SUPER BANK: The bank of the future today

This pandemic has shown that there is a large majority of the world’s population that is excluded from digital financial services, confirming the existence of a large digital inclusion gap. This reality is very present in third world countries, which do not have the adequate infrastructure so that the entire population of their country can have access to the Internet. So it is clear that the digital inclusion gap must be solved first, and then the financial inclusion gap will be reduced, because there is no doubt that the future of banking is 100% digital.

This also generates a social problem, because nowadays, only people who have enough money can have access to the Internet. We must prevent the benefits of technology from reaching only people with enough income to pay a monthly payment to access the internet, excluding people who cannot afford it. That is why it is super important to be able to develop social programs, so that technology reaches more people worldwide, because there is no doubt that bank services will all be digitized in this new digital era.

Financial Technology

Financial technology companies, better known as Fintech, are the ones that are leading the digital transformation of digital financial services, taking more agile and accelerated steps in this digital transformation of financial services. We have as an example the case of Ant Financial founded by Jack Ma in China, which has managed to go public on the United States stock exchange with an estimated valuation of 200 billion dollars, being able to be worth more than Deutsche Bank of Germany and Citibank of the United States of America.

This clearly reflects that Fintech, like Ant Financial, are the future of financial services. We also have the case of challenger banks, which are Fintech that operate with a banking license, such as we have the largest challenger bank in the world called WeBank of China, which has more than 200 million customers, more customers than Chase Manhattan which is the bank with the most customers in the USA.

There are many more cases that can be commented on, but it is clear that traditional banks have to evolve faster so as not to be left behind. Today there are already more than 3 billion people using digital wallets around the world and there are currently countries like Kenya, which already have more customers who have opened their bank accounts through digital wallets instead of banking agencies.

The future of banking lies in the digital inclusion of people, the inclusion of customer through digital acquisition tools, to be able to combine different digital financial solutions through a Super App in smart cell phones with an Internet connection. Cellphone companies are putting smartphones at very low prices for access to the entire population and companies like Starlink will soon offer low cost satellite Internet in rural areas and around the world. Banks that depend today on their customers physically having to sign a paper in order to be their customer, are in a complicated situation and with problems to scale in the future.

Brett King predicts that large global banks will be overtaken by more agile and easy-to-scale applications. Digital banks have a technological structure very different from that of traditional banks, which allows them to be agile and customer focused; unlike traditional banks that have a legacy of technology based on old technology such as a Cobol programming language with VSAM files, which is a very heavy anchor that does not let them advance fast, which has them destined to be surpassed by these new technologies.

During this pandemic we have been able to compare the form of card interaction of traditional banks against neobanks or challenger Banks worldwide. While traditional banks maintained their traditional communication such as sending statements and reminders for you to pay your loans, neobanks have taken advantage of this situation to get closer to their customers in a more fluid communication and aimed at improving the user experience, without a doubt that neobanks and challenger banks will emerge stronger from this pandemic.

Digital inclusion is fundamental for the development of financial ecosystems, we see how countries like Kenya have 98% financial inclusion and have the technology to make digital payments through basic cell phones via USSD technology with applications such as M-pesa, in the case of India and China, these countries are investing heavily in renewable energies such as solar and wind, to store energy to charge batteries to have a more economical energy source in the future, to support all the growth of global digitalization.

Regulation

Another issue is financial regulations, which for example in the United States there is a law of 1977 called “Community Reinvestment Act” where banks are required to have at least one agency in each town, so they can legally not close them and are leading some banks to bankruptcy due to the high costs of maintaining a network of agencies. While in China they have relaxed banking regulation and now China has a lot of advantage over the US regarding digital payments.

There are still countries where large corporations slow down change by preventing regulations from being relaxed, but it is proven in every past industrial revolution, that it is not possible to reject change and companies that do not adapt will simply disappear as happened in previous revolutions. Traditional banks will not be able to prevent regulatory change for many more years and those that do not adapt to this new normal, will simply disappear.

Open Banking

In Europe, this concept has been established since 2015 with PSD2 regulation, which regulates the financial industry, where the client is empowered to authorize his financial institution to share his information with other entities of his preference. This regulation has proven to drive the growth of more digital financial services and benefit end customers. Open Banking regulation is already reaching Latin America in countries such as Mexico, Brazil, Colombia and is expanding in our region, which provides much more transparency in traditional financial system and facilitates the creation of more digital financial applications. This type of regulation benefits the entire financial system and helps the financial inclusion of many people who are unbanked in our region.

Super Apps

In short, a super app is a marketplace of services and offerings, delivered via in-house technology and through 3rd party integrations. Today, however, super apps have become synonymous with the rising array of Chinese super products, namely WeChat and Alipay. The futurist Brett King who has written several books on predictions of the evolution of financial services, in his book Bank 4.0 published in 2018 predicted that financial services will be everywhere, in addition to traditional banks. That is already happening today and we see how Walmart is working this year to create a super application in the United States, something similar to the Chinese platforms Wechat, Alipay and Meituan. We can see an image of the Wechat super application:

Walmart is taking the steps to launch its super application in the American market, for which it has hired two Goldman Sachs executives who managed to create the Fintech of this financial group called Marcus, with great success since 2018 and now they plan to do it for Walmart. In the future this trend will continue to evolve, digital financial services will be used from a super application that allows many mobile applications to be integrated as services.

Fintech Marketplace

The ecosystems of digital financial solutions have been developed in a way of collaboration between the different Fintech in the market, generating Fintech Marketplace that facilitate the creation of Neobanks and Fintech, as well as the digital transformation of financial institutions. Super apps are based on mini programs, lightweight apps that run inside another app. There is no need to download or update them through app stores, which makes it possible for one app to service many apps. Some of the main components that the digital Super Bank of the future should contain are the following applications:

• Digital Wallet
• Personal savings
• Personal loans
• Investments
• Credit Cards
• Personal insurance
• Payment of Services
• Loyalty Program
• Government Services
• Cryptocurrencies
• Money exchange
• Transfers
• Group Payments Together
• Online shopping
• Delivery App
• Social Support
• Financial Education
• Budget

We are coming up with a super interesting future where digital financial services are going to be present everywhere and make life easier for all of us with a few simple steps from our smartphones.

But it’s important to comment that within this great projection of growth of digital banks and Fintech, social actions must be present to help those most needed, because as I mentioned before, it should not be allowed that only those who can afford a monthly internet service should have access to all the benefits of SUPER BANK: The bank of the future.

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