In a world of change, where is the answer?

For over a decade technology has been transforming the financial world with the rise of the newly integrated markets of fintech. What is interesting is the nuance of this revolution is not playing out in Europe or America, but in Asia, Africa and South Americas. We have seen this since the late 2000s when everyone talked about mPesa in Kenya but, since then, there has been the rise of Alipay and WeChatPay in China, PayTM in India and PIX in South America. What is happening?

What is happening is a revolution in payments, finance and access. Everyone can now pay directly, instantly, 1:1 in real-time. That’s great but, more importantly, everyone can pay. This is a key focal point as, historically, billions of humans had no access to finance. Now, everybody does and the examples above prove it.

Billions of dollars every day are transacted through the mobile network, and the mobile network is the core of why this has happened. The rise of smartphones and networked telecommunications has allowed everyone from Texas to Timbuktu to transact, trade and talk globally, in real-time, all the time. It is a fantastic change.

For those nations who were under-automated, it has allowed them to regenerate, renew and become leaders. For those nations that were over-automated, it has created huge challenges in how to embrace this new technological change.

This is clear in the difference between how the Southern States of the World have automated versus the Northern States.

Just take QR code payments as a key example. The rise of AliPay in China and Paytm in India is predicated on a technology that, until the 2010s, was pretty much dismissed by Northern companies, but embraced by the Southern world and, to be clear, this means Southern Americas, Africa, India, China and other nations.

The use of QR codes meant that, both online and offline, payments could be taken from anyone, anywhere, using a mobile phone. This has been transformative. After all, by the year 2000, most of the Northern Hemisphere countries were running on systems implemented thirty years before. Remember the Millennium bug? That was a massive challenge for all companies based in the Northern World – by which we mean America and Europe – because their systems were implemented thirty years before and could not adapt to a four-digit year (you can google that).

Twenty years later, the Northern World is still trying to adapt. The rise of cloud computing, the smartphone and the networked economy has  created massive challenges to renovate and renew legacy systems. Most companies in the Northern World had implemented technology in the 1960s and 1970s, and had to refresh them again and again and again.

Meanwhile in the Rest of the World – by which we mean South Americas, African Nations and Asia – had yes, implemented technologies, but had not locked their infrastructures and institutions into these legacy systems. They were catching up and boy, have they caught up.

Transformational technologies based upon the new cloud and telecom technologies have allowed the Rest of the World to leapfrog the legacy Northern World. This is easily seen when you hear about a challenger bank like NuBank in Brazil reaching over 100 million users in just eight years or AliPay in China aiming for two billion users. What’s the secret? The secret is technology. More than this, it is digital transformation.

What is digital transformation?

There are many definitions as, a bit like cloud computing, it is not a single view but, at its core, is building a business that is born on the internet with data at its core. That is a radical new business model that is completely different from the last century models of business. The last century model was based upon physical distribution using analogue functions of paper. The new century model is business digital distribution using technology functions of data.

That is the huge challenge for the Northern World and yet, as can be easily seen, has been the huge opportunity for the Rest of the World.

A great example is what the Indian government has been doing for the past twenty years. It began with the introduction of Adhaar – a biometric digital identity system – that led to the IndiaStack – a technology structure – and Unified Payments Interface for connected the 1.2 billion people who live there. The result? From 2010 to 2020, India went from only thirty percent of citizens having access to finance to over eighty percent.

The same has happened in China. A great example is WeBank, the bank launched by Tencent who run WeChat. Launched in 2015 and, by the end of 2022, reported over 360 million users. Or take NuBank which began in Brazil and then spread to Mexico and Colombia and, in just eight years, reached 100 million customers.

This reach is critically down to technology, connectivity and the network. This reach is also critically the major challenge for companies who were built pre-network, as their business model is not designed for digital reach; it is designed for physical reach.

This is why the QR code payments revolution has been so huge. QR code payments is an easy way to do business online and offline and, driven by mobile phone cameras, has become the easiest way to pay. However, if bank systems and structures are not ready for such payments, it is a huge challenge. In fact, this is the major challenge for all CEOs of last century companies: how to update to deal with real-time online and offline systems.

When you think about the discussion above, it is clear that there is a lot learn from new century firms. This is why, when delving deep into digital transformation, most last century firms talk to new century firms about their business model. How do they do things? How are they structured? How do they manage their teams and organisation? How do they think?

In developing strategies for being digital, the most important part is the plan. Fail to plan means plan to fail and, in discussing digital with hundreds of executives, the key for all of them is to investigate who leads in the world of leading-edge thinking. They explore and visit with the leaders around the world and then try to get to grips with how to internalise that thinking. It is not easy as any change project will take years, but it is all about mindset.

Digital transformation is not about technology; it’s about mindset. What we mean by this is that it is cultural change, not technology change. In fact, a key lesson was shared by Jeff Bezos, the founder of Amazon. Jeff says that the focus should not be on change, but what is not going to change. What he meant by this is that customers will always want one specific thing: service. They want fast delivery, low prices and easy access to customer support. So technology is there to deliver better customer service and, when we look at digital transformation, the focus should be on that customer experience rather than on the technologies per se.

This is why, when you look at the technologies being deployed in the new century firms, you can see that they are 100% dedicated to regenerating customer experiences with the new century technologies. Take Pix as an example.

Pix is an instant payment platform created and managed by the monetary authority of Brazil, the Central Bank of Brazil, which enables the quick execution of payments and transfers. Pix was announced in the summer of 2019, and was fully operational on November 16, 2020. Three years later, in 2023, there were 42 billion transactions (seventy-five percent growth compared to 2022), with a turnover of 17.2 trillion Brazilian reals (around 3.5 trillion US dollars). That is something every country could learn a lesson from.

The bottom-line is that, as we all know, the world is being reinvented with technology. From Seoul to Sao Paolo, there is massive change. However, the dividing line is that there are many countries – mainly in the Norther World – who are hugely challenged by this change. They could learn a lot from the Rest of the World.

This article is written in partnership with Veritran