Pierpaolo Barbieri: recommendation

Transcript context

…Let’s say we take away your short-run advantage just from being smart and better at software, and we look at a longer-run steady-state equilibrium. What is the factor or the variable that determines if the market will be filled with institutions that make money from loans as opposed to institutions that make money from payments on fees? What does that depend upon? That is a fantastic question. I think it depends on a variety of factors. First of all is the microeconomic stability. In a place like Argentina, if you only depend on loans, there are times when you have a recurring crisis, and if you have a crisis every ten years — that used to be the norm — or a crisis every four years, your whole lending book could blow you up if you don’t have access to any other type of fees. That is why, historically speaking, Argentine banks have pivoted in and out of lending a lot very regularly. In a more stable economy, I think it depends on the kind of quality of the ecosystem that we have and what kind of competition exists out there. I could have a very profitable asset management business on its own, but it’s less defensible. Eventually, there’s going to be more competition, and more people are going to get into that business. Eventually, I think the value is in the whole ecosystem, and that’s something that we can learn in the new steady state that we learned from China, where people want to have all their money managed in very few platforms. Then different platforms are able to channel a variety of services. Tomorrow in Argentina, we’re launching insurance in partnership with Willis Towers. We’re going to be the first fintech to offer direct access to insurance product on a fintech platform. There you want to move faster and offer services that are similar to what the banks do in a more digital way without the associated costs of the banks. I think, eventually, there are positive externalities that come with having the best and fullest ecosystem, in the same way that Facebook was able to profit from having the network effects of having just a better ecosystem where more people wanted to join. Then, economies of scale also help financial institutions because, unsurprisingly, when you have 10,000 cards, nobody picks up the phone. When you have 100,000 cards, people start picking up the phone. When you have three million cards, then everybody wants to be your partner, and everybody wants to sell services through you. That means that they want to sell it through you and not someone else. That should help you keep staying ahead of the game and, in the steady state, diversify away from having an 80 percent revenue-from-lending institution to a 20 percent revenue-from-lending institution, which I think is also, from a stability perspective, smarter in a place like Latin America where, historically speaking, you have a lot of potential macroeconomic negative effects. Why did Argentina’s liberalization attempt under Macri fail?…

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