Latin America's digital transformation can be a global model
The pandemic has shed light on a stark digital divide. In Latin America, digital infrastructure is severely limited in rural areas and developing countries. A large segment of the population is excluded from the internet era. Similarly, one-third of Americans don’t have access to the internet. However, amid the massive paradigm shift caused by the pandemic, having the ability to use digital channels is not just a nice-to-have, it is essential.
This holds especially true for digital payments. Although adoption has historically been difficult, Latin American is now uniquely positioned to serve as a model to the rest of the world as the global population transitions to a digital-first way of life. All nations are in the process of figuring out how to transition to the new normal – Latin America's rapidly expanding fintech sector may prove to be the guiding light as we look to establish a widely accessible digital financial ecosystem.
Latin American countries largely view cash as king, but the current environment has accelerated an overwhelming movement toward digital payments and banking as handling money becomes a public health concern. The region is leveraging digital channels to an unprecedented degree, and those who had not previously transitioned into the digital era are now making the move out of necessity. With fintech and mobile payments booming, one thing is clear: The traditional system of banking no longer works for everyone.
Digital channels have quickly shown their value-add, as organizations who had already moved away from legacy systems prior to the pandemic have quickly seen a return on investment. One case study is in Argentina, the government decided on a stimulus solution to inject money into social layers who have either lost their income or are unbanked and typically receive their income in cash in person, a near-impossible task amid a pandemic. Argentina’s Banco de la Provincia developed Cuenta DNI, a digital wallet allowing people from all walks of life to quickly access the stimulus funds. Usage has tripled since the beginning of the pandemic. In just 15 days, Cuenta DNI reached 500,000 active users.
America’s nascent digital financial channels are facing similar challenges as emerging markets, with paper stimulus checks in some cases taking weeks to arrive to 70 million Americans who can’t afford to wait.
The pandemic has caused an unprecedented level of global collaboration, with nations working together to develop a vaccine and offer medical aid. The same collaborative spirit can be true in fintech – the U.S. should look to its neighbors to understand best practices and potential solutions as these nations also accelerate into a future where digital wallets and mobile payments are the norm.
Digital inclusion has been a priority in Latin America for years, since the region started a dialogue and established a commitment to reducing the digital divide and implementing educational programs in 2000. Moving forward, digital financial literacy education will be paramount in establishing a widespread financial ecosystem.
VeriTran reports that the use of digital wallets has increased globally by 180% during the pandemic. As more users adopt these platforms, they must learn how to leverage these tools to their advantage. Educational programs, such as the ones discussed in Latin America, will be a necessity in other markets. This is admittedly a long-term program. Meanwhile, it should be the responsibility of banks to enable ease of use quickly.
One tool already being employed by multiple financial establishments in Latin America is the low-code platform: It enables rapid development of apps without requiring technical expertise, and facilitates digital channels regardless of, and compatible with, any existing legacy systems. Furthermore, more globally established tools will continue to add value and ease of use as organizations transition to digital channels – customer success technology and chatbots, workplace management and IT tools, and more.
Global digital financial channels are developing alongside each other, with the majority of nations looking to quickly build out their payments and financial offerings. Emerging markets can provide valuable lessons in pitfalls to avoid and policies to implement.
It’s time to seize this opportunity for change and prioritize implementing a wide-reaching digital system. As we continue down that path to a digital-first way of life, an end-to-end financial system (from education to adaptable platforms) will be key in allowing all members of our global society, from the U.S. to Latin America, to contribute in meaningful ways.