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Financial inclusion and providing access to banking services for as many people as possible, particularly for those at the base of the social pyramid, offer significant commercial opportunities, even to entities that are not related to traditional banking, says Gerardo Márquez, Founder of Evolve Fintech. “In Mexico, there is reluctance to use banks and regulated financial entities. As a result, using brands that are well-known but that are not necessarily tied to the financial system, such as Coppel and Elektra, has worked very well to lure more people into the banking system,” says Márquez, whose company specializes in generating customized banking and financial solutions for companies under the framework of a regulated financial entity.
Evolve Fintech hopes to take advantage of the market opportunity by providing “white label” banking services platforms for companies looking to expand their business to include financial services. “In many cases, in Mexico it is not profitable for banks to have offices in every city. But through digital banking solutions offered by companies with different commercial activities, communities can gain access to formal banking services.”
According to Márquez, approaching clients through well-known and reliable companies facilitates commitment to financial products, which makes this the best way to offer unbanked end users new products and services. This process is part of a revolution that Márquez says will change the financial system in the coming years; a change that will originate with new digital players like Evolve instead of traditional financial and banking institutions. “The systems inherent to traditional banking companies pose the biggest challenge when trying to digitalize operations. Their core systems do not allow these institutions to move at the speed that the market demands.” In this regard, Márquez says that Evolve is the right player to spur the revolution. “Unlike traditional banking, we develop financial products to fit our client’s vision.”
Part of Márquez’s revolution comes from the development of the concept Banking-as-a-Service (BaaS), which allows a more flexible and complete implementation of digital banking services. “The idea is to provide banking services that meet specific needs of population segments or companies like retailers, fintechs, social networks or money transmitters.” Evolve Fintech’s added value lies in the fact that it can generate customized solutions for its clients, leveraged against a regulated financial institution. But Márquez says this has not been easy. “The challenge of providing personalized solutions is to find the appropriate balance between the segment that you are catering to, profitability and the correct business model. Too much personalization without enough market complicates the business model.”
Providing the right solutions for the client is easier said than done. Márquez says the only way to do this is by conducting a thorough analysis of the information available. “A regulated financial entity has a great deal of information regarding its clients. In Mexico, this is not being analyzed or exploited correctly.” If banks used tools such as analytics, they could open a new business line that would allow even traditional banking institutions to offer more specific products that would generate greater customer loyalty.
Márquez does not see that transformation happening anytime soon. “In places like Europe, financial institutions changed their focus and now have business areas completely specialized in selling personalized products to each client, increasing the bank’s profitability per client.” In Mexico, this line of business is not as clear and does not happen as seamlessly as in other places. “There are still many people who do not have a bank account and banks are focused on luring these customers instead of analyzing their existing clientele.”
While the fintech sector has gained in relevance in recent years, Márquez says Evolve Fintech still faces several challenges, the most important of which is changing people’s perspectives of what a bank is. “Explaining our model is complicated,” he says. “Many people still picture a bank as a physical space and bankers as people in suits. Trying to convince potential customers to adopt our solution is not easy.” However, Evolve Fintech’s founder is confident. “One hundred percent digital banking in Mexico is groundbreaking; we just need to keep an open mind.”