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Latin lessons for aspiring digital banks

Radar Payments - in collaboration with Fincog - recently published a report on the state of digital banking in Latin America. In this series of blogs we explore some of the issues discussed in this whitepaper in more detail.

The objective of the ‘Digital Banking in Latin America’ report is to provide valuable context on the potential for payment innovation in this exciting market. Informed by interviews with market experts and drawing on both existing research and analysis performed by Radar Payments and Fincog, it is valuable resource for any potential market entrant.

The report includes observations on recent payment market developments as well as insights into the current economic landscape. It summarises the propositions and strategies of selected digital banking players across Latin America and provides a list of carefully assessed action points and imperatives when trying to establish a digital bank in the region.

By outlining the economic and social factors behind the growth of these digital-only institutions, discussing the regulatory factors they have to comply with, and explaining how they can best exploit the opportunities on offer, the report provides a valuable insight into the Latin American neo-banking market and opportunities for new payment products and services.

Differentiation, positioning key to success

Before we get into the detail we thought it would be helpful to start by looking at examples of banks in Latin America that are facilitating and encouraging digital payment innovation.

Creating a unique selling point and value proposition is vital to creating a loyal customer base with active users who ultimately determine revenue streams. Here are details of some of the Latin American neo-banks that have been successful in establishing their presence through unique propositions and the elements of their payments offerings that have made them successful.

Nubank is Latin America’s largest digital bank, expanding beyond its home market of Brazil into Mexico, Argentina and Colombia. It achieved first-mover advantage by launching its no-fee credit card (managed through a mobile app) in 2014 and its strategy of installing fully autonomous local teams in each new market has been a key factor in the bank achieving high customer satisfaction ratings.

Nubank makes it easy for customers to make or receive payments by allowing them to send a payment reminder with their account details to receive transfers, and pay their utility, phone or shopping bills right from their app.

Neon started life as a payment company (Neon Pagamentos) and now services retail and SME clients with a broad range of financial products and services accessible through a simple and intuitive customer interface.

Neon customers can use facial recognition to access their account and perform additional transactions such as payments. They have access to unlimited bank transfers plus the option to use the Brazilian Central Bank’s free instant payment system.

RappiPay is the first super-app in Latin America and allows consumers to automate recurring bill payments, receive instant alerts and schedule payments as well as make payments by credit card, debit or cash.

The product of an alliance between multi-vertical delivery service Rappi and Colombia’s Banco Davivienda, RappiPay offers Rappi users a variety of digital payment functionalities including in-store QR payments, person-to-person, and bill payment services, as well as a contactless-enabled Visa debit card.

Uala offers low cost financial services coupled with money management features to drive financial inclusion in Argentina and Mexico. Its long-term ambition is to move beyond a mobile app into a full payments ecosystem.

While remaining focused on the young unbanked population – 70% of its customer base is under the age of 30 - Uala has developed a range of services for small to medium-sized businesses, the first of which is a mobile point-of-sale device.

Albo is a Mexican challenger bank focused on lower and middle income segments, although it recently added business banking services to its offering.

The bank has developed a platform through which businesses can receive money and make payments. Transfers can be made at any time of the day and users can make payments for company-related expenses through dedicated cards.

Broxel is a Mexican company with a long history in digital payments that offers a range of financial services in the US. The goal is to offer products to Mexicans that allow them to pay lower fees for moving money and facilitate sending funds back to their families in Mexico.

Users can send money to Broxel accounts in the US and Mexico, to bank accounts in the US, or between cards (if they have more than one). In the US, wire transfers to other banks made before 2pm MST are completed the same day, while transfers to other Broxel cards or to Mexico are completed immediately.

Maximo has partnered with Mastercard to strengthen the digital payments ecosystem in Peru. This alliance is aligned with its ambition to allow users to transition from cash payments to digital payments without maintenance or membership costs.

Cuenca works with communities to tailor its service to local culture and offers fast account opening, with cards delivered within 90 minutes of account opening in Mexico City. It is focused on making transfers fast and easy to complete with options such as making payments via WhatsApp.

Services include bank transfers and electronic payments for online services and utility bills. Customers can also make cash withdrawals at convenience stores and other retail outlets.

For more information, download our guide to digital banking in LatAm.