With the new regulations, Chile’s financial sector can leverage cutting-edge technology to deliver the best possible products and user experiences.
By Marcelo Fondacaro, Veritran COO
Chile recently enacted a Financial Portability Law, a regulation that allows users to change financial institutions in search of better products and services.
There has been much talk about the benefits of this for customers, from making it easier to refinance of all types of loans by cutting the cost and number of procedures to do so, to improving access to financial services with better conditions. But, what about the banks?
Financial portability brings opportunities, rather than difficulties, for financial institutions. Technology will undoubtedly be an ally, as it will allow banks to take full advantage of the information available to improve – not the product, but the user’s experience – to win their loyalty.
Technology as a Catalyst
The better the data, the better the creation of products and experiences.
Therefore, to take full advantage of the new legal framework, creating strategic alliances with fintech and big tech companies will be key. Financial institutions should take a collaborative approach to develop new business models, products, and services, based on a customer-centric mindset.
Just as Open Banking has been generating great disruptions in the financial sector in Brazil, Financial Portability in Chile will have a similar impact. We will see up close how some banks will be able to change or transform their business model through innovation.
Banks will still offer financial products, but the differentiating factor will be provided, for the most part, by technology companies capable of quickly deploying efficient digital solutions that are sharply-focused on the user, to meet the new expectations demanded by the public.
Financial institutions can connect with specialized technology companies via APIs (application programming interfaces). APIs are tools for developing software and applications that help financial institutions exchange data with other banks, fintechs, developers or third parties.
APIs are used in the financial industry for information transfer, while expanding the variety of products and services that an entity can offer in a unique way to the consumer.
‘API banks’ – as institutions that have adopted this technology are called – have the ability to use customer data to provide better services.
By combining the use of APIs with innovative technologies, such as low-code development platforms and systems for analyzing big data, it will be possible to develop personalized products – no longer mass products. This is the opportunity to really get to know the users, provided they are willing to share their information with the financial institution.
Financial Portability, a Step Towards Open Banking
Financial Portability can be considered a stepping stone towards open banking, something that is already being worked on in Chile. The challenge of both regulations for financial institutions lies in the convergence of technological tools, to deliver new consumer products or loans for a certain niche, and thereby expand the customer base.
Banks that adopt open banking platforms and take note of this trend in their digital transformation processes will enter the era of transferring and using data to improve the customer experience, something that some of the world’s biggest financial institutions are already delivering.
Collaboration is necessary to push for better and greater opportunities. The key will be to work together to develop new solutions and distribution channels to create benefits for the user.
With that, it’s important to remember that Financial Portability does not herald a new environment of competition between products, but between experiences.