Coronavirus brings 'golden opportunity' for digital financial services

The coronavirus crisis has created a sudden and singular opportunity for digital financial services in Latin America as digital and incumbent banks and fintechs look to take advantage of the millions of clients forced to handle finances from home.

“Banks really should take advantage of this time to gradually educate their customers about the capabilities within their mobile banking app,” said Lindsay Lehr, associate managing director of marketing consultancy Americas Market Intelligence. 

Banks, both traditional and digital will likely never again have this kind of opportunity to make headway on adoption said Lehr, who oversees market intelligence projects for the payments sector in Latin America, in an interview with BNamericas. 

“Most people use them to transfer money between their own accounts or check their balance, but this is a really good opportunity for targeted marketing campaigns and really training,” she added. 

Any winners coming out of this global pandemic crisis will be taking advantage of the fact that the world will largely be hunkered down at home, connected to the internet and watching a screen, said Lehr.

“Consumer habits that are created now, and that are useful in the long run and not only in a time of crisis - such as mobile transacting - are likely to stick.”

The key will be to “focus on really tangible problem solving’ and for banks to act quickly while the preference for cash is temporarily inhibited, according to Lehr.

“Because cash [has always been] available, there’s not that great of an incentive to explore these options and learn how to use them.”

“But right now, because that preference for cash is dramatically reduced, or even removed entirely, now is the time [customers] are really going to be more open, and really they need to solve their daily problems,” she added. 

With social distancing becoming the norm over the next several weeks, digital channels may be the only suitable ones for consumers to pay bills, send money and manage their accounts, Lehr said.

Brazil vs. Mexico and Colombia

When talking about m-banking and digital penetration and adoption, a distinction has to be made between Brazil and the rest of Latin America, according to Lehr.

“Brazilians are very well versed in mobile banking,” she said, noting that north of 60% of transactions occur over a digital channel in Brazil. 

“Their situation will probably enrich that, but I don’t see it as much of an opportunity for Brazilian banks to convert people to mobile usage.”

“Colombia and Mexico are where we really have the opportunity, because we have a fintech and digital revolution happening but slower adoption because of lower access to banks and a higher preference for cash,” she said.

Lehr added that banks in Mexico are very interested in getting clients engaged with their app’s personal budgeting tools. 

Banks, she said, have been working with fintechs in this area in particular, seeing budgeting as a gateway to other financial services as clients begin to see the value of banking and become familiar with the broader capabilities of the digital toolkit available to them. 

Window for 100% digital

Lehr told BNamericas how digital-only banks like Albo, Cuenca and Nubank can “leverage this time by getting front and center of this mobile remote trend that will accelerate considerably over the next 30 days.”

“Nubank has a free credit card, free debit card that you apply for online. Access to products that are free and I can get virtually, that’s the golden ticket at this moment.”

The opportunity that banks and fintechs have now is that "everyone is going to be looking to reduce costs and get access to financing, because everyone’s pockets are going to be running low,” Lehr  concluded.