Banks believe they will die in 5 years if they don’t make changes Photo: Gerd Altmann. Pixabay
More than two-thirds (71%) of Latin American bank executives and 67% worldwide believe they will lose market share within two years if they don’t invest in digitization. This is what a new study of the Mambu, “legobank” which offers banking solutions in the cloud, and from The Financial Times Focus (FT Focus).
The study Evolve or be extinct (“Evolve or be extinct”, in Portuguese) consulted more than 500 senior executives from banks around the world, including Brazil, to understand their perceptions of the banking sector today and for the future, as published by Fintechs Brasil, Blocknews partner site.
The results reinforce the urgency of modernizing the offerings of these institutions, as 44% of respondents in Latin America and 58% worldwide predict the end of their business within the next five to ten years, unless they radically change their models.
According to 78% of executives in Latin America and 74% of the world, tech giants like Amazon and Google will own the biggest market shares in the banking sector in just five years. According to the study, this is the ideal time for banks to make significant investments in their digital offerings.
Covid Impacts
“The study shows the banking sector’s divergent approaches to digital transformation. While retail banks have been slow to respond to changes in consumer behavior brought about by the pandemic, there is a group we call ‘digital evolutionists’ that counter this trend. In addition, these players can help those at the end of the line in the digital journey to accelerate their transformation process, mainly due to the high rate of debanked people that we still see in Brazil, indicating the way forward, as well as proving the success of an approach customer-centric”, says Sergio Costantini, general director of Mambu in Brazil.
More than any other region in the world, Latin America used the Covid-19 pandemic as an accelerator for change that will be permanent. The survey reveals that the health crisis was one of the most important influences for the development of digital strategies and an opportunity for banks to redefine their relationships with customers through financial inclusion. Across the region, 57% of executives see increasing financial inclusion as one of the biggest benefits to building a customer-centric banking model through digital transformation.
More than 80% of Latin America’s retail banking industry leaders agree that replacing more conservative models with progressive social purpose is vital to their growth strategies. This was made clear by the loss of importance of concepts based only on “profit” and “increase in earnings” in the priority list of banks, especially when considering their journey towards a customer-centric banking model.