Moving from cash to digital in Latin America is a process that requires not only the right technology, but the right types of partnerships and use cases between banks and FinTech firms, built on trust.
That process, and making sure it works profitably, were among the main themes of the latest PYMNTS “Monday Conversation” series. Anabel Perez, CEO at NovoPayment, talked with Karen Webster about the digital payment progress in a region with more than 630 million consumers and at least two globally significant economies: Brazil and Mexico.
NovoPayment offers financial and transactional services through a cloud-based platform, the company said. Its clients include banks, financial institutions (FIs) and others throughout the Americas.
So what are FIs in Latin America hunting for as pressure builds to go ever more digital in both B2C and B2B?
First, capturing more deposits, Perez told Webster. What bank doesn’t want more consumers and businesses to put more money into their accounts? Second, building new relationships, which can then add revenue boosts to balance sheets.
The strategy for pushing banks further into digital first involves getting those FIs to focus on the value chain — that is, working from the customer back.
“We show [banks] that they can deliver better financial services within their customers’ own value chains,” Perez said. “That seems like a new concept to many of the bankers you talk to, but it’s actually at the heart of open banking and digital transformation.”
That’s only the start.
Trust matters in any business relationship. FIs in Latin America need confidence that FinTech firms — operating along the frontiers of Latin American payments and commerce — are not there to poach customers, but to sell technology, software and services designed to help banks make the move from cash to digital, as well as better serve customers and advance their own relationship banking strategies. Done correctly, FinTech companies and FIs help each other find deeper wells of profit.
Perez said it also helps to be able to prove the tech that FinTech firms bring is secure and compliant, as well as to understand how FIs think. That in particular, Perez said, is something that NovoPayment considers one of its competitive advantages.
“We have a banker’s mindset,” Perez said. “We have origins in banking. In some cases, we may surpass their own standards.”
That said, Perez emphasized that getting FIs to buy in doesn’t happen overnight, given the complexities of working with and across the different stakeholders in a bank. She said it takes time for bankers to understand there are newer models of doing business that, in certain cases, involve a hybrid of traditional practices, such as mobile and API delivery methods — which involve working in partnership with FinTech businesses to make progress happen faster, and scale faster.
Perez said she and her team have found that helping these banks identify a few “quick wins” that will result in near-immediate revenue gains can help establish that trust and get a project started.
“First and foremost,” Perez said, one must bring more collaborative and API-enabled models to banks, and new payment propositions that have a solid, documented track record that shows the banks how that solution can scale, or be applied to new use cases. Banks always want better margins, after all — a prime goal of an FI’s board of directors – along with evidence of digital transformation.
From a NovoPayment perspective, Perez said that since they understand cash management and how the money and data can flow to and from the bank, they can help them find a “quick win” project that delivers a benefit consistent with the reality of their clients’ businesses.
On that score, she said, there are many proof points.
“We are seeing positive growth in some markets,” Perez said. She offered an example of an unnamed client enjoying a 2,000 percent compound annual growth rate (CAGR) in new deposits via projects that completely replace cash.
“It’s a double win for the bank,” she said.
Citing mass payments for gig workers as a proof point, Perez said banks gain revenue streams by giving their enterprise customers new ways to digitize the payments services they offer to their consumers. That keeps the customer sticky to the business which, in turn, keeps the business loyal to the bank that provided the capability.
It is a circle that Perez said is proving virtuous for NovoPayment.
“Banks are calling us to see how they can capture those types of relationships,” she said.