Page 109

payments and petrol station sales. At a stroke, drivers could be forced to use bank account-linked payment systems, making adoption of card or mobile wallet payments obligatory by default. “CoDi’s limit is going to be around 8,000 pesos per transaction, which is a little over $200 – big enough for most of the transactions ordinary people do,” says Juan Carlos Espinosa, head of digital strategy CoDi will run on the rails of instant payments system SPEI, which has existed since 2004 (the concept of real-time electronic payments is nothing new in Mexico) and be processed via the central bank, Banco de Mexico, with payment taken directly from the customer’s bank account. The seller generates a payment message – represented by a static QR code, dynamic QR code or NFC (near-field communication) message – which the buyer receives on their mobile device and accepts for processing. CoDi aims to be simple and low-friction, the vendor pays no commission and, because participants need to have a bank account, anti-money laundering (AML) and know your customer (KYC) are already taken care of. Espinosa says HSBC is pushing ahead with digital services in the belief that modern payment systems will become the norm in Mexico, along with holding a bank account and access to the other financial products considered mainstream in the developed world. “The government’s driving to reduce the use of cash and improve financial inclusion. HSBC already has two million users registered in our digital channels, with around 1.5 million of them active and regularly taking advantage of services such as instant payments between bank accounts using the SPEI system,” explains Espinosa. “Because financial inclusion is so important in Mexico, the industry has developed what we call a level-two account, which can be opened digitally, via a mobile phone, without visiting a branch. The customer gets a virtual debit card and can start making transactions quickly. From there, they begin to create a transaction history, which evolves their financial inclusion path. “We can direct them, give advice on how to budget and save money, and a credit rating is formed so that www.fintech.finance

the bank can offer credit products. The banks’ goal is to start that evolution with customers, helping financial education and inclusion, and then giving them products to meet their needs.” Last year, the country passed legislation commonly known as the Fintech Law, which mapped out regulations covering crowdfunding, electronic payments and cryptocurrencies. Next year, the rules will be extended to cover the use of application programming interfaces (APIs) to facilitate the growth of an open banking system that’s been directly influenced by the UK’s pioneering model, but will go beyond retail banks to encompass the entire financial system. It’s predicated on inviting third parties to develop digital banking products that will accelerate the use of cashless payments and the growth of current accounts. Espinosa says: “Next year, we will see banks and other financial institutions beginning to comply with open banking API requirements. We have three types of API: public information, such as ATM and branch locators and product finders, aggregated data APIs and transactional data APIs. “We are ready to begin running public information APIs. We’ve carried out hackathons and the infrastructure is in place. “The introduction of APIs will be huge and mean that, as banks, we can interact more fully with the fintech ecosystem. In relation to payments, under the Fintech Law, we will have other types of vendors issuing virtual cards, debit cards, credit cards and wallets, so the payments ecosystem will continue to evolve. Third parties will come to the market to start doing closed loop, such as pre-payment cards, or even open loop payments, with NFC and QR codes. That means more competition and, as a bank, we want to play with everyone. “We will be part of CoDi, but are also running pilots for other QR code services that run on alternative rails, such as ones charged to a credit or debit card. There will be many players and banks will need to prepare for different scenarios.”

HSBC has drawn on its own digital resources by applying systems it’s developed for other markets, in Mexico. “You don’t need to build anything from scratch,” says Espinosa. “There are many pieces, use cases, companies, apps and platforms you can connect with. “As a bank, we don’t want to be commoditised in the process, but we do need to partner with third parties and not worry too much about the stage they’re at. We aim to create partnerships for hackathons at an early stage to develop pragmatic projects that could escalate and become commercial products.” Espinosa reveals that much of the short-term focus is on mobile digital products, such as apps that cover a range of banking services, plus payments and rewards. The bank also aims to be ‘where the customer is’, meaning services through social media platforms. “We want to interact with messengers, such as WhatsApp, beginning with unauthenticated services and then on to processes that need authentication,” says Espinosa. “We could let our customers ask questions via bots, then evolve it into monetary interactions. “Another sphere we are focussing on is analysis of customer data so that we ensure we are relevant to our customers. But onboarding processes for new-tobank customers are of the utmost importance.” Whatever stage they are at, HSBC wants its customers to fully embrace digital services in order to free up staff in branches to give more complex financial advice. In that, the Mexican bank faces no different a challenge to its European counterparts. “We continue to be a very physical type of banking ecosystem – we have 1,000 branches here,” says Espinosa. “Because people tend to go into branches, you need to teach them to recognise which channel is more relevant to their needs. The user will have the ability to choose a channel, but you need to help them to understand why it’s better to conduct the self-service transactions away from a branch. We’ll be addressing that for the next 24 months at least.”

The introduction of APIs will be huge… as a bank, we want to play with everyone

Issue 13 | TheFintechMagazine

109

Profile for ADVERTAINMENT MEDIA

Fintech Finance presents: The Fintech Magazine Issue 13  

Fintech Finance presents: The Fintech Magazine Issue 13

Fintech Finance presents: The Fintech Magazine Issue 13  

Fintech Finance presents: The Fintech Magazine Issue 13