HSBC Mexico’s Arce sees pandemic push for digital banking
Private sector digital adoption is surging because of the pandemic. The resultant efficiencies will partially offset pressure on profitability at the bank.
HSBC Mexico’s chief executive, Jorge Arce, says the coronavirus pandemic has greatly accelerated adoption of its digital banking services – with clients overcoming cultural resistance to move online and take advantage of the bank’s recent investment in technology.
“We have seen a significant growth in the use of digital channels from bank clients, some of whom had refused in the past their use, especially in developing countries like Mexico,” Arce tells Euromoney. "Clients are paying services, bills, transferring money, checking balances, controlling their credit-card spending using state-of-the-art digital tools.
“Even when the client goes to the banks, new digital contracts and mobile applications used by bank officials are making their journey easier and faster. We expect that even one-on-one client calls will move to a virtual setting using tools such as Zoom with upgraded security features. Also, the need to use e-commerce has catapulted the use of electronic payments and card payments online.”
Arce’s comments come after an earlier report in Euromoney suggested that the Mexican government was missing an opportunity that is being seized elsewhere in the region to tackle informality in the economy and migrate the unbanked section of the population into the digital banking system.
However, Arce says the private sector in Mexico isn’t letting the opportunity created by the crisis pass by. He says that, by the end of May of this year, the proportion of card payments in Mexico that were processed without the physical presence of the cardholder grew to 50% from 30% (when compared with the previous year).
“In the operation of the bank, we are currently operating at 100% capacity, with more than 75% of our collaborators working from home and/or remotely,” he says. “All this is possible by years of upgrading bank systems, security protocols and internal and external communication networks. Just five years ago, this would have been pure science fiction.”
Data provided to Euromoney bears this out. In May 2020, the bank had a 41% increase in digital users (up to 2.6 million customers from 1.8 million) and a 70% increase in digital customer interactions compared with May 2019.
The efficiencies being driven by greater digital adoption will be crucial for Mexican banks’ profitability as they seek to offset falling central bank rates, growth in lower-yielding segments and lower fee income. Early data showed that the sector’s profitability fell by 17% in April.
Mexico is one of the countries hit hardest by the pandemic. Should the economic lockdown persist, then deteriorating asset quality and credit demand will also become an issue for bank earnings.
In April, the banking system's non-performing loans stood at 2.3% and loan growth was up 10.6% when compared with April 2019.
Juan Carlos Espinosa, director of digital banking and innovation at HSBC Mexico, says the pandemic is the largest driver of the bank’s extra 800,000 digital customers.
"The confinement fostered by the health contingency has accelerated the adoption of digital banking services, especially mobile banking," he says.
This situation is having a positive impact that is here to stay... it has changed our behaviour, habits and future plans - Juan Carlos Espinosa, HSBC Mexico
“The growing adoption of digital channels is partly attributed to their convenience as they can transact from any place at any time; this will surely represent the beginning of a new way of interacting with our customers,” adds Espinosa, who explains that the 2.6 million digital customers at the end of May represent 48% of the bank's total customer base.
Espinosa says the pandemic is “undeniably” boosting HSBC Mexico’s digital transformation and accelerating digital adoption: “This situation is having a positive impact that is here to stay. This is an imminent path that applies to all industries across regions, this pandemic has made that clear – it has changed our behaviour, habits and future plans.
“It reinforces and enriches our vision to continue our digital agenda as an essential pillar of our strategic plan for our business. We want to be a better bank for our customers by facilitating their everyday and key lifetime financial decisions through relevant, convenient and intuitive solutions.”