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5 min read
The smartphone-wielding demographic, grown up on Netflix and Spotify already expects it. Can your business entice them before someone else does?

Change is never easy. Everybody knows that, but it can be downright unnerving in the notoriously risk averse financial sector, which has safeguarded the fruits of hard work for people, families and businesses for centuries. Migrating from written ledgers to software systems was a big step, yet today some banks are still hesitant to advance to cloud-native systems, including in Latin America.

In the past, many associated cloud-native platforms with fintechs were niche lenders. They were small and nimble and deserved credit for catering to the unbanked. Plus, they weren’t always subject to the same kinds of regulations overseeing their traditional banking counterparts. These rookie digital competitors were seen as steering clear of more complex areas of financial services, so the cloud was just fine for them.

Banks work in a much deeper financial universe where change isn’t easy. Why embrace the uncertainty of migrating to a cloud-native platform at all? Weren’t there enough things to worry about on a more fundamental level like a pandemic, macroeconomics and elections that always seem just around the corner?

Maybe, but if you want to talk fundamentals, there’s a huge one that needs to be addressed and it does have cloud implications — demographics. That’s right, young people.

Fountain of Youth

Latin America is a very young area of the world compared with other regions. According to the Inter-American Development Bank, 11% of its inhabitants were over 60 years old as of 2018, well beneath 23.9% in Europe and 20.8% in North America.

This big chunk of young people grew up in a digital world. They booked rides on Uber, they watched their favourite movies on Netflix, danced the night away to music on Spotify, shopped on Amazon and sent money to family and friends or paid their bills via a slew of apps. Do these tech-savvy, smartphone-wielding young people spend time wondering how the companies that supply these services manage their IT to stay competitive? They do not. Their top concern is whether these firms — financial services providers especially — can adapt to their changing demands as quickly as any other elbowing for space on a handheld screen. And that is where nimble core systems matter.

It’s hard to picture today’s youth and even early middle agers ambling down to the local branch office, taking a number, having a seat, filling out a loan application and waiting to find out whether they’ve been approved or not. They’ll go through that whole process on a phone in seconds and find out instantly what their financial capacity is — and who’s helping them.

Mambu can help banks migrate to this new reality. That’s what we do, and it has a name: composable banking, where all partners and vendors are part of a technological ecosystem on the public cloud, communicating seamlessly with one another via APIs and web hooks. When new products need to be made available and existing ones tweaked, a Mambu customer can adjust its ecosystem quickly to stay competitive.

Try that while fully siloed in a legacy system, where adapting to change is costly and time consuming.

And the good news is this migration needn’t be a Herculean task. Take ank as an example. Brazil-based financial institution Banco Itaú Unibanco saw the need to innovate its digital banking operations, and to address this issue, Itaú in 2020 launched ank out of Argentina, a completely detached spinoff, known as a speedboat, powered by new technology designed to facilitate the issue of new products and services to customers seeking to pay bills and send money to and from accounts in a one-stop shop.

To implement such a launch in an innovative fashion, Itaú chose Mambu to develop the project’s platform, and as a result, the speedboat required very little outside assistance with integration and establishing APIs. Mambu’s flexible Software-as-a-Service platform was easy to configure and supported all of ank’s requirements involving:

  • P2P transfers
  • configuration-as-a-code
  • specific third-party integrations

The process went quickly. In total, the speedboat went from a proof-of-concept stage to a final product in just three months’ time, which exceeded expectations. Today ank is mulling other product verticals and will remain attentive to market needs.

There are many paths to the cloud, and the speedboat is just one.

Always tomorrow

Demographics will change over time. According to the IADB, by 2030 the population over 60 in Latin America and the Caribbean will reach 17%, and the multilateral lending institution added that by 2050 one in every four inhabitants of the region will have reached that age.

Who knows what kinds of medical and financial services affecting pensions, investments and insurance will be available to retirees in the future? What role things like Artificial Intelligence, new regulatory agencies and even newer currencies like Bitcoin will play? No one knows, but composable banking positions one to best adapt to unforeseen changes with greater agility.

The power to anticipate the unknown is perhaps one of the greatest assets that composable banking brings. Your customers have learned to thrive in uncertainty, especially your younger base, so shouldn’t you do likewise?

Change is never easy for any institution, but it’s a constant, especially when considering the disruptive times in which we live. But that unease that comes from migrating away from legacy systems will seem like a flash in the pan compared with the years and years of peace of mind that moving to the cloud today will bring for you and your future customers.

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Edgardo Torres-Caballero
Edgardo has a 20-year track record of growing businesses and developing winning teams in the Americas. As an entrepreneur himself, he understands the value of strong regional partnerships, local presence and customers support. He is responsible for leading growth plans and driving execution in LATAM.
Edgardo Torres-Caballero