Why a Bank Built a Fintech to Compete With Itself

Jim Marous (0:01)

What does Latin America know about banking innovation that many of us in the US are still missing?

Most of us see Latin America as a market that's catching up. Fidel Vargas, CIO of Bank Colombia, Colombia's largest bank, sees it very differently. As he told me, Latin America is not a catch up story. 10 years ago, Bank Colombia built Nequi, a digital bank inside the bank, and let it compete for the bank's own customers. Today, Nequi serves 24 million customers, all digital, and on September 1st, it became its own licensed company. Most would say that's a technology story. I think it's really a story about decisions. Bank Colombia brought more than 60 percent of its IT people in house. It built its own AI platform, and by putting generative AI in front of customers, it has cut its contact center budget by more than 20 percent. Fidel says his customers now compare Bank Colombia with Uber, Amazon, and Spotify. Guess what? So do ours. Yet in our Innovation in Retail Banking research with Infosys Finacle and Qorus, only 17 percent of banks said that their transformation is deployed at scale. This is what innovation at scale looks like. Fidel explains how Bank Colombia decides when an idea inside the bank deserves a company of its own, why a 150-year-old bank refuses to choose between innovation and stability, and why he believes banks that don't modernize, in his words, are going to be dead.

Hope you enjoy this episode.

Welcome to the show, Fidel. As I talked to you before our actually going live, I referenced that I had been in Columbia several times, and that I really admired Bank Colombia when I visited, because you are a very innovative financial institution in a country that really thrives on innovation and change. But actually, and it may not be as true now, but many of the consumers in South America don't necessarily trust traditional financial institutions or hadn't regularly. But as organizations have gotten much better at building technology-based models for consumers of all scales and all financial backgrounds, it really has made it and opened some doors to your organization, and not only innovation, but you've done it in unique ways through not just the overshadowing financial institution, but with a lot of subunits within your organization. Fidel, before we can start, can you talk a little bit about Bancolombia and also the units that you've built that are separate from the overall bank?

Fidel Vargas (2:55)

Hi Jim, it's a pleasure to be here. Thanks for having me. Yeah, let's start with Bancolombia. We're part of Grupo Cibest. We're a financial group that operates across Colombia and Central America. We have different lines of business and different companies. We serve with our customers with banking products, digital services, payments, and other specialized business. We are very happy to serve more than 32 million customers, and we have more than, in terms of scale, more than 110 billion US dollars in assets. Within this ecosystem, nice to meet you. I'm the CIO, easy to say, hard to do. My role is to connect business and technology and drive the digital transformation to the bank and the companies of the bank in the age of AI.

I would say my mission is to make technology disappear.

That's why, because that's because meaning, the meaning is what we want is our customers feel financial services very easy. I'm very excited for this conversation.

Jim Marous (4:16)

So, you know, Bank Colombia, as we also discussed beforehand, serves a really unique customer base. Can you talk a little bit about, you know, most of our listeners are US based or in the European countries.

What can you tell us about banking in Colombia that may surprise or differs from what you've seen across the globe?

Fidel Vargas (4:39)

I would say we can talk about Latin America and financial services.

I see in Latin America, Latin America is very interesting. I see three main forces. The first one, we are focused on financial inclusion. While we have made a lot of process, the last 10 years, there is still a lot of work to do. We are working very hard on financial inclusion.

On the other hand, consumers has gone digital fastly.

These two things means that we need to serve both realities at once. The second force is competition. The competitive landscape has changed dramatically. We don't only compete only with banks. We compete with neobanks, fintechs, wallets, and that rises the bar for banks. In the other hand, customer expectations have changed as well. People don't compare their banking experience only with other traditional banks. They compare with Uber, Amazon, Stripe, even with Spotify. That forces us to rethink the customer experience entirely. The third force, I would say, is AI and real-time financial services. Customers expect services to be more in-made, interoperable, and personalized. AI is giving us, as banks, a way to anticipate the needs of the customers at scale. Underneath, all of these three forces needs a foundation that is trust. Customers expect the foundation, trust, security, resiliency, and regulatory compliance, especially as financial services become more digital.