Descubre el futuro de las finanzas en América Latina y el Caribe

The future of finance in LatAm & the Caribbean

O futuro das finanças na América Latina e no Caribe



‘We were very dependent’ — Two Mexican banks say no to external tech providers

Jul 31, 2023

By Antony Pinedo

As fintechs scale back their ambitions (and their workforces), two Mexican banks explain their decision to prioritize having strong tech teams and keeping development in-house

As much of the traditional banking industry modernizes its technology infrastructure through alliances with outside providers, Mexican banks Banregio and Banco Invex are keeping development in-house, with the aim of reinforcing their digital channels.

While Banregio took this approach from the outset, Invex initially outsourced some digital functions and subsequently rowed back. Both banks are opposed to moving their servers to the cloud, and they’re keen to have greater knowledge about technology and their business rather than leave it in the hands of external partners.

Their thinking reflects the growing need for banks to understand their digital banking divisions first-hand as they grow in importance for the business’s broader financial performance.

“We were very dependent on third-party providers […]. By being so, we didn’t grow in knowledge and engineering in the last five years,” Mario Piazzesi, director of innovation at Invex, tells iupana.

A small corporate bank founded in 1994, Invex said last year it aims to double in size by 2025 and reposition itself as a technology company that provides financial services. This year, it launched its digital spin-off Now, with which it hopes to attract new young audiences, and it’s investing more to develop its tech infrastructure.

The bank has established 25 development teams and is scouting for new talent to ensure it has the capabilities to deliver a pipeline of new products.

Banregio’s in-house development

For Banregio, a mid-sized bank also founded in 1994, one of the benefits of having an internal team to execute its digital transformation was being able to launch its own digital spin-off: Hey Banco.

“Rather than investing to buy third-party products, we generate them,” says Daniel López, Banregio’s director of digital banking.

Hey Banco, founded in 2017, obtained a banking license two weeks ago that will allow it to operate independently from Banregio. The digital division is about about to launch Hey X, an application that will allow customers to invest in US fractional shares, according to López.

In addition to splitting up the two businesses, Banregio and Hey Banco have had to detach their tech infrastructure. “An investment has been made to separate the core banking systems in order to allow Banregio and Hey to operate independently,” says Lopez.

The aim is for the institutions to reach different market segments with different digital proposals.

“We run in parallel […]. At Banregio, we want to be able to attract customers and facilitate their business and operational dynamics. In the case of Hey, they’re about to release an application that will allow people to make investments,” explains López.

The trend of banks keeping services such as tech development in-house is not exclusive to Mexico. Last month, we reported on how the Peruvian subsidiary of Banco Pichincha has begun a hiring and investment drive to enable it to stop outsourcing technology functions.

Not everything is cloud

In October last year, Invex upgraded its banking servers to gain a higher transaction capacity and pave the way for the launch of its digital subsidiary, Now.

The new servers allow the bank to have 90% of its technological infrastructure on the premises —the rest is in the cloud— and benefit from hyper availability.

Its strategy contrasts with that of other banks, such as Santander, which in May last year said it had migrated 80% of its technology infrastructure to the cloud.

Piazzesi says the bank spoke to Amazon, Google and Microsoft but didn’t see sufficient technological or economic benefits in fully relocating to the cloud.

The advantage of a partial migration is that the 10% of usage capacity in cloud technology can be temporarily expanded almost immediately should the need arise.

“We prefer to have internal hardware of the highest capacity in order to have the development and maintenance entirely in our hands,” says Piazzesi.

Stay ahead of LatAm’s digital banking, fintech and payments industry

Únete a los líderes mundiales en tecnología financiera que leen los informes de iupana