Interview: Luis Carlos Sarmiento Gutiérrez
About 69% of Colombians use at least one financial product. How can that figure be increased?
LUIS CARLOS SARMIENTO GUTIERREZ: While the country has made significant strides in recent years, the banking sector has two major priorities. First, we need to include the 31% of Colombians who do not yet have access to the financial system. To achieve this, banks are developing new deposits and loan products that respond to the financial needs of the unbanked.
Besides this, we need to keep extending our network to reach more people in better ways. This implies using traditional bank branches together with new channels such as neighbourhood shops. Another new way to reach the unbanked population is through mobile banking. Mobile platforms allow people to open a savings account directly from a mobile phone. This enables a leap from link banking penetration to mobile phone penetration, which stands at more than 100% in Colombia.
To address our second priority, banks need to deepen the relationships they maintain with customers. Banking in Colombia has advanced mainly through one product: savings accounts. We need to enhance our credits offer and create new solutions for the users of the financial system. It is the banks’ duty to support people in developing their businesses and purchasing goods through productive and consumer credits, respectively. The system requires further work in financial education, so that people can make the best possible use of these credits. We also have an obligation to develop products that adapt to people’s reality, revenue streams and payment habits. The main financial groups in the country are working on this duty. It is key to provide low income earners, in urban and rural areas, with access to small productive credits.
Only 29.6% of financial transactions are made online. What barriers may be hindering e-banking?
SARMIENTO: Online transactions still have growth potential. However, about 80% of today’s non-cash transactions – predominantly balance inquiries – are performed in this way, which indicates that electronic banking is not marginal. The challenge ahead is to migrate monetary transactions, transfers and payment of services to electronic channels.
A number of factors contribute to the adoption of internet banking channels. These include user-friendly websites, customers’ perceptions of the channels’ security, low fees, the offer of electronic advice, the sale of financial products online – which is already a reality in more developed markets – and the creation of an environment where invoices can be electronic, encouraging customers to pay their bills online.
Mobile banking is most likely to become the fastest-growing channel in Colombia in the coming years. While in 2013 it represented only 1-2% of monetary transactions, that figure doubled in 2014. The development of mobile applications for the banking sector is one of the areas with the greatest attention at the moment.
What is your forecast for pension fund growth, and will funds engage in infrastructure development?
SARMIENTO: We see significant potential for future growth in pension funds due to a foreseeable continued decline in unemployment rates, which goes in hand with economic growth and especially with the formalisation of employment. These trends are increasing the number of Colombian people accessing the benefits of our social security system, including pensions. Therefore, pension funds are being called on to gradually increase the amount of capital they manage.
With regard to pension fund investments, fund managers will continue to seek profitable, long-term assets. Consequently, the financing of new government infrastructure projects – the so-called fourth generation (4G) projects – is extremely attractive for them. However, funds will tend to invest only after the construction phase, when the risk has decreased. This will ensure that banks regain liquidity to invest in new projects as the 4G programme will continue to run, and that affiliates will have pension savings invested in excellent assets.
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