 back to Latin American directions. My name is Nicholas Sussman and welcome to our show to discuss the most current topics in Latin America and the impact for our region. Today, we have the pleasure to have with us as guests, to have Maria Monica La Torre, Maria Monica is a lawyer from Universidad de Los Andes in Bogota, Colombia, with a postgraduate degree in financial legislation. She has focused her professional experience in financial law, both in the law firm and banking sectors. And today, we're going to discuss a very fascinating, interesting topic, which is financial technology, financial access, and the impact it has on poverty and development. Maria Monica, welcome to Latin American directions. It's a pleasure to have you here. Hi, Nicholas. Hi, everyone. Thank you so much for having me. It's such an honor. I'm very, very grateful to be here and well, happy, happy to talk to you. Great. So Maria Monica, let's start with some basic questions to set the ground for our audience, right? So now we hear fintech, crypto, a lot of new terms in the financial world, right? And now it's mixing with technology. So very briefly, what is financial technology or fintech, if I'm saying it properly? Yeah. So fintech basically refers to the idea that financial services can be provided through technology. So it's the idea that there are new business models, new ways to provide traditional financial services through technology. That's basically it. Right. And why is this better or different from traditional banking? What's the need of this new fintech world? Well, I think it's not necessarily better. But it's how like somehow how the market's been developing and like the new tendencies of the market have been leading leading there, right? So we have been seeing that the more traditional sectors of the of the financial sector have had to adapt quickly to these new technologies, these new ideas, these new business models more focused on the digital era and on new digital tools. So I don't think one is like better than the other. It's just how the market's been developing currently. Right. And how does this change the financial game? How is this different from traditional banking? Well, I think, well, the first thing that comes to mind is financial inclusion. So traditionally, and then the traditional financial services have been neglecting, let's say, or forgetting a important part of the population that has been underserved. So let's talk about more vulnerable, poor segments of society, and also, for example, small, medium enterprises that haven't had normally access to traditional financial services, right? So I think these FinTech Revolution has allowed for these traditionally forgotten segments of business and of society to have access, right to financial services and products. And that's been fascinating, I think. So I think that's one of the most important things and how it's changed the deal and how it's changed the dynamic in the financial system. Right. This may seem a bit obvious, perhaps, but why is it important for people to have access and use the financial system? Well, that's a very, very good question, actually. It has been proven that financial inclusion promotes financial development, economic development. It helps people have more access and let's say it helps for increased availability of economic resources in the economy. So that's the first thing, right? It is also an enabler for sustainable development. So let's talk about, for example, the sustainable development goals. Financial inclusion has been proven to be one of the enablers for the sustainable development goals because it helps people come out of poverty because they can have access to more resources and to more services. It helps promote education, for example, financial education, which is one of the most important sustainable development goals. It helps improve female empowerment, right? Because when we help women have access to financial services, then women have more power and more control over their financial situation, right? So it helps a lot in development, and that's why it's become so very important for people to have access to financial services. Right. Right. Let's bring this into more specific and perhaps daily life examples, right? So when I imagine financial access before, right? I just imagine the person going to the bank with its folder, with its documents trying to get a loan, right? For, yeah, a short business, they want a small business they want to create or something like that. And they have the interview with the person at the bank. And then they get an answer of yes or no, right? And that that's financial access. How does this change in in digital banking, in technological backing? Does it work the same? Is it easier, for example, to get a loan? How does this improve from traditional banking, the situation of people? Yeah, so I think let's take one step back. So the first thing is financial inclusion is it's firstly about giving people access to the most basic financial services. So before a loan even, let's guarantee that people have access to savings accounts, right? So they can store money, and they can save, they can plan for the future, right? They can have a more structured management of their finances, right? So that's on the one hand. Then on the second hand, on the on this digital era, we have seen that people have been able to be closer to the financial services, right? So for example, in rural areas, in areas where traditionally a branch of a bank would be very expensive to install if people just have access to a phone or the internet, well, they can have access to financial services without the need of them being seated in front of a person telling them what to do, how to do it, what they can do with that. So I think that's been fascinating. It's allowing people to really get access without the traditional means of the banking system, right? Right. Right. And how does this work? Because we've seen worldwide, I would say a boom of new financial institutions, right? Which they don't even have offices. As you say, you apply from the phone. How do you see this situation? How does this model is operational and also provides trust, which I would say is one of the key questions of this, right? Who am I giving my money to? Which I would say is one of the main questions we have when we go to a bank, right? Who is this person I'm trusting with my with my hard earned savings, right? Yeah, totally. And that actually has been one of the challenges of these new digital revolution in financial services, right? Because, well, people are still very wary of where they put their money and how they invest their money, right? And we have also seen that this digital era has allowed for more fraud or different new ways of defrauding people, right? So how does it work? Well, I'm going to talk a little bit about the efforts that have been done in the past and how the digital era has allowed for, for for example, more financial inclusion and more access to financial services. So the first thing is it has become a priority for governments, right? So governments have found out that if people have more access to financial services that will contribute to economic growth. So there have been products and services that have been leveraged by governments themselves. So for example, if there are government payments that the government is giving to more underprivileged segments of the population, if the government insures that their payments will only come through a savings account that has been promoting for people to open savings accounts, right? And that has included, that has promoted more bankability in different and traditionally forgotten sectors of society. The other aspect is we have allowed mobile financial services to to thrive. So we have taken advantages of already existing technologies like telecommunications to leverage and to allow for mobile financial services so people can make payments through their phones, through text messages, you can send money. So and this has been, for example, a great success in Sub-Saharan countries and specifically in Kenya. It was a great case of success where people had access to mobile banking in places in rural places where, of course, there weren't any branches of the banks, but people had access to a signal on their phone, right? So they could handle their money. We have welcomed new business models for financial inclusion. So for example, small, medium enterprises have promoted microcredits and micro indebtedness that have allowed for segments that have traditionally not passed all those benchmarks that traditional banks set for them to have access to credit, for them to have access to loans. So it's been quite, quite refreshing to see this this happen. So yeah, I think that's how basically it's worked so far. Of course, we're still inventing much of this because as technology is evolving very quickly, well, we are having to figure out how it works, how we protect the customers, how we protect the money from these new business models without hindering and without putting a stop in their development, right? So it's still very much under construction. Right, right. And now let me play a bit of devil's advocate here. And let's pick up on the common beliefs, perhaps people who are unfamiliar with the financial system have, and is that banks are not reliable, banks only want their money, and they're not going to receive any benefits. What are you going to say to these people and why would they choose now to go into this technology supported banking instead of traditional banking? Does it bring any advantages? Is it more trustworthy? What would you say to these people? Well, firstly, I think it will facilitate much of what we before hated about the traditional banking system, right? So you don't have to go to a physical place to make a line for two hours to just have access to your bank account. You just can access it from your phone, right? And you can have your resources available at any moment, at any time for as long as you have internet, right? So I think that's the very first thing. Well, the second thing is, of course, banking is a business, but that doesn't mean that there aren't any protections around banks to make sure that people receive sustainable and responsible products and services, right? So there are quite a lot of regulations in place to make sure that people's savings, people's money is safe, that banks have the right strength to back those products, right? They have the enough, how do we say it, enough strength, solvency to make sure that people won't lose their money. So I think even though we cannot forget that banking is a traditional business, there are a lot of protections in place to make sure that the people's money is protected and is safe, right? And, well, these new technologies just had made it easier for people to access it and just had made it easier for people to have access to products and services that previously were limited to a very specific segment of the population. I think that's the key aspect of all of this, right? And I would like to make like a quick propaganda here and it is, I think the digital financial services have allowed for people to have a much better financial education, right? If you don't have to go to a financial advisor in a bank for you to have access to a service or for you to get to know the services at the banks or the the fintechs are offering, well, that's we're all winning, right? Because from your phone you can see what you can do with your money, how can you invest it in a safe way, right? So I think it's also been great for improving financial education and for giving people access to information on financial services, which was, I think, previously was very limited and people just like they went to the bank to deposit their money but they didn't know what happened after that, right? We now have more access to information and information is more transparent nowadays. So I think that is also key and that is also something that should give people like the tranquility to go and deposit their money in in the banks. So, right, and well, the question now is, is it working? Are you having an increase in the amount of clients? Is it growing business model? Is it competitive against traditional banking? How does this situation of traditional versus new banking is looking like? Well, the first thing we need to say is it has definitely improved the panorama in terms of financial inclusion, right? So right now the numbers have improved significantly. 76% of the global population have an account or have an account, a bank account, right? That, of course, leaves still a very large 24% that we can improve but these new era has allowed for people to have access, for many people to have access to financial services and it has also presented as a very good business opportunity, right? Because it has become a priority for governments so it has become a great opportunity for investment, right? If you can invest in financial inclusion, well, there is a unattended segment of the population that you can, how do you say, you can focus on and that is definitely has infinite potential, right? And the other thing is it has become, for example, a huge, huge opportunity of growth for small and medium enterprises, right? So we have seen that traditional banking sectors are, well, they are evolving a lot but they are still focusing on the traditional parts of the financial sector, right? So it has left a very large portion of unattended population to be attended to by the small and medium enterprises. So it has allowed for startups, for fintech startups to be very successful for them to grow and for them to not only grow their business but also provide a good service to people that previously didn't have access to it. So I think it's a win-win, however you see it, right? Right, and in terms of global use, the appearance of these new banks, of these new financial services is more frequent or popular in what we call the global south or developing countries or is it something occurring worldwide in a similar manner? Well, it's something occurring worldwide and the thing is, of course, in more developed countries, historically more developed countries, people have had more access traditionally to financial products and services, right? It's where people have been more vulnerable when people are poor, where people are in more rural areas, where people are in conflict, that they haven't had the opportunity to have access to all those products, right? So it has presented as a great opportunity for growth in developing countries because well it's where traditionally there have, there has been more space to grow in that aspect, right? So for example, the financial, the financial, the gender gap has been more pronounced in developing countries than in historically developed countries, so it has presented as a good opportunity to promote more female access to financial products and services. So I think even though it's been a worldwide phenomenon, it has really been focused, or not focused, but it has proven to have infinite potential in developing countries where there is more space to grow and where there have been more traditionally forgotten segments of the population that haven't had access to traditional financial services, right? Right, right, and it's very interesting what you say about the link between access to the financial system to financial services and first, personal growth and second, development. Could you explain us a bit this link? Why using banks having a savings account, having access to the financial system is going to improve my personal situation first? How is this better from having my money under the mattress or in a shoebox under the bed? Well, of course. First, I think because it allows for you to have more knowledge on how to manage your money, right, to have more planning. So if you just have a daily wage and you spend it every day, you don't have any kind of planning for the future, you don't have any kind of savings for any emergencies, so I think having access to, for example, a savings account is a better way of planning and of having a better control of your finances, right, so that is the first aspect. What I was saying at the beginning, it is going for people to have more access to financial products and services is going to make more economic resources available in the system. So what does that mean? If I am a small business owner or if I am a female entrepreneur, if I have access to credits, for example, I have more chances of making my business grow, right, and if I have more chances of making my business grow, well, I have more chances of making more wealth, of producing more money, and of me being a bigger part of the economy, so I think that is really key. It has allowed for, at least here also, way for the money to flow, right, so if you have a savings account, well, you can easily receive payments and send money to other people without the need of having it in cash, right, so the other day this happened to me, I was in a small, in a small town here in Colombia where normally you wouldn't be able to pay with your credit card, of course, because people didn't have like the little thing where you pay with your card, but the guy said to me, I don't have the little thing to receive your card, but I have a QR code that will allow for you to pay with your card, with your phone, right, in a small business, in a small town in Colombia, so that opens the opportunity for their business to grow and to develop, right, and the flow of money, of course, becomes easier. Also, for example, we have seen that, well, our world is every day is more globalized and the financial system is very globalized and is very interdependent, so we have seen that having a more digital financial services has allowed for money to move easier from one place to another, decreasing, for example, the transactional costs, which is something that has traditionally been crazy, so I think all of those small aspects end up helping the bigger purpose, which is economic development, sustainable economic development, right? Right, so bottom line, more people using the financial system create more flow of cash and that leads into development, right, that's the story, that's amazing. More flow of cash, but also, like, more access to cash, yeah. Well, that's really great, and well, just to finish, how do you see the future of fintech and financial access in our region? What's the closing message that you would leave to the audience and perhaps a message for the people that are still a bit shy or reluctant to go for these new banking models? Okay, so some key takeaways perhaps. The first thing is, I think, right now governments are having a more strategic development of their financial inclusion services and the financial sectors has assessed very, like, is assessing better the situation, so if we know what we're working with, with data, then we can develop effective strategies to pursue more financial inclusion, right? So I think that's the first takeaway. The second is, we are focusing more on products and providers for underserved segments of the population, right? So if we can promote more product and more providers that are serving specific underserved segments of the population when we can help strengthen our economies and we can help strengthen and enable more development. The other, I think, takeaway is we are promoting more financial education, which is something, I think, key for economic development and for sustainable development. If people know how to manage their money, well, they're more likely to manage it in an adequate way, right? We are also trying to promote more micro-small and medium enterprises for them to make it easier for people to have access to financial services, right? And for your last question, what can you say to people that are still a little bit reluctant? Just bear in mind what I was saying earlier that, really, there are many regulations in place designed to really protect the consumer and to make the consumer the center of all of this, because at the end of the day, companies are providing services but it's just for the customers, right? So let's not forget that there are many regulations in place to protect your money. There are many regulations in place to protect your data and to ensure that the companies that are providing these services are providing them in a responsible, sustainable, ethical way and that we are not, we're trying not to allow any defrauders into the system. So just bear in mind that regulators and companies are working very hard to protect your money and to provide good services because, well, if we don't have confidence, well, the system simply doesn't work. Well, I think that's a great way to end our show. Maria Monika, thank you so much. Thank you for inviting us with something that could seem complicated, but at the end, improves our access and our education. It was a pleasure to have you in Latin American directions and for our audience, we'll see each other in two weeks. Thank you so much. Thank you so much for having me, Nikolas. It's always a pleasure and well, whatever you need, I'm always here available to talk. Thank you so much. Thank you. 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