Until a few days ago, Banks Competed in the Digital Transformation Marathon…
A microscopic organism changed everything, including changing the rules of the race. What was a marathon of strength, strategy, and endurance that still had several years and many kilometers to the goal, has become a one-kilometer race! Resistance is no longer useful, and now innovation to be discovered is not relevant. It is only worth arriving as soon as possible and being the first. Either the world is digitized, or we will not be able to have many necessary services.
With half of the planet practically confined, the reality is the world continues to spin even though we can’t go outside. We still need to buy at the supermarket, pay electric and water bills, taxes (although some policies are relaxed). Companies, although they are operating at a slower pace, still have suppliers and creditors, logistics services, transportation, and security. All of this should keep working, and banks are a fundamental piece in this great cycle.
Banks run this race with a clear objective: to enable digital channels so all their services and products can be carried out digitally. This seems simple, but actually it is not. All of us who consider ourselves digital clients use mobile Apps, but we never had to carry out absolutely all of our day-to-day operations digitally.
Let’s think about pensioners, companies, supplier and credit management, risk management, foreign trade and international operation needs, investment management, government financial operations, construction logistics, and the strong demand for credit that will be necessary for the next months or years. It is still necessary to go to a bank office to carry out many operations that we do not deem as basic, and you have to go to dozens of people in public to carry out countless administrative and financial procedures, health companies with manual procedures, necessary documentation for many bank procedures, to mention just a few.
To make the challenge even more interesting, now there is a natural fear of contact with physical money that goes from hand to hand. The payment method markets require digital solutions very quickly and are accessible to any income level or social class. Now more than ever, Open Banking needs to be a reality in a fast and convenient way, and banks need to be open to institutions, goods, and consumer services, communications, health, utilities, industry, and all daily basic needs.
None of us are fully prepared for this situation. Neither clients nor banks. This poses one of the greatest challenges in our society, in a really short amount of time, but also one of the greatest opportunities that we have as a society to learn, adapt to a more digital world and leave the comfort zone even if it is out of necessity.
In Brazil, the challenge is greater and the last kilometer is also very steep…
According to the BC of Brazil data, 70% of adults have a low education level. Around 40% have an elementary level (understand medium text, basic operations, do not master percentage calculation or proportion), and more than 25% struggle to recognize letters and sentences, or do not understand simple text. There is still a very relevant number of under-banked people, and almost half of clients of large banks do not use mobile applications because they either do not know how to do it, or do not have smartphones with features to operate them, or do not simply have an infrastructure network required. “The street economy” represents a very high number in the country’s economy, where the street trade, the seller of coffee or cake, of cloths, of food in the stand, like everyone else needs payment solutions or to enter the financial system. This is the challenge for banks in the country, in addition to competing to digitize services, will have a job of financial education, teaching, and to be close to this group.
The large retail financial institutions are somewhat in the same position in this race, and now we will see who is faster and more agile implementing solid processes, with an impact on society that allows scaling services. And we will see which entities are committed to training, educating, and bringing simple technological solutions to the most disadvantaged segment of the population that needs solutions. We all have a huge job ahead of quick adaptation, because this race will pass, and a new one will have to start quickly, but we do not know what direction it is going yet.
*Training and education data for Brazil belongs to the BCB.