Tuesday, March 28

The transformation of the financial sector: How to face the challenges of digitization in Latin America

In the last 10 years, the financial landscape has been radically transformed. On the one hand, banks have had to modernize to keep up with digitization and, on the other hand, fintechs have grown and developed rapidly to be as robust as traditional banks. In this diversified context, consumers have become increasingly demanding regarding the security, speed and simplicity of financial services, they want instant access to digital services at any time and place, from checking the balance and paying with a QR code, to take a look at your crypto wallets.

In Latin America, the fintech ecosystem is expanding and is one of the sectors with the greatest evolution and innovation. According to Inter-American Development Bank (IDB) and Finnovista, in the last three years, the number of platforms increased 112%. There are now approximately 2,482 fintechs in the region. This figure represents almost 23% of all fintech companies in the world.

The increase in demand for new financial services has brought with it great challenges as well. Regulatory changes, new cybersecurity threats and the constant need to innovate in an agile way to meet the continuous evolution of customer demands are some of them. However, the industry can take advantage of the benefits of hybrid cloud to accelerate innovation, extract value from their data, maintain security and compliance using specialized industry clouds.

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Systemically accelerating innovation

In a changing world, innovation is no longer optional, it has become the center and address industry imperatives in various dimensions. For example, companies today are evolving beyond traditional structures to build inclusive and flexible ecosystems of financial capabilities. We are talking about Open Banking, APIs, the platform economy. And in the hybrid cloud they can find the technological features to modernize with the infrastructure they already have. This is particularly important, since only 1% of companies in Argentina use a single type of cloud.

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Analyzing data where it resides

Financial institutions were transformed into technology hubs. They are now massive data repositories with all the risks, opportunities and responsibilities that this entails. However, the value of the data is in the possibility of extracting valuable insights for the business, whether to make decisions or identify new ways to improve business performance, differentiate or innovate. With the help of the hybrid cloud, even if the data is stored in different places such as the public cloud or on-premises infrastructure, it can be accessed and analyzed securely.

Go hybrid to stay safe

The financial sector is one of the most attacked by cybercriminals in Latin America because it has critical infrastructure for the functioning of society, along with the energy, health, transportation, and food sectors, among others. That is the reason why privacy and information security have become a priority for banks and fintech companies. With threats becoming more sophisticated, hybrid cloud helps mitigate systemic risk by enabling enterprises to better control the unique privacy and compliance demands of each data set—in other words, for the most sensitive data, tighter privacy controls. most demanding access.

Demonstrating compliance from technology

Financial institutions want to be certain that they can protect their assets and remain compliant with industry regulation. This is where hybrid cloud can help them address security and compliance requirements, while also enabling rapid innovation for personalized experiences. With this in mind, at IBM Cloud for Financial Services we work to strengthen the business ecosystem, focused on creating clouds conceived, designed and developed with our partners to respond to the specific needs of the industry.

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An example of a company in Latin America taking advantage of the hybrid cloud is Inswitch, a fintech that has helped more than 100 organizations in the world to implement their own digital financial services on its Fintech platform as a service (FaaS), with more than 75 million active users, managing 26 million transactions per month and a total payment volume of USD 9 billion. Powered by hybrid cloud technology from IBM, Inswitch offers its solution securely and transparently, for any technology infrastructure, while maintaining regulatory compliance.

The future of banking is open and collaborative.

Data is allowing traditional industries to interact in ways that were previously unthinkable. New types of ecosystems are emerging, being powered by emerging and dynamic business models that are even mixing financial services with services or products from other areas and industries, from healthcare and transportation, retail and logistics, and more.

Given the rapid transformation that is generating all kinds of new business models, the technological key to making them a reality is found in the hybrid cloud: it offers a way to integrate the entire ecosystem on a voluntary, multilateral and secure basis, while maintaining compliance regulation and allowing them to be aligned under a strategy for success.

By Alejandro Pelloni, Director of Technology at IBM Argentina

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