Financial Transformation: How to Meet Digitalization Challenge

Over the past 10 years, the financial landscape has been radically transformed. This is a multifactorial phenomenon that has much to do with technology, the role it is playing in the digital transformation, and the way it impacts people's lives.

In Mexico, financial inclusion has taken an interesting turn: Today, more than 50 million people between 18 and 70 years-old use at least one financial product. In addition, there has been a steady increase in internet penetration in Mexico, which reached more than 75% of the population this year.  

This new context, in which digitalization converges with the financial sector, has driven the modernization of banks. Similarly, the fintech sector's proposition has evolved rapidly: there are more than 500 fintech companies in Mexico, making the country a hub of financial innovation at the regional level. In Latin America, the fintech ecosystem is expanding, becoming one of the sectors with the greatest evolution and innovation. According to the Inter-American Development Bank (IDB) and Finnovista, in the last three years, the number of fintech companies has increased by 112%. There are now approximately 2,482 fintech companies in the region. This figure represents almost 23% of all fintechs in the world.

In this diversified context, consumers have become increasingly demanding about the security, speed, and simplicity of financial services. They want instant access to digital services at all times and places, from checking balances and paying with QR codes, to taking a look at their crypto wallets.

The increasing demand for new financial services brought great challenges as well. Regulatory changes, new cybersecurity threats and the constant need for agile innovation to meet the continued evolution of customer demands are some of them. However, the industry leverages the benefits of hybrid cloud to accelerate innovation, extract the value from data, and maintain security and compliance by using specialized industry clouds,such as the IBM Cloud.

Accelerating Innovation Systemically

In a changing world, innovation is no longer optional, it has become a core and addresses industry imperatives in several dimensions. For example, companies today are evolving beyond traditional structures to build inclusive and flexible ecosystems of financial capabilities, such as open banking, APIs, and the platform economy. 

In the hybrid cloud, they can find the technological features to modernize with the infrastructure they already have. This is particularly important since, according to data from IBM Cloud's next leap study, only 8% of companies in Mexico use a single type of cloud.

Analyzing Data Where it Resides

Financial institutions transformed into technological centers. They are now massive data repositories with all the risks, opportunities, and liabilities that this entails. Yet, the value of data lies in the ability to extract valuable insights for the business, either to make decisions or to identify new ways to improve business performance, differentiate or innovate.  

In the hybrid cloud, even if the data is stored in different places, such as the public cloud or the local infrastructure, it is possible to access it and analyze it safely.  

Becoming Hybrid to Stay Secure

The financial sector is one of the most targeted by cybercriminals in Latin America because of their critical infrastructures, which millions of people rely on to conduct their daily activities. The same can be said for the energy, health, transportation, and food sectors, among others.  

That’s why privacy and information security have become a priority for banks and fintech. With increasingly sophisticated threats, hybrid cloud helps mitigate systemic risk by enabling companies to better control the unique privacy and compliance demands of each data set; in other words, for the most sensitive data, stricter access controls.

Demonstrating Compliance From Technology

Financial institutions want to be certain that they can protect their assets and maintain compliance in line with the industry regulations. This is where hybrid cloud can help them address security and compliance requirements, while enabling rapid innovation for personalized experiences. 

To this end, it is important to strengthen the ecosystem, designing actions that help accelerate cloud adoption and even mitigate risk to build trust and enable a transparent public cloud ecosystem with the compliance and resilience that financial institutions require.

The Future of Banking Is Open and Collaborative

Data is enabling traditional industries to interact in ways that were unthinkable. New types of ecosystems are emerging, enhanced by rising and dynamic business models that are even mixing financial services with services or products from other areas and industries, from healthcare to transportation, retail, logistics, and many more. 

In the face of the accelerated transformation that is generating all kinds of new business models, it is in the hybrid cloud where the technological key is found to make them a reality: it offers a way to integrate the entire ecosystem in a voluntary, multilateral, and secure way, maintaining regulatory compliance and allowing them to align under one strategy for success.