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More digital banks are coming: alliances and fights in the war for money management

2021-05-16T05:23:52.329Z


New apps emerge and Santander's Openbank appears. Criticism against Mercado Pago grows.


Damien Kantor

05/15/2021 1:00

  • Clarín.com

  • Economy

Updated 05/15/2021 10:01 AM

With considerable delay, the Openbank (Santander's digital bank) finalizes details for its official launch in Argentina.

Under the leadership of former Google CEO Federico Procaccini, the platform

already has authorization from the Central Bank

to operate in the country and will be officially presented

"in the second half of the year,"

said a qualified source from the Spanish company, without giving more details.

The imminent arrival of Openbank

is one of the responses of the traditional financial industry to the challenge of fintechs, the new generation of technology companies led by

Mercado Pago, Ualá and Brubank

, among many others, and which compete and dispute the money management business . For the Central Bank, the reconversion of banking is an auspicious fact since

cash represents 80% of operations

. The data is surprising because currently 33 million Argentines, 91% of the total, have at least one bank account.

In the troubled world of finance, alliances, mergers and fights also thrive,

especially against Mercado Pago

(Mercado Libre's powerful financial arm),

the first to launch QR code payments in the country

and which today has 5 , 4 million users and 1.3 million member businesses. Mercado Pago leads, but

there are more than 30 very active fintechs

in the business

, including Modo (belonging to a consortium of 32 banks), Bimo (from

Prisma and 365 Clarín

), Ualá, Naranja and Cuenta DNI (Banco Provincia).

In the pulse there are many other actors, but

today it is basically focused on the modality "Transfers 3.0"

, a new regulatory framework that began to be implemented on December 7 and that aims to

create a single interoperable QR code compatible with any wallet

. This implies that Mercado Pago, Modo and Bimo customers, for example, will be able to pay at any business that operates with QR, regardless of who it is, and share the collection devices and commissions as well.

The deadline for full integration is

November 29

, but the task is very slow, the industry and Central Bank sources agree, "

because Mercado Pago resists sharing its QR code

." His vice president, Alejandro Melhem, categorically rejected the questions. "

Mercado Pago is the one who does the most to make Transferencia 3.0 work

: it is the only one that is expanding the offer of interoperable businesses and the only one that invested during 3 years in developing a QR network with national coverage," he said.

The truth is that 5 months after its launch, the compatible QR only works in the chains Burger King, Farmacity, Axion, Open25 (network of kiosks), TodoModa and Isadora (accessories and clothing) and La Anónima.

In total there are only 1,300 points of sale out

of an estimated universe of 300,000. At the BCRA they do not hide their discomfort over the delays and

confirm that the deadline for integrating the entire system is immovable

.

With the backing of the country's main public and private banks, Modo was launched late last year. To date,

the app has 1.6 million users

and "our priority objective is for it to be used in stores," says its CEO, Rafael Soto. The senior executive, on the other hand, highlights that fintech "

is technologically prepared to be interoperable

and we are waiting for other players to join the system." An allusion to Mercado Pago?

In the industry they believe that in the long run, the compatibility process is inevitable beyond the resistors. They also consider

the mobile payments revolution inevitable

, as is the case in other countries. Although cash predominates, the pandemic accelerated the use of cell phones to operate accounts and cards from an app. Data from the Fintech Chamber indicate that today

there are more than 14 million CVUs created by financial apps

, 3 million businesses accept payments by POS that connect to the cell phone and 6 million cards issued by electronic wallets.

In the issuance of plastics, especially in the prepaid mode, Ualá is the one that stands out. The fintech created by Pierpaolo Barbieri shook the market by announcing an agreement to buy Wilobank, Eduardo Eurnekian's digital bank. The operation, subject to the approval of the Central, will allow it to expand its offer of financial services and compete face to face with any bank: fixed terms, purchase of dollars and credits, among others. "We are betting on a more open, inclusive and competitive ecosystem," he said. Barbieri maintains that due to the advancement of new technologies "

in 10 years there will no longer be people without banking,

" he predicted.

Regarding the future of banking, in the industry they believe that hybrid models will prevail, that is, entities that complement physical branches with digital applications, especially mobile ones. Orange has just taken a step in this direction. The entity has just merged its fintech, Naranja X, which allows it to operate as a bank.

It has 180 physical branches, 5 million customers and 10 million cards issued

.

Orange is another of the digital variants that proliferate in the country. There are others, such as digital banks, which some call

“neobanks”

, without physical locations, such as Brubank, Wilobank, Reba (Rebanking) and Banco del Sol. The latter belongs to the Sancor Seguros group, has only been in the market for 8 months, It has 150,000 clients "in the main cities in the interior of the provinces, which are the most neglected areas," explained its commercial director, Juan José Munne.

Electronic operations skyrocketed with the onset of the pandemic. Traditional banks updated their operations, forging alliances and drawing up new strategies. This implies, for example,

linking their own applications with wallets

, especially that of Modo, of which they are their shareholders. There are also agreements on the outside to achieve interoperability. A notorious case is Yacaré, "an application compatible with Modo and that allows you to buy in supermarkets in Mendoza or pay rental bills in Misiones, for example," says Soto.

Reba is the digital bank of the Trasatlántica group, originally from Rosario and focused on tourism and construction. "The application allows you to open a bank account and access a Visa debit card, an American Express credit card, all in virtual form", says its CEO, Stéfano Angeli. As a great novelty, adds the executive, "we have just

launched the possibility of buying and selling MEP dollars directly

."

The emergence of so many competitors is not so surprising, especially in an area like technology.

Some remember what happened to coupons or dot-coms, which proliferated for a few years and very few survived.

“The good news is that more and more we can choose how, where and how much to pay.

Without a doubt there will be innovations, new payment platforms and better payment technologies but, ultimately, habits will continue to be heterogeneous ”, reasons Gastón Irigoyen, CEO and founder of Pomelo, a technology provider startup for payment methods.

Bitcoin and cryptocurrencies, in the sights of the Central

The head of the BCRA, Miguel Pesce, prepares a document to warn of the risks of investing in cryptocurrencies.

The Central Bank watches closely what happens in the financial industry. There are two topics that are at the top of the agenda of the entity led by Miguel Pesce: on the one hand, the development of the system called "Transfers 3.0", the system that promotes to create a QR compatible with all the wallets on the market. And on the other,

a stricter control over bitcoin and the cryptocurrency market

.

In the second aspect, the BCRA demanded that all banks report on the number of users who operate with cryptocurrencies and the volume of operations, to evaluate - as reported - the possibility of developing a regulatory framework, to limit operations . In that entity they highlight that "

cryptocurrencies do not have support, are highly volatile and represent a high risk for investors

."

The entity emphasizes that crypto assets are a widespread concern in almost all countries in the world. In January, Christine Lagarde, the president of the ECB (European Central Bank) called for "a globally agreed regulation", described bitcoin as a "highly speculative" asset and one that facilitates "

illicit business and money laundering operations

". A month later, the United States Secretary of the Treasury spoke in the same vein.

Regulating bitcoin, however, is a complex task for the Central, since it

does not meet any of the three requirements to be considered a currency

, which leaves it out of its orbit.

It is not a store of value (its price is very volatile), it is not a unit of account (it is not used to value goods and services) nor is it accepted as a means of payment.

Precisely for this reason, in 2014 the BCRA admitted that it cannot regulate it.

In principle, the entity led by Pesce has been preparing a document with the CNV (National Securities Commission)

to warn

that investing in bitcoins and other cryptocurrencies is a highly risky activity, which has no backing and that savers can lose all their money. "This as a first step," they warn.

Another priority is to reduce the use of cash. Despite the advances in electronic payment methods, the proliferation of applications and digital banks, it is estimated that 80% of operations are carried out with cash. This despite the fact that the majority of the population in Argentina is banked. According to data from the Central, 33 million people have at least one bank account.

Furthermore, due to social assistance, such as the IFE and the AUH,

4.9 million new accounts were opened last year

and the penetration rate went from 82 to 91%. "What you have to do is that people use electronic applications and let the ATMs go to look for cash," they proclaim from the Central Bank. Easy to say and difficult to pin down. For example, Banco Provincia activated its Cuenta DNI wallet in April last year to

collect the IFE from more than 1.2 million people.

Many analysts take a close look at what is happening in other countries.

“A few months ago, the Central Bank of Brazil launched the PIX instant payment system, which allows immediate transfers between individuals and companies.

Shortly after its debut, with more than 75 million registered users, the modality already represents 80% of transfers ”, explains Juan Pablo Bruzzo, CEO of the Moni wallet.

In China, with the impulse of two eCommerce giants, Tencent (WeChat) and Alibabá (Alipay) introduced QR codes as part of their service platform a few years ago and today about 80% of mobile phone users pay with the cell phone.

Source: clarin

All business articles on 2021-05-16

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