The rise in digital fraud is leading Mexico’s largest banks and fintechs to reconsider the role of financial education, and explore new uses of technology to prevent breaches, even when they occur beyond the screen.
This was considered by around twenty executives from banks such as BBVA and Citibanamex, fintechs such as Revolut and Mercado Pago and other institutions such as the GBM brokerage house. and the payment processor Prosa, gathered by iupana at an Executive Table in Mexico City: as digitalization advances, threats also grow.
Ximena Salgado, head of product at Nu México, summarized: “there is still mistrust, not only towards fintechs, but also towards banks (…) The client says ‘I don’t know if they are going to play tricks on me’”. The entity has accumulated 7 million clients since 2022 and for almost half of its cardholders this was their first financial product.
Claims related to possible fraud in banks grew by 26.7% between January and June 2023, according to data from the National Commission for the Protection and Defense of Users of Financial Services (Condusef), showing a higher incidence of digital crimes.
For Edgar Estrella, director of onboarding and digital sales at Banorte, the fraud landscape has become more technical. “It’s no longer a call, the fraud happens in person,” Estrella lamented.
Angélica Arana, corporate technology director at Banco Multiva, said: “We can’t just blame the customer if they provide information to those who social engineer them to steal their banking credentials. Instead, we must find tools and solutions to help clients be protected in cyberspace (…) it is no longer enough to provide them with financial education, we must also provide them with education on cybersecurity issues.”
Persistent lack of trust
The experts on the Executive Board identified that financial inclusion gaps persist in the background of the criminal figures. Nearly half of Mexican adults are unbanked and credit penetration is moderate, compared to other Latin American countries.
Segments with little digital experience, older adults, microentrepreneurs and women, are more vulnerable to cyber attacks, which is why they also remain reluctant to join the formal system.
“We still haven’t hit that acceleration in the corner to beat the cash. We advance by 1 to 2 points [de reducción] per year,” listed Ramiro Nandes, commercial director of Mercado Pago.
Entities and authorities have identified a scam pattern that uses people to impersonate banking agents and open accounts or take out fraudulent loans in the name of users. This joins the classical methods of phishingwhich use messages or emails to convince customers to offer their banking details.
“The risk is not in the financial product, it is in the people, due to ignorance, lack of financial education,” said Estrella de Banorte. “Today many of us have the best technologies, agile 2-minute onboarding processes, but in the end, we still have a significant cultural gap.”
Thus, strategies that coexist in the digital and physical worlds are necessary.
Gradual accompaniment of the consumer so that they try increasingly complex products, the creation of habits and simple and present education in the flows have also been fundamental aspects to grow Nu’s customer base, reflected Salgado.
“You earn customers’ trust by rewarding them when they make positive decisions,” the executive said. “We saw this in comparison with Brazil, which has a credit card model as a payment method, and in Mexico, it is more of a financing mechanism. If you give them flexibility and encourage them to make good decisions, little by little they will adopt you.
For his part, Carlos García, head of technology at Revolut, said that new generations of users come with a new set of digital skills that will facilitate the transition to 100% digital and interconnected banking. “LThe reality is that the people who are promoting and using finance do not want to take time out of their daily lives to complete a procedure at the branch.”
Digitally, but also in person
In this sense, artificial intelligence (AI) applied to generate personal finance suggestions and graph consumption patterns, while identifying fraudulent patterns and raising alerts, appears to be a tool with potential.
“In other countries, we are focusing on AI becoming the tool that advises clients to avoid making transactions,” added Jorge Andrés Aguilar, business development manager at Infosys Finacle, a global financial technology provider and partner of iupana in the meeting.
“For example, just the minimum payment on your credit cards. This is feasible for the bank, since clear visibility has been established on the income that clients receive on their payrolls.
The market is also awaiting a regulatory push, with the publication of a draft resolution headed by the National Banking and Securities Commission (CNBV) to strengthen internal control and risk management for the prevention, detection and response of fraudulent behavior. And the Federal Cybersecurity Law remains in parliamentary debt.
In the first half of 2023, claims for possible identity theft to contract products and services increased 3.1% year-on-year, Condusef said.
This puts additional pressure on the players, who have identified that to have a holistic view of the problem they also require greater communication between entities and technological collaboration, which transcends the unions.
“Education also means educating ourselves as banks,” said Teresa Díaz, operations director of Ve Por Más bank. “Unfortunately, frauds have always existed and will continue to exist. But we ourselves must evolve, shield ourselves and devise, not just the typical multilateral agreement, but technological tools to identify and stop frauds no matter in which entity they are occurring. Create a support network of all financial entities: banks, fintechs.
In accordance with Arana from Multiva – also a former executive at the payments fintech STP and Citibanamex – Achieving this balance between speed of innovation and generation of anti-fraud friction will be essential to reach the next frontiers of financial service. “The trend is to offer ubiquitous services, regardless of our location. For example, we could watch a video on YouTube about the car we want and, at that moment, access a link to start the credit application process at the financial institution of our choice.”
