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Edgardo Torres Caballero, Managing Director of Mambu Americas.
The technological advances will promote the development of the digital economy in Latin America, the author points out. (Photo: Mambu)
Thursday, March 28, 2019

Digital Banking: The New Latin American Paradigm

El Salvador, Honduras and Paraguay see boom in mobile money services.


We are living through the fourth industrial revolution and technology is a fundamental factor of the changes we have seen. Financial services too must get on board with the new trend and be part of the next revolution, the digital economy.  

In order to innovate, financial services must do it through technology, since it offers infinite options to provide new experiences, empower users, and level society. Today the use of the cellphone allows us to pay bills and make financial transactions online leveling the worlds citizens regardless of their social class.

The GSMA presented the Mobile Money certification in April 2018 (GSMA Mobile Money Certification). This certificate is a global program aimed at offering financial services that are more secure, transparent and resilient to millions of users around the world. According to the organization the number of users that will benefit from the certified service are 114 million users worldwide.  Latin America and the Caribbean account for 21 million accounts registered in 17 different markets, where as Brazil, Colombia, Dominican Republic, Ecuador, Panama and Peru stand out in their use of e-money, according to the GSMA.

Likewise, Apple Pay offers the sending and receiving of money from user to use without any financial middle men (intermediary). This is done thanks to the virtual card associated with the products installed in the Apple Wallet. It has also been a decade since virtual currency was made public knowledge, with Bitcoin being the most popular, being one of many in a long list of virtual currency that exists today.

Electronic money is breaking the paradigms and forcing the financial institutions to innovate. Worldwide the use of physical cash is dying. 

This modernization is already being observed in the region and has grown on average 50 percent in the last two years, with stand outs like El Salvador, Honduras and Paraguay, countries that are part of the 15 principal markets on a global level in terms of the proportion of adults that are actively using mobile money services.

According to the 2018 Global Digital Report from March 2018, 91 percent of internet users in the European Union accessed a website or used an app for mobile financial services. The online banking services were used by 70 percent of the internet users, compared to other industries the banking sector is adopting and adapting successfully mobile technologies.

Reducing the use of physical cash sustained in the digital transaction is one of the main goals that the world is aiming towards. Reducing the use of paper and paper currency is a goal for markets that want to be sustainable. In Switzerland, for example, only 5 percent of the transactions are done with physical bills; and in India there has been a reduction in the production of paper currency.

The change toward an increasingly more technological bank is brewing. We need to take advantage of the benefits that today’s technologies offer and confront the new challenges of this new digital economy head on. During 2019, 5G networks will begin deployment in the US, China, UK, Japan and South Korea; meanwhile in Latin America according to the GSMA, the first country that will deploy 5G networks will be Mexico in 2020. The new networks will optimize communication and there will be more devices connected to the internet, which will be key for the explosion of the new services like IoT, mobile transactions, artificial intelligence and can help develop smart cities and mobile money. The technological advances will promote the development of the digital economy in Latin America.

For this reason the financial industry must advance in reconfiguring the architecture to be part of the “fourth industrial revolution”, the financial sector needs to restructure their services and products for the new consumer, alongside the technological sector with services in the cloud, API, robust and secure platforms and this was accomplish the “digital and social revolution”.

Edgardo Torres Caballero is Managing Director of  the Americas for global Software-as-a-Service (SaaS) banking software maker Mambu.


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