Among the increasingly agile ecosystem of the fintech that lend money and the traditional banking world there is a third generation of financial solutions that combines something of both: digital banks. And they are willing to fight with the rate to gain mass of customers.
They work purely online, without branches or imposing parent companies in the City of Buenos Aires and unlike fintech, they also collect deposits. And they pay them very well. In fact, they are up to 10 points above the average of the leading entities.
With the financial cimbronazo that followed the PASO, the reference rate of the Central Bank (Leliq) jumped 11 points in a single day to contain the fury of the dollar and today borders 75%.
Thus, banks - despite the fact that they usually take their time to transfer this performance of the letters issued by the entity to customer placements - this time they did quite quickly with increases of between 8 and 9 points in just these first days. The National Bank took the lead: it had already risen from 52% to 54% before PASO and today it already pays 60% for a fixed online term of $ 100,000 to 30 days, according to the information on the BCRA website.
Among the major leading banks, the majority is around 55%. (Santander 54%, Galicia 55%, French 56.5%, HSBC 55.5%). Many entities are still below 50%.
But the new digital banks, which were already paying a remuneration well above the market, also did their touch-up to make sure they were ahead.
Rebanking, the last player to enter the market, also increased it from those levels to 62%. In Wilobank, for example, the increase, which had already started before PASO, brought the rate from 55% to 61%. And with no less detail: there is no floor as to the amount to invest.
The only one who, at least for the moment, chose as a strategy to align rather with the rest of the bank was Brubank, with 55%. But clearly it is not a troubled entity: it has just obtained in London a multi-million dollar capital injection from the Canadian owner of Thomson Reuters, which took 15% of the shares. "In their expansion strategy they do not seem to be betting on adding clients based on fixed terms," they speculate in the market.
The neobanks
They are dedicated to the business of giving credit, like many fintech, but they also get deposits. That is, they perform what is called "financial intermediation" (the money they obtain for fixed terms lend it at a higher rate and keep the difference).
There are already two "heavyweights" operating - such as Wilobank and Brubank - and recently a third party has been added - Rebanking - which even has the license that enables it as a financial company. And, as if this were not enough, there are other big players in the starting line, such as Naranja and Santander Openbank.
The key to being a neobank is the license. Replicating the classic business, although in digital form, implies being under the regulatory scrutiny of a Central Bank that, at least for now, has let Fintech proliferate out of its radar.
Obtaining it is a process that requires patience. In most cases, it expands more than one year, not counting the time for the installation of infrastructure. But, above all, it implies being subject to a pile of requirements: from technological controls and audits to the crucial guarantee for fixed-term deposits.
Paradoxically, this burden is a competitive advantage when it comes to attracting customers, since for them it translates into tranquility. More than anything considering the traumatic experiences in Argentina. Those who bet on this business model ensure that it is a key aspect in the user decision-making process.
Guarantees to sleep better
Guillermo Francos is the man who is in charge of Wilobank, the first digital bank that began operating in the country and has the financial support of Eduardo Eurnekián.
"The market is going to be organized little by little. Tomorrow we will see what happens," he says, anticipating a feasible purification. "The bank gives guarantees that a fintech does not offer. Before launching, we made focus group and it was very clear that people perfectly understood the difference," he tells iProUP.
Francos, then head of the Province, had Federico Sturzenegger as head of the BCRA. Despite this advantage, the talks began in 2016 and the project, presented towards the end of that year, was approved in mid-2017.
"When I went to talk to Sturzenegger I already knew that I had a very open mindset. From the beginning he told me that he had all his support. He gave us a year to put it into operation and in a year it was operational," he recalls.
According to the manager, "50% of adults never had a bank account." Therefore, qualifying is usually a vital issue. Hence, fintech, based on granting small amounts, function as the simplest gateway to the system.
"As for the credit analysis, we are in similar conditions, since many have no history. Onboarding (high) takes 5 to 8 minutes and in that same process a rating is given based on the data provided by the person plus the that we get from the truthful. Something less than half does not agree, "he acknowledges.
In order not to leave that audience out, the firm designed Wilocard, a prepaid card. "It is a very aspirational product, with very low amounts but rechargeable," explains Francos.
"We still have the problem that while the cell park is huge, many are very low-end and the app is somewhat heavy. We have 60,000 customers, but 100,000 attempts," he says.
Hypercompetitive in rates
In terms of attracting customer deposits (the other leg of the business) the bet is strong: the daily balances that remain in savings banks are remunerated with 20% per year until the money is used to load the card.
"In turn, we were very aggressive with fixed-term rates. When the market paid 40%, we were at 50%. We moved everything we could without losing money," he admits. "Sooner or later, it will end up regulating and there we will see the cost that that represents for each operator. That is, who survives and who does not," he concludes.
Brubank, the entity that chairs former Citi Juan Bruchou, this year resorted to strategies such as paying almost 65% per year for new 30-day fixed terms and up to $ 100,000 per customer for a promotional day.
The bank was licensed in September 2018, after requesting it in May 2017, and is operational since January.
Lend without hanging
The Rebanking case, which was released in July, is different: Transatlantic Group, of local origin, with businesses in tourism, finance and real estate, already had the license of the BCRA to operate as a financial company.
Stefano Angeli, its CEO, tells iProUP that this does not represent differences in terms of supervision, with the sole exception that it is not possible to issue checks, a business that they were not interested in exploiting.
"The Central Bank controls everything, as the infrastructure is very robust and solid. So many tests and tests must be done," says the manager, and anticipates: "We have already begun the process to migrate to a bank license. The BCRA is driving it and it is still a marketing strategy. "
The rate war is declared. Rebanking today pays 55% for fixed terms while balances in savings accounts yield 30% annually.
"While it is the cost we assume to attract customers, it is still less than if we could not capture public savings, such as unregulated fintech. One can soften rates by offering less risky products. It is what we intend to do, leaving with standard rates of system, "says Angeli.
With these benefits, digital banks are making an investment in marketing to gain popularity at this stage embryonic sacrificing profits, a strategy that is only sustainable over time if the firm has enough financial back.
Angeli makes another argument: "If you look at the experience of other markets, you realize that Fintech end up asking for a license because they have already achieved volume and need to exploit the business, make it scalable."
Complete the offer
Gastón Irigoyen, CEO of Naranja Fintech and former Google centerpiece, exudes enthusiasm: "We went from being a single product brand to an umbrella brand. In the future we will be a technology company. We already have two apps, one for individuals and one for businesses And we are working on a third banking pillar. "
In August it is a year since they asked for the license. "Once we have it we will offer a comprehensive service, with banking products that will improve and complete our value proposition," he summarizes.
Of its 5 million current clients, 1.3 million already consult and pay their summaries online, without considering the enormous potential of attracting new users.
Banks take out the wallet
In this technological career, banks are not far behind: only in 2019, JPMorgan will allocate $ 11.4 billion to technology and Bank of America, $ 10 billion.
Santander will disburse US $ 5.6 billion this year and US $ 22,000 million in the next four to internationalize Openbank, its digital bank, which is already in Germany, Portugal and the Netherlands. In Argentina it will start in the first quarter of 2020, beyond which the "among known" tests will begin at the end of this year.
"It does not necessarily target the same customer. We have 3.7 million users and some can migrate because they feel more comfortable. We can also capture new ones that prefer to operate in a 100% digital environment," they point out to iProUP from the entity.
And they add: "In turn, it can attract those interested in increasing their degree of banking or level of contact with the system. We really see it as something complementary."
Santander has been developing very successful platforms, such as One Pay FX, which allows money to be transferred abroad on the spot with blockchain technology; and the successful Superdigital wallet in Brazil, focused on low income segments.
Argentina will continue to be the first integral development of Openbank outside its native country, since in the rest of the markets only the Openbank Spain platform was deployed.
The Brazilian Colossus
Nubank, the Brazilian monster with 12 million customers, has already warned that it is coming to the country as Nu, shortly after having set foot in Mexico. It is one of the global top-ten and the few unicorns (valuation greater than US $ 1 billion) in the region.
He has just made his eighth round of capital injection for US $ 400 million to boost his internationalization, which has already raised US $ 820 million since 2013. It is the sixth financial institution in Brazil and already has a value similar to that of the Pactual BGT, of US $ 10.4 billion.
The three-year wait for a financial company license to operate in their own country seems to have discouraged it, so they did not apply for a local license. What is clear is that it will set up a service export hub that will involve the investment of US $ 2 billion. And that as fintech will shake the domestic market.
The coming months will be decisive for the business of the "neobanks" to consolidate, with local and international players. The beneficiaries are the users since they obtain advantages that traditional banking does not match. Everything goes to win market share.
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