Robin Arnfield talks to José Antonio Wolff, Bancolombia’s digital strategy director, and Nequi CEO Andrés Vásquez Echeverri about how the Nequi digital sub-brand aims to redesign the mobile banking experience
Colombia’s largest bank, Bancolombia, has invested heavily in digital technology, and data analytics and marketing systems.
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It has monetised this investment by offering the Plink analytics platform to merchants, and now it is showcasing its successful digital investment via the Nequi digital brand.
As of September 2018, 50% of Bancolombia clients were active users of its digital channels and carried out 75% of their transactions digitally. Clients performed 1.79 billion digital transactions during January-September 2018.
“We’re focused on advanced data analytics and management, application programming interfaces [APIs], artificial intelligence [AI], improving the digital banking user experience – digital banking apps, chatbots, personal financial management [PFM] tools, roboadvisors and digital lending – and biometrics,” José Antonio Wolff, Bancolombia’s digital strategy director, tells RBI.
“We see data as our most valuable asset, and have new initiatives and business models involving these capabilities. We’ve developed analytic models aimed at gaining a deeper understanding of clients and strengthening revenue generation. We’ve also created models for pre-approved credits and for collection processes in order to manage [loss] provisions more efficiently.”
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Wolff continues: “Our Plink analytics and advanced intelligence platform brings together merchants and consumers.
“Plink provides value to both, based on the richness of data we hold on consumers and retail businesses, and our analytics and AI capabilities. As our first ‘platform’ business, Plink generates an alternative source of revenue, positively impacting non-interest income.”
Plink gives merchants data on their business performance – how their sales are evolving, how they compare with merchants in their retail category. It offers anonymised, grouped information about merchants’ clients such as who these customers are – demographics, income, profession, etc. – where they live, through heat maps of customer locations, and purchasing habits. “This helps merchants make the best decisions for their business,” says Wolff.
The platform enables relevant offers to be uploaded for targeted delivery by Bancolombia to consumers via the Plink app.
While there is a free version of Plink, with a basic tier of reports, more advanced reports and capabilities are available for a fee. Bancolombia has decided that AI intelligence is a strategic competence and is accelerating its adoption in the bank.
“With technology leaders such as Microsoft and Amazon, we’ve created the first Centre for Competence in AI in the Colombian financial sector,” says Wolff. “To date, we’re exploring use cases focused on natural language processing [NLP] and machine vision for incorporation in our internal processes.”
“We’re in a digital transformation programme to redefine the customer experience for Bancolombia’s most frequently used products and customer interactions,” Wolff continues.
“These include client onboarding, credit management, investment management, and trade finance. Due to this initiative, our clients can now open accounts in under seven minutes through a fully digital experience. To date, we’ve originated over 50,000 accounts digitally.
“In Medellín, we operate BancolombiaLab, an experimental branch where people can try out new technologies.”
Apps, Bots and PFM
Bancolombia offers its clients Tabot, a smart virtual assistant that leverages AI capabilities such as NLP to answer common questions.
“We plan to evolve Tabot to include more complex queries and transactional tasks, which requires more sophisticated AI algorithms,” explains Wolff.
“In 2017, we launched our Invesbot roboadvisor that uses advanced analytics to enable our clients to manage their investments. Invesbot resulted from our partnership with Alkanza, a US fintech specialising in investment advisory and online wealth management software.
“For digital lending, we’ve created an end-to-end digital experience which allows clients to complete credit applications in a few minutes and have the funds instantly in their account. Over 11,000 credit applications have been digitally processed and approved.”
Bancolombia has implemented biometrics in its branches to improve authentication processes for customers. It has also implemented biometrics in its digital channels; Nequi, for example, uses facial and voice recognition for authentication.
“Our API strategy focuses on developing a new set of APIs, allowing us to build new platforms and applications and connect to other players and ecosystems,” says Wolff.
Bancolombia is the first Colombian company to sign a partnership with Plug and Play, a Silicon Valley-based innovation ecosystem that connects start-ups and corporations in specific verticals. “Through this partnership, we want to connect to Plug and Play’s network of ecosystems and open our doors to entrepreneurs, accelerators and venture capital funds,” says Wolff.
Bancolombia is also part of Colombia Fintech, an association promoting collaboration among fintechs and partners and taking an active role in regulatory issues that benefit financial inclusion and innovation.
“Bancolombia has created an Open Innovation area to deepen our relationships with innovation ecosystems and develop more agile processes adapted to the needs of startups working on potential partnerships with us,” Wolff adds.
“Bancolombia is working on proofs of concept with various start-ups, addressing different strategic needs of the bank. Additionally, we’re working with international accelerators and other organisations with strong relationships with world-class startups to achieve our goal of being a regional innovation leader.”
Nequi
Nequi has 800,000 customers in market segments ranging from the unbanked to affluent consumers.
The first digital-only bank in Colombia, Nequi is currently gaining 60,000 clients a month. Bancolombia originally developed Nequi to target younger people, but found that other customer segments – including freelancers, direct sales agents and older people – were also users. Moreover, around 30% of its clients are unbanked.
“We’re targeting ‘banking sceptics’, people who don’t like traditional ways of banking,” Nequi CEO Andrés Vásquez Echeverri tells RBI. “We’re creating new types of banking relationships that change the way people relate to banks – more like relating to a friend who focuses on your needs. So we developed tools to help clients manage their money the way they want to, rather than the way the bank tells them to do.”
Many Colombians withdraw their salary from ATMs when they get paid, and save cash in different jars in their home for various purposes. In response, Nequi’s app provides ‘pockets’, where clients save for specific expense items such as electricity bills. It also offers savings goals, where an amount is put aside each month until clients have saved enough to meet a specific target. Nequi also recently launched micro-loans for its clients; these are typically for short durations, until the client receives their salary, for example.
In September 2018, Nequi partnered with PayPal to enable Colombians selling products or services outside Colombia – for example, in the US – to send payments via PayPal to their Nequi account.
Transfers from accounts in the US to Nequi take a few seconds, notes Vásquez Echeverri. “The service has been an amazing success for us, as previously Colombians sending money home via PayPal from the US had a hard time doing this,” he says.
Wipro digital
Working with Wipro Digital, Bancolombia built Nequi’s technology as a greenfield implementation. “We bought and implemented a core banking system which is a branded package, and didn’t modify it significantly,” says Vásquez Echeverri.
“The technology we developed is our integration layer and front-end layer for our application and the web. Almost all our technology is in the cloud via Amazon Web Services.”
Although owned by Bancolombia and using its banking licence, Nequi operates separately from its parent in terms of technology, services and marketing. “The reason we’re separate is that we target different customers and because of the speed of technology implementation,” explains Vásquez Echeverri. “We don’t have legacy systems to hold us back, so we can implement new technology and updates very quickly. We do a new release every two weeks, which is impossible with 20-year old banking systems.”
Nequi’s app uses facial and voice recognition biometrics. “Because customers can enrol with Nequi in our app in five minutes, we needed strong security,” says Vásquez Echeverri. “So we deployed biometrics right from the start. When you enrol for Nequi, you need to register your face with us. You can also use voice recognition in case you have an issue with your phone’s camera, or you want to do critical transactions. We don’t use biometrics for all transactions, as it takes more time. Face and voice recognition are used for things like changing your device or your mobile number or when you forget your password.”
There is no Nequi plastic card, just a digital card in the app that is used for cardless ATM withdrawals. “When you withdraw cash from ATMs, you use your app to prepare the withdrawal,” says Vásquez Echeverri. “We give you a one-time password that is valid for 30 minutes, which you enter along with your phone number at the ATM. We only require biometrics for ATM withdrawals that are deemed to be risky.”
As there are no plastic cards, Nequi acquires customers for $2.00-2.50, which would double if it had to deliver plastic cards. It may introduce a plastic card in 2019 for people who request one and are prepared to pay a fee.
Due to low penetration of NFC-enabled phones in Colombia, Nequi offers also QR code-based mobile payments for its merchant clients at the point of sale. This enables merchants to display QR codes which customers scan and pay for purchases using their Nequi app.
