| Panama | Sep 29, 2019
Banks in Panama are embracing fintech in a drive to digitize financial services and provide customers with innovative banking solutions.
Despite its relative political stability and host of growing medium-income economies, Latin America has one of the least modernized banking sectors in the world. A mix of high entry fees, burdensome interest rates, and lack of products and services have kept many of the region’s population away from formal banking systems.
Today, less than half of the Latin America’s adult population has a bank account, and 71% of millennials said they prefer going to the dentist over interacting with their bank, according to a recent survey published by the Spanish bank BBVA. Now, some of the region’s leading banking institutions are looking to reverse the trend, as high adoption rates for mobile banking applications are signaling an opportunity to develop financial technology services, known as fintech, for the underdeveloped consumer and business market.
The fintech industry is currently booming in Latin America, with banks in Brazil, Columbia, Argentina, and Mexico leading the pack in providing innovative, tech-based services, and new markets are gaining attention like Panama, which has long served as a key financial hub for international banking services. Banks and start-up companies based in Panama City are now exploring new solutions to integrate fintech into financial products with aims to improve automation and speed up routine banking transactions.
In its origins, fintech emerged in back-end systems, specialized software, and algorithms that financial institutions employed to support banking activities. Yet, as we roll further into the 21st century, fintech products are increasingly handling direct interactions between consumers and their banks, mostly through mobile banking apps. Today, fintech is an umbrella term encompassing a myriad of financial services and sectors including retail banking, internet-based fundraising, investment management, and also the nascent cryptocurrency economy and blockchain technologies.
Such an open-ended definition has enabled software developers to increasingly partner with banking institutions to streamline online and mobile banking systems, and Panama’s financial sector has been pursuing some noteworthy innovations. Among them is FacePhi, a selfie-driven authentication system recently implemented by Banco General de Panama. The bank has integrated FacePhi technology into its Android and iOS mobile banking apps, which now take advantage of FacePhi’s biometric facial recognition software to identify customers logging on to the Banco General de Panama app.
In addition, ViaCarte, a payment solution and mobile money technology company, recently announced it would partner with PayMachine, a financial lifestyle assistance and credit service, to broaden the availability of credit options for under-banked customers in Panama. The two companies will seek to offer affordable credit options to clients outside the banking system, with aims to bolster the mobile payment ecosystem in the country.
Through a network of financial institutions, telcos, and retailers, ViaCarte and Paymachine will deliver on-demand credit and risk analysis tools to enable consumers to apply for low-cost micro loans through mobile phone applications. The global fintech company, Mobi724 also recently launched a seamless card-linked discount delivery system in Panama that enables consumers to redeem special offers and coupons directly at the point of sale through their credit cards.
Amid such developments, the United Nations Development Program (UNDP) is putting its weight behind fintech development in Panama, where the organization has facilitated Alternative Finance Lab events since 2016 in effort to explore new financial technologies and mechanisms that would increase access to investment opportunities for the country’s entrepreneurs and small business owners.
Working with Panama’s City of Knowledge, the Panamanian Chamber of Technology, and the Authority for Government Innovation, UNDP staff members have sought to catalyze innovation among the country’s tech innovators.
“It is expected that new technologies such as blockchain, crowdfunding, social impact bonds, among others, will change the global financial system, and the development issues will not remain immune to these trends,” said Marina PetroviÄ‡, an Alternative Finance Lab facilitator for the UNDP.
State leaders are also working to draft laws that will modernize the financial banking sector and allow fintech companies to thrive in Panama. The Ministry of Economy and Finance is developing a Specialized Financial Entities legal framework that will oversee and distribute licenses to a growing array of payment managers, mobile exchange services, cryptocurrencies, and private payment systems, among other fintech innovations. In addition, Collective Financing Centers (Ceficos) will be created to facilitate and regulate crowdfunding and crowdlending activities.