Latin American banks are looking to technology to compete for customers

LatAm List – According to a report by the Economist Intelligence Unit and banking software company, Temenos, Latin American banks are preparing to invest in technology like cloud, mobile, omni-channel capabilities and analytics to compete for clients. Up to 40% of banks in the region plan to invest in new technologies in 2020, states the report.

The World Bank states that 2 in every 5 Latin Americans has no access to a bank or savings account, and 60% of the region’s unbanked are barred from financial services due to high costs. Traditional banks in the region often overprice risk for low-income clients or small businesses, meaning high fees and interest rates for these customers.

However, a combination of government regulations and increased competition in the region is starting to erode at these banks’ margins, pushing them to look to adopt technology that improves the customer experience. Mexico’s Fintech Law seeks to open up the market by regulating fintechs, which the report cited as the second largest competitive threat to banks, after new digital payment players.

From the EIU Report:

“Fifty percent of bank revenues come from fees, so this is huge,” says Ángel Sahagún, founder and CEO of albo, Mexico’s largest neobank.

As Latin American banks feel the pressure from fintechs and governments to compete more fairly, they are looking to technology to help cut costs, streamline processes, and boost margins. According to this report, the digital investment will largely go to cybersecurity (47%) and cloud technologies (29%) to help Latin American customers move their banking onto online channels rather than physical branches.

Read more in the original report here.

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