The National Banking and Securities Commission (CNBV) has issued a warning to traditional banks that they will struggle to keep up with the digital transformation necessary to compete effectively with neobanks and other digitally-born institutions. These institutions offer services that are already well-established in the virtual world, making it difficult for traditional banks to adapt.
According to Aurora de la Paz Torres, the general director of authorizations to the financial system at CNBV, neobanks have an advantage over traditional banks because they began operations in a purely digital environment. Most of them started as fintechs and have since become credit institutions. Digital banks, on the other hand, operate on a different business model and offer their own set of services and technologies.
De la Paz Torres explained that while many banks offer online services, a digital bank conducts its business entirely through an app in a 100 percent digital environment. This is a major departure from traditional banking models, which rely on physical branches and paperwork. Because of these structural differences, digitally born institutions pose a threat to the traditional banking system as it had previously operated.
The directive also criticized those institutions that claim to operate digitally but do not possess a license to do so. According to CNBV, the ability to truly operate as a digital bank depends heavily on an institution’s background and its roots. Traditional banks, in particular, will struggle with this as their foundations are built on physical business operations rather than digital ones.
Overall, the CNBV’s warning highlights the need for traditional banks to adapt quickly if they want to remain competitive in today’s digital age. Failure to keep up with technological advancements could lead to further erosion of their market share and ultimately render them obsolete.