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High-tech driving better banking

High-tech driving better banking


​BANSEFI Director General Virgilio Andrade​ shares Mexican bank's strategy on FinTech, digitisation, financial inclusion​​​​​​​​

​​​​​​​​BRUSSELS, 7 December 2017 –​ Virgilio Andrade Martínez, Director General of Mexican WSBI member Banco del Ahorro Nacional y Servicios Financieros (BANSEFI, National Savings and Financial Services Bank, Development Banking Institution), answered questions from WSBI about BANSEFI's strategy regarding FinTech, digitisation, financial education and inclusion, and its ties with WSBI.


​Fintech will deeply change the banking sector over the next years; it already started. How is BANSEFI dealing with the challenges and threats brought by the development of online banking and Fintech start-ups?

The Mexican Senate approved on 5 December a bill called the “Law to regulate Financial Technology Institutions" (Fintech Law), proposed by the Federal Government, which recognizes developments in terms of financial services technologies that are radically changing the way in which traditional financial services are provided. This bill will be reviewed by the Chamber of Deputies, expecting that it will be issued in the short term.

The bill acknowledges that with these technologies, there will be larger advances in financial inclusion in Mexico, as well as an improvement in the competitive environment in the financial system and financial stability. Once approved, this law will determine: an adequate regulatory framework for these financial technology institutions, the way in which financial intermediaries will be able to invest in these companies, and mechanisms to reduce risk and protect users, as well as prevent money laundering.

BANSEFI, as a development bank, has the mandate to promote the development of the financial sector, to provide financial services to lower income population, as well as promote innovation for financial inclusion, so this new Fintech Law will provide a framework of action to develop together with financial authorities, the mechanisms that will allow BANSEFI and the savings and loan sector (BANSEFI's main partner in financial inclusion) to invest and work in alliance with technology companies in order to facilitate access to more modern and efficient financial services in those localities where formal financial services are not currently present.

The main challenge will be to reach adaptability, to modernize our systems, our data centers, and the services we provide, as well as to improve the knowledge of our clients' needs and conducts; that will be needed to face new competitors that will be emerging.
Another challenge will be to prepare ourselves to prevent cyber-security risks and frauds, which if not controlled could aggravate financial exclusion.

Besides, BANSEFI will have to develop new contents for our financial education activities, in order to help our clients and general population to take better decisions, considering risks involved, and protect their personal data and resources, when facing these new Fintech services.

How has digitisation affected the effectiveness of BANSEFI? What is the impact of digitisation on retail banking today, and how do you expect it to be in the years to come? 

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In Mexico, we are expecting that digitisation on retail banking will strongly contribute to financial inclusion and the more efficient use of the incoming remittances flows in our country. But there is still a large way to go in the rural areas, not only on the supply but also on the demand side, because digital financial services are still not largely known or accepted by the population. 

Under this scope, BANSEFI as a development bank, has started to develop those services that target specific financial needs of some segments of the population. Currently, BANSEFI's digital banking strategy covers the development of four main initiatives: internet banking, mobile banking, SMS services and remote opening of accounts using internet web sites. The last initiative has already been launched in November 2017, aligned also with the public policy to facilitate financial inclusion of emigrants and their families.

 In this way, BANSEFI is moving forward in a more technological way that will facilitate the access and use of financial services for its clients. For instance, in “Debicuenta Exprés" (Express debit account) everything is digital, there is no actual paperwork required and IDs are scanned. Digitisation is here to stay, and the fact is that it is a very effective tool to reduce costs of processes and to translate those savings into better products for the low income population.

Finally, BANSEFI's market share in remittances payment has been growing importantly together with financial intermediaries that conform “L@Red de la Gente​" which is a commercial alliance for distributing financial services to more than 170 financial intermediaries, mostly savings and credit cooperatives. In this respect, we also seek to develop payment digital ecosystems in rural areas, among other objectives, to provide more efficient financial services and to promote a more efficient use of remittances. For that end, BANSEFI has grown its correspondent network to more than 4,000 outlets.

BANSEFI targets the most vulnerable population of the country and one of the challenges that we face is for our clients to feel comfortable with new technologies. For instance, in many cases, if they do not get a paper receipt they will not trust that a transaction has been made. Financial education, consumer protection, and most of all, a good first experience with digitisation and new technologies will be essential for their acquisition.

Which are the greatest examples of BANSEFI's efforts to promote the culture of savings? 

Most of all BANSEFI's strategies have a transversal goal that is to promote and increase the savings of Mexican families. In this sense, I would remark results in two examples.  

There is no doubt that the programmed savings account that is offered to Prospera Social Inclusion Program's beneficiaries is a great example. BANSEFI facilitates the savings process, people do not have to go to a branch to make a deposit, the amount of money that our clients instruct us to be saved is automatically transferred from the savings account where they receive the government financial aid to another savings account that they try not to withdraw from (but they can if they want to). 

This second savings account has been very successful, because they do perceive this account as the instrument that will help them face emergencies, or that will help them to achieve their goals. As of September 2017, out of 6.5 million Prospera's beneficiaries, we have 1.9 million that have been offered the new Financial Inclusion Comprehensive Program, receiving financial education and having access to this second savings account, credit and insurance services. From these beneficiaries, we have 1 million second savings accounts with an average balance of US$18.

Another example is PATMIR, the Rural Microfinance Technical Assistance Program. It incentivizes savings and loans intermediaries to deepen their activities to lower income population and smaller and more rural localities. Jovenes.png
With this Program, BANSEFI supports alliances among specialized consultants and savings and loans intermediaries. This program reached the financial inclusion of 1.3 million people in the last five years, focusing on savings. PATMIR was recognized as the best public-private alliance project to foster women and girls empowerment, during the 2017 Global Summit of Women in Tokyo, Japan. 

Financial education programs for children and youth have also become a relevant tool we are using to promote savings. In that sense, BANSEFI designed its Strategy for the Development of Financial Capacities in the Education Sector in coordination with the Ministry of Education and taking into consideration the recommendations from the International Network for Financial Education/OECD. The strategy, through a cycle of workshops of 20 sessions lasting 50 minutes each, at elementary and high junior schools, seeks to promote financial culture and to encourage children and young people to save. We have reached in 2017 around 2,000 children.

What are the main results of the study sponsored by BANSEFI – “Diarios Financieros de México" – and how did it lead BANSEFI to adjust its strategy in order to reach low-income households?

“Diarios Financieros"​ (Financial Diaries) showed us that even though low-income-population families still struggle with smooth and volatile income, they have more than seven sources of income, including remittances. Also, low income population uses different financial instruments, mostly informal, to manage their financial needs. These families value certainty and predictability of financial products, because of all the elements they must consider for planning how they will use their limited resources. 

The Financial Diaries have allowed us to confirm what in practice we have observed with Prospera's beneficiaries and PATMIR users: among other things, formal financial products must be adapted to popul​ation needs and manners, and should be provided in the same localities where the population lives. Also, the Financial Diaries have allowed us to refine the approach and strategies for the services that we provide, for example, to focus the new stage of PATMIR on communities with high levels of emigration.

​How do you evaluate, so far, the results of Somos Mexicanos​? How is such programme rooted into BANSEFI's culture of financial inclusion

Mexicans that were being deported by the United States lacked financial tools that could help them in their economic and financial reinsertion process. In many cases they were sent to a migration point in the Northern Border and they did not have any means to go back to their States of origin. Starting in March 2017, BANSEFI installed 12 units on those entry points where the deported Mexicans can open a bank account, exchange money or collect remittances. As of October 2017, these 12 units have served about 7 thousand people.

As has already been said, the new stage of PATMIR is now focused on the financial inclusion of emigrant and rural communities, in order to make a better use or remittances inflows, and thus in support of the migrant community and its financial and economic reinsertion in case of deportation.

Also, with the remote opening of accounts, BANSEFI is targeting Mexicans independently of their geographical location or migratory condition, which in most cases, have not been served by the formal Mexican financial system. With this service, no matter where you are, if you have internet access you can open a BANSEFI bank account within minutes through your mobile device, tablet or computer. This possibility / tool, allows Mexicans:

  • to have access in most cases for the first time to formal savings accounts,
  • to protect their savings, ​
  • in case of repatriation of emigrants, to facilitate economic reinsertion in Mexico.

 In summary, two approaches are now in place for BANSEFI's strategy: 

  • to bring financial services to every Mexican no matter where they are located, 
  • to make a more efficient use of remittances inflows in order to increase financial inclusion, and to boost economic development and welfare in rural communities. 

Following the terrible earthquake that hit Mexico last September, how has been made the decision to involve BANSEFI in the reconstruction and help Mexican citizens in need​? To which extent does it also trigger customer centricity? Copie de Copie de Copie de 5 reasons to give to (2).png

One of BANSEFI's areas of expertise is the design and operation of financial products for social programs beneficiaries, since the bank is responsible for the distribution of the main conditional cash transfer Program, Prospera, which has more than 6.5 million beneficiaries around the country. And it goes beyond offering the financial products, in most of the cases, BANSEFI has had to create a financial infrastructure (in​​ some circumstances a temporary point of service) in rural areas with no financial infrastructure at all. 

Given the lack of financial infrastructure of the affected communities located mainly in the states of Puebla, Oaxaca and Chiapas, and the short timeframe needed for reaction, when the Federal Government was designing the reconstruction strategy, it was only natural for BANSEFI, a government institution, to be the bank designated to open the bank accounts and to deliver the debit cards on which the reconstruction subsidies would be deposited. That will also give the opportunity for financial inclusion of the affected ones. BANSEFI has the operational expertise that no other bank has, to deliver in a short period of time thousands of debit cards linked to an individual bank account and to process, in record time, the payments for those affected by the earthquake.
Only in the State of Oaxaca, BANSEFI has visited more than 60 thousand households in 40 municipalities and more than 57 thousand people have received federal government financial aid for reconstructing their houses.

As it has been a Presidential mandate, the objective is not only to deliver the financial aid, but to promote financial inclusion, reaching a segment of the population that did not have access to formal financial services. In this respect, BANSEFI will continue with financial education activities and providing financial services to these beneficiaries.

From a financial inclusion and sustainable finance perspectives, what have BANSEFI's main achievements been these past years? 

BANSEFI is always looking to financially include as many people as possible. In targeting massive segments of the objective population, one of the biggest achievements in the past years has been the Financial Inclusion Comprehensive Program that aims to offer savings, credit, insurance and financial education to millions of social aid program beneficiaries. 

But furthermore, BANSEFI has considered a segment that is typically excluded and those are the millions of Mexicans living abroad, for them we have created two savings products, the “Debicuenta Exprés" (Express Debit Account) and the “Debicuenta Migrante" (Emigrant Debit Account), we have installed 12 units for Mexicans deported from the United States and we have developed financial education tools for them. 

In terms of improving access efficiently and with quality service, BANSEFI has hired more personnel in its branches to reduce the waiting period and it has also strengthened its correspondent agent network with more than 4,000 access points.

We can also remark that private and public alliances programs, such as PATMIR and L@Red de la Gente, will be kept as a relevant part of our strategy to sustainably expand the formal financial sector to unattended population.

Please describe your vision of the savings bank in 10, 20 years. 

This is a tough question! In 10 or 20 years, those who want might even have implants in their bodies instead of carrying mobile phones or debit cards! Companies like Google and Amazon will provide a wide array of services. And financial institutions must learn to adapt to different situations and customer needs, and make the right investments and alliances to still be competitive and keep our customers trust.

In this rapidly changing context, there will be those with access to technology and those with limited access. BANSEFI must always stand to promote universal access to financial inclusion in Mexico, and that will still be our vision for the next couple of decades. 

Currently BANSEFI's vision is to be an international reference social banking institution, trustable and innovative that promotes the increase in welfare of Mexicans through financial inclusion instruments. I think this vision will be consistent during the next couple of decades, and we will be promoting alliances with more solid financial institutions and IT partners. Through these alliances we will be promoting financial education, financial inclusion and a wider use of mobile banking, correspondent agents and financial services.

Copie de Copie de Copie de Copie de 5 reasons to give to.pngBANSEFI has been a WSBI member for 13 years now. What does this membership bring you?

For BANSEFI, belonging to WSBI has been an important experience for spreading internationally ​our programs and results, and to learn from other positive expe​riences from very relevant international institutions.

It is significant to BANSEFI to promote a wider exchange of experiences among countries in the southern hemisphere, countries with which we share challenges in terms of social and economic development, as well as challenges in financial inclusion and financial education.

Participating in WSBI general assemblies and annual meetings of the Latin America and the Caribbean Regional Group (GRULAC)​ has also provided a rich experience exchange, and the possibility of directly knowing financial leaders in different countries that provide excellent inputs on how to face financial inclusion goals and challenges.

The constant WSBI communication about regulatory novelties, socially responsible principles and financial inclusion and financial education initiatives is also very relevant for BANSEFI's activities. We are very thankful of all the work performed by WSBI experts and communication team.

Financial inclusion; Innovation; Financial education; Digitalisation