After several months of development, Credicorp, Peru’s leading financial group, launched its digital banking unit iO to cater to young Peruvians.
The rollout marks the first step from the incumbent in building a neobank in this fast-growing fintech ecosystem.
“After many months of work, I am proud to share that today we are launching iO, a familiar and flexible brand that you will find very soon on a mobile application and a credit card,” Patricia Conterno, iO’s CEO and formerly a vice president at insurance company Interseguro, said.
Essentially, iO is a credit card backed by Visa which can be managed through an app. It is expected to offer Peruvians a 100% digital experience, allowing clients to pay digitally and earn cashback. Like many other fully digital providers, it bears no membership fee.
With iO, Credicorp is well-positioned to tap into Peru’s growing demand for digital banking services. Also, to compete with other neobanks in the region that are expanding their user base.
Credicorp’s initiative is built on a previous digital product with significant traction. The holding group launched the digital wallet Yape years earlier, one of the few digital competitors before the pandemic.
According to company data, it had 11 million users in Peru as of 2022. Approximately half the adult population in the country, Credicorp executives estimated during an earnings call.
Credicorp eyes opportunities in building a neobank
To be sure, the banking group had eyed an opportunity for a new fintech brand in the country.
“Going forward, what we see is a definitive opportunity for a digital neobank,” Gianfranco Ferrari, CEO of the financial holding Credicorp, said last year, according to local media Gestión.
iO is expected to run as an independent digital unit with its brand and operations, although backed by the group. It would reportedly target the young segment initially, although it did not specify how it would segment its audience so that it does not compete with Yape. It did not disclose either what the following products on the roadmap look like.
Peru is lagging in financial inclusion
The launch of Credicorp iO comes when the neobanking sector rapidly expands in Peru, driven by the increasing use of digital channels and the growth of mobile payments. Other neobanks in the country include RappiBank, Kontigo, Ligo, and Prex.
While there has been some improvement, Peru still lags behind other countries in the region regarding financial inclusion. According to a recent report by Credicorp, Peru ranks seventh among the eight largest Latin American countries regarding financial inclusion. Savings remain challenging for many Peruvians, with 73% of the population failing to do so last year, according to Credicorp. Of those who did, almost a third kept their money at home.
A buoyant fintech sector
These levels of underbanked have given rise to a buoyant fintech sector. The country is the leading emerging fintech industry in Latin America, according to a report by the Inter-American Development Bank.
With 132 ventures as of 2021, Peru is the sixth largest ecosystem in the region, with a 70% year-over-year growth in the number of companies.
To be sure, Credicorp also seeks to anticipate the possible entry of other competitors, which are growing by leaps and bounds elsewhere in the region. Nubank and Ualá are already active in Colombia’s neighboring market, although they’re still struggling to build a robust customer base.
But Credicorp is undoubtedly aware of this risk.
“In 2023, we will continue to invest significantly in digital transformation and disruptive initiatives to bolster our long-term competitive position,” Ferrari said in the earnings call conference earlier this year.