Brazilian Guga Stocco is an advisor and board member of companies like B3, the biggest stock market in the world. He co-founded Domo Invest, a fund that raised R$ 100 million for investments in Internet and Fintech. Guga was also responsible for the creation of the first fully digital bank in Brazil with more than 300,000 clients and projects such as online bank account opening and open banking platform, allowing fintechs to access APIs easily and explore Brazilian Market.
As the fourth part of our SME Finance Forum interview series, we asked Guga about the key initiatives in the digital transformation taking place in Brazil, and how banks or financial institutions can take advantage of this opportunity.
1. How did you start working in banking?
My particular case is an interesting one, because before starting work within the banking industry, I had absolutely no experience in banking. Since the early days of my career, I was very focused on big technology companies, until one day I had a meeting with Henrique Meirelles, the former president of Brazil’s Central Bank who told me: “do whatever you want with today, but I want you here tomorrow”. He wanted to work with me precisely because I had never worked in bank; he had the vision to see that despite my lack of experience, I would be able to drive key changes and transformation. As a result, I have created the Digital Innovation Department as a means of responding to our main development challenges, and so far it has been a fascinating journey.
2. What does innovation mean to you?
When I started working in banking, I was really shocked to see how far behind the whole industry is when compared to tech giants. It was stuck in the legacy systems, an old way of thinking with no progress. The truth is that banks have the same access to technology as internet giants, they have opportunities to innovate but regulations are stopping them and it’s a problem worldwide, not only regionally. I strongly believe that innovation comes from within the culture of the bank and that’s the first big change financial institutions should focus on. Fintechs are a perfect example of positive pressure, making banks change leadership structures and rethinking the role of innovation in general.
3. What are the key trends and challenges in digital banking space in Brazil?
The key is focusing on the long-term strategy, essentially the opposite to what banks are doing now. It’s a marathon, not a sprint, you need to focus on the eventual target, not on what people are doing now. Banks have the benefit of not having yet taken full advantage of the huge potential offered by personalised online banking solutions. I believe that banks in Brazil are aware of the issue, especially considering that the number of Fintechs has grown from 12 a few years ago to 800 at the moment. The market is becoming very competitive and banks need to go back to the drawing board to come up with newer, fresher ideas.
4. What’s your take on financial inclusion?
Looking from a local perspective, Brazil is a country with a very young, tech-savvy population. However, there is still very large population of unbanked people in this country, presenting a unique set of opportunities and obstacles with respect to promoting greater financial inclusion. Until recently banks didn’t want to let low-income populations open bank accounts, because it was not profitable for a bank, which is shocking.
Moving forward, greater adoption of digital financial services will come about thanks to blockchain technologies, accelerating financial inclusion. It has the ability to address some of the obstacles that currently exist when providing affordable financial access, such as account opening, usability and costs incurred to a financial institution.
5. What’s the impact of tech giants and Fintechs on banks?
Fintechs and tech giants are defining the tempo and direction of innovation in the financial sector. One example is Amazon, which has proved the importance of quick wins and improvements. Since 2008, the company has invested increasing amounts in development and innovation; they were not afraid to lose it, to take risks, and as a result they are an important player in the economy. On the other hand, Fintechs have a more focused niche perspective that gives them a unique competitive advantage, but this comes with difficulty achieving scale at the same time. That’s why partnering with traditional banks will become more commonplace.
ABOUT THE AUTHOR
Vaida Pakulyte is a digital marketing manager at Strands. As an outcome focused online marketer, Vaida is interested in online banking, user experience, technology and specializes in creating content that sticks.