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Technology is the easy part of mobile banking


The story of Argentine Wenceslao Casares, and his technology based financial businesses, has been retold as many times as a literary classic. In 1997, the 33-year-old created Patagon, an online  brokerage firm that he sold three years later to the Spanish bank Santander for US$528 million. Next he created Wanako Games, which he also sold, this time to the French conglomerate Vivendi. He then stopped selling. In 2002, together with a former colleague from Patagon, Venezuelan Meyer Malka, he founded Lemon Bank in Brazil to offer inexpensive distance banking. They installed ATMs in more than 6,100 bakeries, gas stations, and pharmacies, and turned Lemon into the biggest non-traditional microfinance institution in Brazil.

Casares now divides his time between California, Buenos Aires, São Paulo and Santiago because his latest creation is in the United States, not Latin America. Bling Nation (BN) is an open payment platform he will soon launch with Meck, his investment company, and once again, the Venezuelan Malka.

BN is the progeny of an unusual leap from a developing market to a developed one, drawing on experiences at Lemon. The Brazilian bank, which already has 20 million clients and will invoice more than US$100 million in commissions this year, taught Casares how to operate within automated markets. As a result, Bling is focused on the more than 17,000 small banks in the USA. “Those small banks have an enormous resource disparity with the big ones,” says Casares. “They don’t have information technology departments. They have a perceived disadvantage for innovation and technological services, and so they lose the youngest customers, who are very technology dependent.”

How would you define Bling Nation’s services?
Since we focus on the U.S. market, the product assumes that customers meet certain requirements that you cannot always count on in Latin America. The platform allows any financial institution, especially small ones, to reach a customer segment that has not previously used banks.

Those banks need to innovate and provide technological services in areas where they are losing out with young customers, especially Generation Y.

Those people have an adverse relationship with banking, unlike decades ago, when they would celebrate opening a bank account. Now young people prefer not to have one. And since the small banks are having trouble reaching that customer segment, [when they do reach them,] those young people already have an account with Capital One or another big bank, and they’ve been tainted [by another corporate culture]. 

Now, this same customer segment is part of a generation that is highly dependent on technology, especially the cell phone and iPod. The mobile phone is an interesting channel for developing businesses, but the banks don’t know how to engage young people, nor what role the telcos [telecommunications companies], which are indirectly linked to the business, will come to play.

The Bling Nation platform allows them to reach any customer who has a cell phone and to connect, regardless of which carrier or phone they use. It manages services ranging from account information to payments to practically all bank services. It’s up to the bank to decide what it wants to offer.

In the past, mobile banking didn’t catch on because, among other things,the technology was expensive and the bandwidth was slow. These issues have been resolved. So, if tomorrow you go into the region, would consumers be ready to use all the mobile banking services?
Yes. Even though there are many customers who appear to prefer not to use banks, they would use them if the opportunity were properly packaged. We saw it with Lemon. People were asking the same thing then: Is the potential consumer prepared for this service? The answer was also yes, maybe people do want banking services, but in a different way than the traditional banks have offered them. This is why, in addition to Generation Y, the other important customer segment for Bling Nation is the immigrant population, at least in the first stage.

But can these models be replicated in the region? Has any other project proposed the same thing that you have in the United States?
There are a lot of things going on in mobile banking and, like everything, there are some that are irrelevant but get lots of fanfare, and there are a few interesting cases. In mobile payment the situations for the consumer are extremely different. At one extreme you have the richest users in the world in Asia and Europe, on the other, Africa and Latin America. In the middle, nothing. In Africa in particular there’s a little of everything. You’ll find offers of little substance that come up a lot in conversation, but also the experience of Vodafone in Kenya, which is very interesting and is working well. [Through its affiliate Safaricom, Vodafone offers M-Pesa, a money-transfer service performed using mobile phones.] In Latin America there are regulatory barriers to offering that kind of service, despite its convenience. You charge your cell phone with money, as you do with minutes, and send it to another cell phone where it becomes cash. It’s like electrifying and deelectrifying cash, and adding value.

You’ll have prepaid card providers as customers. Could that also be reproduced in Latin America where prepaid telephones are essential?
The important thing about the prepaying public in the United States is that they are banking without bank accounts. The prepaid bank cards are very popular among groups with greater financial needs than the rest. But it’s in outer space, no institution is involved. And in the end, you don’t have the capacity to access all the information and services [of a bank account]. This access could be encouraged, but not while regulation continues to be so important in Latin America.

Usually technologies are designed in developed markets and then move down. It is rare that they move up,as is happening with Bling Nation, which is building on the experience of Lemon Bank.
That’s true. Lemon definitely enabled us to create Bling Nation. Its platform made us think of ways to process payments more efficiently in general and how to use cell phones to cover gaps in those payments. What also excited us is that the United States is behind the curve in the mobile phone payment relationship, which presents a great opportunity.

What did you adapt?
In Brazil we tried to use technology to reach a market segment that couldn’t be reached affordably any other way. The back office can be used for many other things. We rebuilt and Americanized that platform. Many of the basic principles are identical and we learned them in Brazil: how to process in real time; how to do it at no cost; how to take advantage of information; and how to help the user take full advantage of the transaction.

What lessons did Lemon teach Bling and what lessons can be transferred to the region?
The cell phone is an ideal medium for connecting clients and services. You don’t have to be a genius to realize this. The science, the difficult part, is how to structure the business. Now, this doesn’t happen quickly, or develop more value or more business because the ecosystem is very complex. [Financial systems] are a bunch of elephants that move slowly and aren’t terribly efficient at implementing technology in highly regulated environments.

The most important players are banks, which are typically very comfortable with the money they earn and don’t have the same aggressiveness of other industries. On the other hand, [you have] the telcos, which are enormous monsters too. And on top of this is a huge layer, even more complex, of regulations.

I guarantee that mobile banking isn’t a problem of technology. That’s the easy part. What needs to be better resolved is the ecosystem, the value propositions, the business models. This is what will add value for the client and the financial institutions.