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Banco Fihogar reaches a new innovation threshold by launching its Developer Portal powered by FinConecta

By July 16, 2020 No Comments

We held a fireside chat with Alan Muñoz, Banco Fihogar’s Executive Vicepresident, about how this institution embraced open banking and a collaborative model with third party providers, to position itself as a front-runner innovator in Latin America, and specifically the recent launch of their own Developer Portal.

FinConecta: “How do you conceive innovation as part of Fihogar’s strategy?”

Alan Muñoz: “Innovation has been a core component of Fihogar’s vision and strategy from its inception. Since 2015, Fihogar has defined the intensive use of technology as the way to boost innovation and as the bedrock of its digital transformation strategy. The starting point was market research analysis to identify the opportunities that best suited Fihogar’s structure, capacity and market positioning. The initial projects include, among others, the implementation of web and mobile transactional internet banking, credit scoring tools and digitization of credit flows, as well as digital referrals for credit applications.

By the end of 2017, we started conversations with FinConecta to integrate with 4wrd. We were seeking collaboration in the development of APIs that could be exposed to offer services to Fintechs, identifying and integrating Fintechs, and getting support in the validation and strengthening of the digital transformation strategy we had roadmapped.”

FinConecta: “What does the launching of your Developer Portal encompass, and why is it an important step forward in your digital transformation strategy?”

Alan Muñoz: “The Developer Portal is part of our overall strategy of collaboration with Fintechs, and using our banking infrastructure to create an ecosystem where we can serve the interests of our partners, and provide avenues to increase revenues from non traditional sources.

With the Developer Portal we are not only giving access to our clients to their information, but also providing Banking-as-a-Service to developers as well as integrating different players in the market in one coherent marketplace.

Open Banking is still a developing subject in our regulatory environment. As we move forward and the monetary authorities create the framework for more specific regulations, the Developer Portal is a very flexible steppingstone to let innovation loose.”

FinConecta: “May you share some of the use cases?”

Alan Muñoz: “We are currently working on several testing scenarios with local developers, which include integrating payments from our wallet into mobile apps, integrating with ERP systems to allow customers to pay invoices from within the accounts payable modules and allowing Fintech mobile wallets to make bank transfers using our payment rails.”

FinConecta: “Why did Fihogar embrace open banking and a collaborative model, integrating third-party solutions?”

Alan Muñoz: “Fihogar saw in digital transformation the opportunity to take a dominant position in the market -greater than its size share allowed, by identifying opportunities that were not being addressed by other players in the system and that, due to its size and structure, could capitalize in less time than others. Understanding this situation and its potential impact on the future value of the entity, the Board of Directors gave primary importance to a digital transformation initiative that encompassed opportunities to reduce costs, increase revenues, and identify new non-traditional business lines.

The collaboration model with Fintechs considerably accelerates the pace of implementations, in addition to bringing best practices to design products beyond Fihogar traditional practices.

We have developed solutions under different frameworks: proprietary, shared development with local developers, and acquisition of solutions under SaaS (software as a service). This blended approach has proven to be an important accelerator.”

FinConecta: “Why adopt a SaaS model instead of licensing / buying?”

Alan Muñoz: “Fihogar doesn’t have enough scale to acquire software licenses, which, in most cases, are developed for larger entities. The pay-per-use or revenue sharing model has allowed us to execute multiple projects simultaneously and access technology that we could not buy.”

FinConecta: “Why connect through the 4wrd aggregator model instead of connecting directly to digital solutions?”

Alan Muñoz: “4wrd is a key part of our strategy and a great enabler to carry out the vision of digital transformation that we designed. We saw early in the process the advantages of using 4wrd, the sum of these made connecting through 4wrd a clear decision for us.

We evaluated the connection through 4wrd considering several fronts:

  • Security. It allows us to maintain a single connection with our core banking system, reducing the need to open new VPN connections with different providers and maintaining a greater control of the channel that connects to the bank.
  • APIs development. When connecting to 4wrd, the internal team had no experience in developing APIs for connection. We depended exclusively on the core banking developer, making the integration process slow and expensive.
  • API management. By maintaining the connection with third parties through 4wrd, we benefited from the improvements in the scope of the already created APIs and forced us to think about adding services that we would not have previously considered.
  • API standardization. By using the APIs designed by FinConecta, we have a standardized connection with service providers, which adds strategic security. Since we do not depend on a single provider, we can easily switch to other Fintechs that are already integrated.
  • Infrastructure management. Through 4wrd, we are able to create test and production server environments without having to dedicate internal human resources for its creation and management.

This approach has sped up the implementation, supporting us in the process of identifying and evaluating different 3rd party solutions. This access to know-how helped us to better define our strategy and make better selection of solutions.

The evaluation process using FinConecta’s Digital Transformation Readiness Assessment (DTRA) tool is a key step to focus and decide on priorities.”

FinConecta: “What about the regulatory environment for initiatives such as Open Banking and integration of 3rd party solutions?”

Alan Muñoz: “The development of local regulation with regards to innovation has been slightly more delayed than regulations of developed countries or Latin American countries that have set trends such as Mexico or Colombia. However, the regulator has had a positive attitude towards opening up to new trends and the initiatives taken in the area of ​​digital transformation have been well received. The regulatory approval process of projects that set new trends still has room for improvement, and may take more time than desired, but it is a necessary step that has been gradually improved with the supervisor’s knowledge of the tools that allows the development of innovative products while maintaining the necessary risk control.”

FinConecta: “What would you recommend to financial institutions that are in the process of embracing digital transformation?”

Alan Muñoz: “A digital transformation process is more of a strategic business endeavor than a technology initiative, so the first recommendation is to clearly define the goals that the financial institution aims to pursue with its transformation process, in order to properly select how to assign resources, and define the adequate support from the Board and Senior Management. FinConecta’s DTRA is a great tool to provide a head start in the process, and facilitate necessary conversations among key stakeholders.

With a clear strategy and selected processes, I understand that a team dedicated exclusively to innovation projects and a defined budget for innovation are a great accelerator. Many of the innovation projects must be executed with non-traditional indicators in banking and sometimes it is not possible to measure topics such as ROI, so an innovation team with the ability to do quick proofs of concept helps a lot in selecting uncommon projects.

Finally, I would recommend developing the largest number of APIs with the highest possible level of detail, and integrate them to 4wrd -even if they may not be necessary for the implementations at hand. Counting with a seamless, simple and efficient integration blueprint greatly speeds up the process of new deployments and propels the institution to new horizons.”

 

Banco Fihogar is a savings and credit bank from the Dominican Republic founded in 1977. The bank is focused on consumer and SME financing, and its main product is car loans. Its operations extend nationwide through a network of 8 branches, 650 payment points and 235 sub-agents. Its product portfolio includes personal loans from bankarized clients of B-C target market and commercial loans for SMEs and micro-enterprises. On the liabilities side, it captures funds through savings accounts and fixed-term certificates of deposits.

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