Technology can close financial gaps in Colombia

This column was written by guest columnist Esteban Villegas. I want to debut in this space of the Empty Chair Expert Network, telling them that this week, Opportunity Banking (BDO), led by its director, Paola Arias, presented the most recent data and advances in financial inclusion in Colombia for 2023.

The BDO has become one of the main sources of information for understanding how Colombians consume financial services and for projecting what is needed in Colombia. Here are some comments on what these data mean for the country.

“The task in access is done,” said Paola Arias at the presentation of these data. This is referring to an amazing fact: 94.6% of the Colombian population is banked. That is, it has at least one financial product. The predominant one is the traditional savings account. However, low-amount deposits, where entities such as Nequi, Daviplata or Movii are located, already number 27.5 million users.

The most impressive thing about the low deposit figure is that from 2022 to 2023, 4 million people obtained a new digital wallet. This is closely related to the fact that digital wallets have been adding more and more services, such as cards, smart pockets, credits and more.

After the pandemic, the government of former President Iván Duque announced that the country had achieved 100% coverage in the country, something that is true, but that has its complications. For example, according to the BDO report, on average, Colombians have a bank correspondent less than 1 km away.

Although the number of bank correspondents, dataphones and QR code payments has increased in Colombia, bringing more and more options to Colombians across the country, it is worrying that there is still a practically immovable gap between financial services in rural areas and urban areas.

The positive thing is that there are many entities working precisely with this approach, just to give a few examples: USAid, the United Nations Development Program (UNDP), Banco Agrario, Agrapp, the BDO itself, or Bancolombia with its Bancolombia account a la Mano.

The future of financial inclusion is through technology. I say this because, despite these advances and challenges, there is one fact that I think is the most important and the one that could provide real financial coverage of 100%.

In 2019, only 23% of transactions were made through electronic means, but in 2023 this figure rose to 63%. In addition to this fact, the majority of transactions in Colombia are made through electronic means and physical channels are on the decline.

In addition, it is very important that more and more people are using their card to make payments and not just to get money out of their cash accounts. The key to success in the digital financial sector is that: that there is a real incentive for people not to withdraw their money and keep it in their accounts or use it digitally. This will make it safer for users and will discourage the use of cash, which is closely related to informality and illegal economies.

However, the State and the entities will have to do their part. It must be guaranteed that individuals and companies can transfer money between banks and digital wallets immediately and securely and that user information is at the service of them, not of financial institutions.

Banco de la República will bring to light its immediate payment system in 2025 and must be a channel that ensures that we can all be part of it. It is essential to eliminate any barriers and not fall into the concept of “closed gardens”. With that, we can practically eliminate the cash and there will no longer be an excuse not to transfer your friend when he pays the bill and is from an entity other than yours.

Although traditional banking has made great efforts with applications such as Transfiya, there are still obstacles for users who are not familiar with this type of transaction. The key is that the services are intuitive and immediate, so BDO data will continue to be increasingly positive.