability and survival of banks. Everything is moving towards customer-centric platforms and operational frameworks.

Banks must adapt to this framework by enabling a platform for engagement banking with the ability to add functionality to meet changing customer demands.