It’s Your Move

In Latin America, no time has ever been better than now to modernize your banking core. There are many options out there except for one—your comfort zone.

Ari González-Pella
Ari González-Pella – Temenos Regional Marketing Director

Talk of digital transformation plans in the banking sector has become so commonplace that it’s clear that doing nothing is bad for business. 

Still, with so many ad campaigns, events, sales calls, news articles, blogs, meetings, roundtables and any other venue highlighting different choices, it may seem natural to wait a while. 

Let the dust settle and see which company—and which offerings—separate themselves from the pack. 

Can’t rush big decisions, right? 

That’s true. You can’t rush big decisions that will affect the nature of your business, but you can’t afford to lose ground either. The time to start moving forward is right now, as your customers expect it. 

Fourth-generation banking cores provide banks with flexible, scalable, and data-driven platforms that enhance operational efficiency and vastly improve customer experiences. These modern systems offer modular customization, real-time data processing, and advanced analytics, and as a result, banks can better tailor services, adjust more quickly and decisively while constantly adhering to regulatory demands. With omni-channel support, enhanced security, and smoother integration with third-party services, banks running on fourth-gen cores empower deliver more personalized services, streamlined operations, and they reduce costs over time.  

Data supports the argument that these systems are in demand. Latin America’s cloud computing market, for example, should grow by US$18.7 billion during 2022-2027 period, accelerating at a CAGR of 16.32%.1 Furthermore, Latin America is the fastest growing SaaS and cloud market in the world, expanding at a robust 26% per year through 2026.2 

Add to that, hundreds of millions of people in the region could become brand new customers. 

Some research shows that 70% of the region can be classified as unbanked (i.e., no checking or savings accounts) or underbanked (i.e., they have bank accounts but do not have access to credit or loans).3 

Access to smartphones will open the doors to formal banking. Most, if not all, of these new customers aren’t going to begin their banking journey in a branch office flipping through pamphlets with information on checking accounts. Instead, they’re going to expect top-notch customer experiences across multiple channels from the get-go, and they’ll expect those experiences to improve going forward. Bankers know this. 

According to a recent Economist Impact survey conducted in conjunction with Temenos, 86% of bankers polled in Latin America believe banking will become embedded in consumers’ lives and businesses’ value chains. 

And in a region that relies heavily on remittances, bankers also expect nimble fintechs to continue competing for business. 

According to the survey, 36% of Latin American bankers believe international remittances is the top area where non-traditional entrants will gain market share. In second place, 30% said investments (self-executed or robo-advisory) followed by SME lending (24%). Corporate lending and trade finance tied for fourth place at 18%. 

Remittances received by Latin American and Caribbean countries hit an estimated $155 billion in 2023, according to the Inter-American Development Bank, up 9.5% from the $142 billion received a year earlier.4 To put that figure into perspective, $155 billion is more than double the size of the Uruguay’s nominal Gross Domestic Product and not far behind the GDP of Kuwait. 

So, with technology sweeping the region, with more people ready to enter the formal banking sector and with spry fintechs competing for business, perhaps it’s time to prioritize modernizing the core a little higher? 

There are many paths to modernization. 

The most talked-about is the SaaS model, in which the core provider can assume the infrastructure costs. The provider can help the client migrate to the cloud, and if the bank in question requires more or less of the Cloud Service Provider’s infrastructure, it can pay accordingly.  

Scaling is seamless and elastic and can take place amid huge transaction volumes and unforeseen surges in demand.  

Other customers rely on a public-private cloud model core. Here, the financial institution assumes the cost of owning the infrastructure but tethers it to a cloud provider. Again, the core provider can facilitate this route. 

And in some markets, including in Latin America, cloud models are not permitted by the regulators, so on-premises systems must suffice. Here, the provider can assist banks in expanding their offerings by utilizing open architecture assembled on premises. This approach allows for vibrant ecosystems to be built, ultimately delivering better user experiences. 

There are lots of paths to digital modernization out there, and the right one is out there for you. 

For over three decades, Temenos has been committed to assisting financial institutions of every size in enhancing their modern cores to effectively serve their customers and markets. Our ongoing investments in our platform, characterized by a single code and configuration base, have maintained our strong competitive edge for thirty years. Furthermore, the expansion of our retail, corporate, and wealth management client bases, combined with a consistent rise in the number of SaaS cases within our client portfolio, is propelling us into new leadership positions within the market. 

Act now.  

Don’t wait until the dust settles. 

Your customers and competitors won’t. 

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Ari González-Pella
Ari González-Pella – Temenos Regional Marketing Director