It is a worldwide trend that consumers are spending more money in online channels than ever before. This has enabled businesses to reach more customers and create digital sources of revenue. At the same time digitally minded consumers are expecting to access services with ease in digital channels. This trend keeps challenging companies to constantly change and develop their digital business strategies. Businesses, which are successful in adopting digital transformation in their business models, will have a strong competitive advantage on the market.
Often, Latin American countries are overlooked when discussing digital transformation in business strategies and digitally minded consumers’ needs.
Digital Growth in Mexico
According to the Digital Evolution Index published in 2018, Latin American region is experiencing a digital growth spurt. The Digital Evolution Index takes into consideration four key drivers:
- Demand: consumers’ ability and willingness to adopt technology
- Supply: accessibility and security of country’s infrastructure
- Institutional environment: indicators that measure country’s legal and bureaucratic environment
- Innovation: indicators that measure financing, start-up capacity, and available talent pool in the country
A country’s digital economy competitiveness is determined by two factors:
- Digital Evolution Index, which marks a country’s current state of digitalization.
- Country’s pace of digitalization, which is measured over a ten-year period. The pace of digitalization is a great indicator to predict a country’s future digital potential.
One of those rapidly advancing countries is Mexico. Mexico’s digital advancement is driven by relatively stable institutions, innovation mindset, and improvements in information and communication technology infrastructure.
Mexico’s digitally minded consumers challenge various business processes
Businesses operating in Mexico can no longer postpone digital transformation. Digital transformation is not only about maintaining the current customer base, but a chance to create meaningful interactions and intentional user experience.
That exponential growth in digitally minded consumers are driven by following factors:
Rising middle-class, and 80% of the population living in cities
Although Mexico’s middle-class size is below the OECD average (45% vs. 61%), it is expected to grow by 3.8 million to 18.4 million households by year 2030.
Mexico has one of the highest smartphone penetrations in the world
By the end of 2020, Mexico is expected to have almost 80 million smartphone users out of population of 126 million
Access to the Internet
According to Interactive Advertising Bureau Mexico, in 2019 90% of Mexican internet users accessed the internet via their smartphone, and 67% of Mexicans claimed to have recently completed an online purchase.
Digitally minded consumers are looking for easily accessible and transparent services. They will opt for digital services that will eliminate unnecessary bureaucracy and give them instant access. These types of consumers will choose a feature over a brand. Meaning, that they are willing to change their service provider, if a competitor offers a more digitally advanced user experience.
Digital identity and businesses
One of the ways to eliminate bureaucracy and give users instant access to services is by implementing digital identity as part of the user onboarding process.
Xpass’ COO Thomas Dobereiner has compared digital identity’s function with the case of cash vs online money transfers: “Instead of having to pay someone in cash, you can transfer the money to them. It is the same relation with paper documents and digital documents, digital identity allows you to say who you are, verify that you are that person in digital channels without the necessity to physically show up somewhere to prove your identity.“
It is known that with time new technology becomes more affordable, and thus, more accessible for a larger audience. The same goes for the cost of technology and infrastructure needed for digital identity expansion. According to Mckinsey’s Digital ID Report published in 2019, the cost of smartphones fell by 25% from 2008 to 2016 in Latin America. Smartphones are considered to be the primary entry point for digital identity expansion.
Not only will digital identities help businesses to transform their processes and give users instant access to various services, it carries with itself a tremendous economic gain. It is believed that for emerging economies such as Latin America, digital identity will contribute an average of 6% growth to the GDP in 2030
The use of digital identities can help businesses to protect different types of customer logins and transactions, enables automated background verifications, and reduces fraud and manual work. It allows businesses to make instant trust decisions in real time.
Digital identities allow companies to pull user’s data with their consent, avoid paperwork, and create seamless processes. Basic data that can be automatically pulled from a verified digital identity:
- Date of birth
- ID number
- Login credentials
In-order for businesses to automate above listed processes, and make instant trust decisions, there are certain qualities a digital identity should have. Mckinsey has defined the attributes of a good digital identity with following characteristics:
- With a range of possible credentials (e.g. biometrics, passwords, smart devices)
This type of digital identity saves time and cuts costs for businesses. According to Mckinsey’s report, using high-assurance digital identity could reduce 90% of the cost for customer onboarding processes and lessen the verification time from days to minutes.
On average, fintechs and financial service providers lose 30% of their potential new customers due to long application forms. Implementing digital identities as part of onboarding process will enable companies to onboard more customers with lower cost.
Digital identity is the next step for innovation
Over here at Xpass we are convinced that digital identity is the next step of innovation for Latin American countries. The implementation of digital identity has the power to unlock growth for businesses and for the governments in Latin America. A good digital identity enables to automate and cut costs in several business processes, and gives for Latin American consumers an easier access to services. Mexico is a great example for a country, which has experienced and is still on the path of fast-paced digital growth.