Covid-19 is teaching banks to go digital or go home

via Contxto

Traditional, brick-and-mortar businesses aren’t the only ones paying the cost of refraining from going digital. Coronavirus (Covid-19) is also teaching banks that there’s a high cost to relying on physical branches to keep in touch with their customers. 

Some banks had already launched their apps long before the bug broke out. But, at a global scale, they’re still lagging behind in attracting and retaining users in comparison to some of the ferocious fintechs out there. 

And this isn’t just a statement to laud them. A recent report from marketing startup, Liftoff, and data analysis startup, App Annie, provides evidence of this.

Brazil already caught the fintech bug

According to this report, from 2018 to 2019, in Brazil, the number of users for both banking apps and fintech apps grew. Although fintechs are ousting banks in that category. On that note, the report also showed that Nubank is Brazilians’ preferred fintech. 

But that’s not surprising. Earlier this year, Nubank announced that it had 20 million customers divided amongst two of its core products. And while by its customer base, it’s the sixth-largest financial institution in Brazil. In terms of app users, the report from Liftoff and App Annie gives the fintech the win.

And at the moment, digital applications are more relevant than bank branches.

So,due to Covid-19 confinements, it’s likely that Nubank and other similar fintechs in Brazil and the region saw a surge in user signups as of March.

The future of fintech in Latin America

This doesn’t mean that banks will sit by idly and wait to be killed by their competition. But rather, they’re pushing for more user-friendly digital solutions. And to that end, they’ve embraced various strategies. 

Some have launched corporate venture arms to invest in fintechs that satisfy their needs. Others created their own fintech spin-offs.

Another common approach is to buy fintechs or a specific product from them, rather than build a solution from scratch. As did Brazilian banco BV with the acquisition of fintech Guiabolso’s loaning platform last year.

While there are also banks that have opted to hire startups to help them develop their digital products.

For example, the Banco de Crédito de Bolivia (BCP for its Spanish acronym) announced that it worked with Chilean startup Rocketbot. On that occasion, it was to help it set up the automation features for its app.

Who will win?: As fintech and banking apps continue to emerge, fill the market, and the fighting gets down and dirty, the details (beyond costs and marketing budgets) will definitely separate the winners from the losers.

It won’t just be a matter of user interfaces, customization, and artificial intelligence (AI), mind you.

Ironically enough, factors that crippled the customer experience with traditional banks will also come into play in the digital realm. Examples include speed and customer service.

So watch the digital details, go big, or go home.