There is just under a year left until the deadline for Bre-B, the Bank of the Republic’s bid to boost financial interoperability in Colombia, comes into effect, and despite the fact that the country has already made great progress in this task, There are still barriers to overcome to reach the levels of success shown by countries like Brazil.
Juliana Sguerra, Managing Director & Partner at BCG, maintains that if all the players in the banking sector do not join forces, it will be difficult to achieve success. She also warned that Colombians need a lot of financial education and that the benefits of investing in a digital ecosystem that avoids the traumas and delays that currently exist in the banking sector need to be better explained.
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How is interoperability?
In Latin America we are in a process in which the evolution of the different countries has not come at the same time and in cases like Brazil and Mexico it has gone a little faster in the area of interoperability and open finance. Argentina has also made greater progress than us and I believe that Colombia, with the definitions it began to make since 2022, is taking on the task of advancing along the path it needs.
There are currently many players and open finance or Open Banking is generating major changes in issues such as obtaining customer information, customer service or the treatment of their data, since everything will move much more easily and with this, competition will be strengthened.
Is Colombia doing well?
From the point of view of interoperability, which is what we plan to do in Colombia as a great first step towards Open Banking, led by the Banco de la República, it should be noted that this entity has played a very important role, with which we are reaching a point where we have a more established infrastructure than countries like Brazil had when they started.
In the case of our market, it will depend a lot on how the central bank handles this process, mainly in the management of banks, fintechs, digital providers and offers so that they join the Bre-B model. Effective marketing is also needed so that customers know how this is done and how healthy competition is encouraged to boost the market.
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Do we have what it takes?
Based on the success stories that are already being told in the region, such as Pix in Brazil or CoDi in Mexico, the first thing to say is that we have many things that they did not have when they started. We are a country with a significant level of knowledge about the operation of digital systems, we are familiar with them.
The pandemic forced us to learn and with that ground gained, all we have to do is understand that thanks to Nequi, Daviplata or Bancolombia at hand; people know that this digital movement of money can be done and with this, for example, the number of Colombians who have a bank account, even if it is with digital money, has increased. Now all that remains is to add platforms like Nubank or Lulo.
What are we missing?
Taking into account all the players, let’s say that the shortcomings are in those three large blocks that citizens face, since you are part of one of those three large platforms, but it is difficult to move from one to the other. Having said that, we must understand that if those barriers are not knocked down, it is unlikely that we will have any notable success that will help us create effective interoperability.
The banks are getting ready, but the role of the Banco da República will be fundamental, because in Brazil PIX worked, because it was mandatory and the banks were forced to get on board. No matter what, you have to get on board, period. Here it should be the same, because if someone doesn’t get on board, it’s not interoperable. We all have to get on board for this to work.
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What should you pay attention to?
The model must meet two key aspects. First, simplicity in the experience, that is, making it easy for the user. If we complicate the process, it simply won’t work. This simplicity includes the user experience and the definition of the “keys” or accesses to operate the accounts, something that banks have been working on recently.
Secondly, the issue of fraud and cybersecurity is crucial. Even though the platform is managed by the central bank, banks must assume certain responsibilities in cases of fraud. This is crucial because, as soon as any such incident occurs, the reputation of the system will be affected and people will lose confidence. Colombians, being cautious with their finances, need a secure and easy-to-use platform to adopt these new technologies.
Do we have enough financial education?
To be honest, we lack financial education. If I ask someone outside the banking sector, like my aunt, they would have no idea what Bre-B is or what ‘interoperability’ is and that is why it is essential to educate people about the benefits that this system offers: it is free, in real time, available 24/7 and your money is protected. That communication must be clear so that everyone understands it.
If we fail to generate network effects, the Bank of the Republic will have made a very large investment with an insufficient return. The key is to ensure that people know and trust this system, so, I repeat, we cannot leave aside the issue of cybersecurity, connection protocols and explaining to people why they should join this trend.