Chile’s digital banking race starts in earnest
Chile’s new financial portability law came into effect in September, providing a huge shot in the arm to financial innovation in Latin America’s most stable banking market.
A large part of Chile’s growth story has been the conservative regulation of its banks: the country has avoided bank and debt crises that have stymied the other large economies in past decades.
But that conservatism can hold back innovation, and the number of fintech launches has been noticeably lower in Chile than in other large markets in the region.
The financial portability law could be the spark that changes that.
By making it much easier and cheaper for businesses and retail customers to switch providers of bank accounts, credit cards, loans and mortgages, the central bank is lowering the barrier to entry. This reduces the turnover friction that can make incumbents slow to adapt to the digital forces tearing up the financial markets elsewhere in the world.
For example, Itaú and Scotiabank still don’t have 100% digital opening of accounts – a surprising fact given these banks have international businesses that should have helped anticipate the digital drive.
Taking the lead
Meanwhile, Banco Santander has taken a jump on the market. In June last year, the bank launched a Santander Life account that is fully digital and nudges customers to increase savings.