Guatemala City — Executives of the Latin American Federation of Banks (FELABAN) are gathered in Guatemala City, together with more than 1,500 bankers and representatives of the international financial sector, for the 56th edition of its Annual Assembly.
After two years of not being able to carry out the event, the main objective is to promote direct relations between financial and banking entities to generate an impact on the development of Latin America.
The Latin American Banking Federation was founded 57 years ago and brings together, through its respective banking associations, more than 600 banks and financial entities in 18 Latin American countries.
Some of the main issues being addressed during the meeting include financial penetration, the incorporation of informality into the banking sector, and cybersecurity and regulatory issues that are creating an asymmetry within the sector, especially regarding digital players.
“Not afraid of competition”
For Giorgio Trettenero Castro, FELABAN’s secretary general, the conversation is focused on regulatory issues, because currently there are regulatory asymmetries due to the entry of non-banking companies in the sector, and which operate outside banking regulation.
“This is a very important issue for all banking in the region,” he said.
For his part, Luis Lara, president of the Banking Association of Guatemala (ABG), said such asymmetry caused concern not due to a “fear of competition”, but because equal conditions should be generated to protect, mainly, the savings of users, and because as banks they have insurance to back them up.
For example, Lara explained, in the field of loans, new players will enter the market that will not necessarily be financial institutions, and there will be an enormous diversity of products and services, from basic financing to sophisticated operations.
“The disruption in the payments ecosystem will be immense. There will be all kinds of players, and the companies that will survive will not be the most solid or the oldest, but those that adapt the fastest to change,” he said.
Daniel Becker, president-elect of Mexico’s Banking Association (ABM), and who will take over the leadership this year until 2024, said that banking is constantly improving the user experience, as fintechs or bigtechs have done, without considering them a threat but rather as an opportunity, because they are complementary and not substitutes, “as long as there is regulatory symmetry,” he said.
Becker added that another concern within the asymmetry observed is the risk and vulnerability with cybersecurity issues, and that the prevention of money laundering could be weakened.
Becker pointed out that there is a difference between a regulated financial entity and a technological financial entity that has no regulation, therefore, the healthiest thing for the system is that similar activities enjoy regulatory symmetry, with the objective of being complementary and creating synergies in order to have more people incorporated into the formal banking sector.
Making banking more efficient
Technology has changed how traditional industries operate, including banking, Juan Gabriel Aguirre, a financial specialist in digital banking innovation, told Bloomberg Línea.
The concept of the neobank encompasses five aspects: saving, collecting payment, lending, paying and investing, meaning it is related to the services provided by a banking institution, but in a digital way, and can provide the same services with the objective of making them more efficient, unlike a fintech, which is dedicated to a specific solution.
“Neobanks can have a banking license because they comply with legal requirements and reporting, in addition to capital, but they use technology to solve certain problems,” Aguirre said.
Currently, banks talk about technological transformation, but opening an account or writing a check still requires a physical presence, and many of these services can already be digitized, he said.
When it comes to security issues at the time of identifying users, neobanks use technological systems that rely on artificial intelligence and biometric systems, among others, which are difficult to corrupt, he said.
In addition, they can operate with tighter margins, and infrastructure costs are cheaper, because they operate in the cloud.
Another issue that arises with neobanks is customer service, and in this sense “automation” is the key to improving the user experience, Aguirre said.
For Aguirre, Guatemala has one of the strongest banking systems in the region, thanks to the financial institutions themselves, but also the role of banking sector regulator SIB, which has achieved a solid banking system within a regulatory structure, and the important thing is that it can adapt and modernize to new solutions, he said.