Pressured by competition from big technology companies, banks have revamped their culture and worked on ways to attract valuable IT human capital with a more informal and diverse background.
As competition intensifies, banks in Brazil are pushing to subject fintech companies to the same regulatory requirements as they have in order to create a level playing field.
A high-cost structure might prevent traditional financial services from targeting the unbanked population in Brazil.
André Rodrigues Cano is senior director and executive vice president of Banco Bradesco SA. He is also vice president of Febraban, the Brazilian banking association. Cano sat down with S&P Global Market Intelligence during the banking associations’ recent Ciab banking and technology conference in São Paulo, to discuss the competitive environment between banks and financial technology companies in Brazil.
What follows is an edited transcript of that discussion.
 André Rodrigues Cano, Banco Bradesco executive and vice president of Febraban. |
As big techs step into the financial services offer, how do you see Brazilian banks’ readiness to face unprecedented competition?
André Cano: It is not clear yet how this competition will unfold in the market. Of course, the big techs have a lot of information about their customers, but not necessarily financial information. We think that there is something that counts, which is the trust that people have in banks, especially in Brazil. It depends of course on how the competition plays out, there are a lot of regulatory aspects that we have to consider … They have to play on the same field of regulation as the national banks and foreign banks.
Are regulatory grounds uneven at present?
We can’t say there is competition exactly just yet. But of course, we (would) need an even one. What we do not need is asymmetry. Certainly, regulators in Brazil are looking into this.
Where do you think are Brazilian banks most heavily targeting their IT investments?
Brazilian banks are still made under legacy (systems), so there are still a lot of investments in [that regard]. Of course, banks have to have those systems, otherwise, they could not process billions of transactions every day, as they do. So I would say part still goes toward legacy, and a lot of significant innovation on technologies such as AI. Customer relationship management is another area in which banks are investing a lot, trying to get the view of big techs. And big data and analytics in general, which are not only being used for credit analysis. Today, we have data that could be applied not just on the historical information of customers, which is the old model for credit analysis, but in fact, you can capture information on social media, and other areas that combined with AI or other systems, like machine learning, can produce a much better credit quality analysis. All things are possible today due to these new technologies.
How is the banking sector planning to attract human capital, and win them over a tech environment that might appear more attractive to young generations?
I think that the best way to do that is trying to make agreements with Brazilian universities to provide opportunities for students. We have a lot of programs with Brazilian universities, such as Universidade Federal de São Carlos. We have an agreement to provide data science internships in the bank. So they start as interns and then, if they prove worthy, they become employees.
What changes, if any, are being made to make banking culture more appealing to talent?
It’s a more informal environment inside the bank we are going for — that’s the main change. After 75 years since the founding of Bradesco, people can now work without a tie … Probably more important than that is the vision of diversity. If banks want to connect with their customers, they need to have diversity, and accept it internally. This is a big cultural change. And then, of course, there are things that do not have to change … At Bradesco, we have a strong ethical culture that does not change with age.
AI services and blockchain have been some of the most talked-about technologies during the Ciab event. Are Brazilians ready for digitalization and this kind of new tech?
We [at Bradesco] have 16 million fully digital users, more than 50% of our 29 million customers with current accounts. I think most Brazilians are prepared for the digitalization process. I remember in the past, when we started banking automation in Brazil and the first ATMs arrived, there was a big concern about retired people. How are they going to use them? And it surprisingly worked. People learn fast. When you look at the numbers of digital access in the bank, we have higher transactions from mobile than from internet (banking), which was unthinkable years ago. New technology can always appear and change the situation.
There are still roughly 55 million non-banked individuals in Brazil. Who would you think is going to serve them in the future?
I think we have done good work so far in Brazil with unbanked people. Bradesco started in 2002 with an agreement with a postal company in Brazil, Empresa Brasileira de Correos y Telegrafos. We started Banco Postal, which was an enormous success in providing financial services to unbanked people all over the country in places where there were no banks at that time. Since then, you now have a lot of new services and technologies that can provide financial services. We have the creation of “payments institutions” now, [which] are working on services that can satisfy some of the needs of unbanked people.
[Editor’s Note: “Institucões de pagamento,” or payments institutions, are companies that offer payment services that can be carried out independently from banks through pre-paid cards, mobile phones and other methods, according to Banco Central do Brasil.]
Will the next wave of inclusion in Brazil be driven by payment institutions and fintechs rather than traditional institutions?
Payments, probably, but also from traditional institutions. I would say that we have more possibilities today to serve the unbanked. We have the correspondents, payment institutions and credit card; we have free digital accounts. Multiple ways of serving people and if you have a low cost of service, it is certainly profitable. But it always depends on your cost structure. Traditional services are probably not the best way to address (the segment) because of the costs.