Industry dynamics of the banking industry of Brazil

Artificial intelligence and data analytics are two emerging technologies that can greatly enhance the banking sector in Brazil. Currently, the traditional Brazilian banks have many antiquated and obsolete processes that lower the efficiently of the financial sector. Bank accounts often take weeks to open with traditional methods with the branch network often being very uninviting to guests.

Artificial intelligence and data analytics have helped to provide new alternatives to Brazilian consumers in the banking sector. For one the Brazilian government has opened the market to allow for more competition within the sector. Prior to government intervention, the three largest Brazilian banks controlled nearly 80% of the countries deposits. Now with a much more robust competitive landscape, new entrants are now encroaching on the incumbents market share.

The solution has been the use of artificial intelligence and data analytics to provide a digital solution to consumer in the banking sector. Due to the deregulation by government new entrants including Nubank, Stoneco, and Pagseguro have entered the market. Each offers a digital solution that leverages many of the technological innovations that have enabled other digital banks to prosper. Namely, the banks can expedite account openings, provide more robust customer service, improve credit and risk management processes, and provide an overall improved banking experience for consumers (Peláez, 1975).

In addition, these banking innovations significantly enhance return on investment metrics as many of these businesses are not burdened with overhead, general, and administrative expenses. Instead they can focus more heavily on technology and the overall customer experience.

Obstacles that these new entrants face are related to the psychological dynamic of digital banking. Many consumers, particularly older Brazilian consumers, have difficulty with accepting the concept of a digital bank. Many prefer to enter a traditional branch or engage in-person. Over time, these objections can be mitigated through adoptions, referrals, and overall market presence.