Pandemic has sped up digital business banking adoption in Brazil
Marcelo Henrique Toledo Santos, Head of Digital Business Banking at Banco Itau in Brazil, describes the range of aid intitiatives developed by the bank to help its SME customers during this crisis.
2020 has been an outstanding and significant year in which many financial institutions have shown compassion and provided fast first aid packages to their SME clients who were hit hardest by the pandemic. Through a series of articles in the coming months, Efma is highlighting some best practices from banks in different geographies to show how to support SMEs in a time of crisis. Banco Itau is one such example in Brazil. In this interview, we spoke with their Head of Digital Business Banking to better understand the lengths they have gone to for their SME clients.
Recent reports show that SMEs are considerably weakened by the Covid-19 crisis. What has the situation been like in your country?
Since March, when the pandemic began, Brazil has experienced a significant reduction in its economic activity as a result of isolation and distancing measures. For SMEs, this resulted in severe impact in its finances. The majority of SMEs in Brazil operate with low cash reserves, which do not support the companies experiencing long periods of negative cash flow balances. This resulted in many companies either closing their doors or halting operations for a period.
What were the immediate first steps that you have taken as a bank internally to cope with the crisis and faster respond to clients?
Itaú Unibanco has been unfolding new solutions to help our clients through this crisis as smoothly as possible. We put aside our strategic review for the retail business to attend to the needs of our customers and, as an emergency measure, created the program ‘Travessia‘ to assist them through this moment in a financially sustainable way. Our clients were given the option to refinance their credit loans and were given an extension to pay the first parcel in 120 days for personal and 180 days for SMEs. In addition, the number of parcels were increased to reduce the value of the monthly payment, but maintaining the interest rates of the original contract. The entire process can be done via our digital channels and by contacting the relationship manager without the need to go to a branc, ensuring social distancing measures.
Additionally, Itaú provided a landing page with relevant information for the pandemic period, such as the opening hours of branches, how to enable and use digital channels, the contact number of call centers and more. We increased the number of functionalities in the digital channels, so our clients do not need to leave home during this period.
Itaú also donated BRL 1 billion to finance ´Todos pela saúde’, being administered by a group of health experts to fund social actions that help fight coronavirus in Brazil.
How are you helping your SME customers face the impact of the covid-19 crisis?
Itaú is participating in all the emergency plans the government has been offering to help our clients. We have provided financing of R$2.1 billion under the emergency line of credit to meet the payroll expenses of micro, small and midsize companies. We were the first private bank to provide a credit line to the National Support Program for Micro and Very Small Businesses (Pronampe). This line of credit was disbursed to around 47,000 micro and small companies, totaling R$3.9 billion. Additionally, the bank has also been working with the Investment Guarantee Fund (FGI BNDES) within the scope of the Emergency Program for Access to Credit to Very Small, Small and Middle-Market Companies with annual gross operating revenue of up to R$300 million, which also covers self-employed truck drivers who use this credit facility to purchase capital assets required for their activities, as well as other self-employed entrepreneurs and sole proprietors. This program has already distributed R$12.6 billion to over 11 thousand companies.
We also created a special program for this moment for the SME customers to pay their expenses with complete and sustainable solutions. In the second half of March 2020 we launched the 60+ initiative, which granted, among other benefits, a 60-day grace period for payments of credit contracts without delay. In mid-April 2020, we launched a more comprehensive support program called Travessia. The balance of the loan portfolio with flexible payment conditions for individuals, micro and small companies reached R $ 53.5 billion on September 30 - R $ 39.8 billion for individuals and R $ 13.7 billion for micro and small businesses.
Furthermore, Itaú accelerated several implementations of functionalities in the digital channels to help customers stay home. For example, our digital channels now offer mobile check deposits, debt refinancing in full, digital account opening, the creation of a form hub in the app where clients can request several processes that only managers can perform, transacional limit increases on digital channels, and more.
Did Covid-19 have an impact on your SME customers’ to move them towards digital banking? Do you have any figures that might demonstrate this?
Covid-19 drove customers to search for digital ways to relate with their banks. Here at Itau, we experienced a peak of our app downloads, with a download average during the second semester of 2020 40% higher when compared to the first semester of 2020. In addition, there was an increase in the average NPS for our digital chanels for SMEs in 9% from January/20 to August/20.
How have your relationship managers served SME customers during the pandemic? Did you have to change your way of working and do more remote work? Has it been a smooth transition?
Before the coronavirus pandemic, one of Itau’s main pillars has been to bring digital transformation to its business and operations. Digital tools which provide a close relationship were developed and are now being widely used by the relationship managers, such as WhatsApp. Since August, another important action which helped straighten the relationship with our customers and to proactively support their needs has been our relationship managers arranging virtual meetings. This enabled a smooth but swift transition to remote work. Our commercial front now alternates between present and remote work, ensuring that our customers can have high quality service regardless of the channel they wish to use.
More and more banks are launching online tools to help their SME customers to manage their business, transform digitaly, and grow. Where do you stand on this point?
Itaú is aware that one of the main pain points for the SME customer is related to business financial management. We have been working on providing tools in our digital channels which will help our customers to have a better view of their cash flow balance, better categorization, and have more control over incomes and expenses and transactions.