Luiz Marcelo Calicchio is a co-founder of C6 Bank, one of the latest fintech entries to emerge in Brazil. After obtaining central bank approval in January and months of beta-testing, Calicchio, along with two other former BTG Pactual executives, launched the digital bank in August with 200,000 customer accounts. The founders, who have set their sights on both individuals and businesses, hope to double that number by the end of the year.
A newcomer to a crowded digital ecosystem populated by startups and brick-and-mortar banks with their own products, C6 is trying to differentiate itself by pursuing a next-generation fintech strategy.
By employing the latest tools to offer a complete menu of banking services from the outset, it hopes to accelerate its growth. Many of the pioneering digital startups began with one or two products. Nubank, which has 15 million users, only offered a no-fee credit card when it launched in 2013.
Special report: Banking tech
1. The outlook: Banks finally embrace the digital age
Banks pursue high-tech strategies to win customers and improve efficiency
2. Trends in fintech: Q&A with Luiz Marcelo Calicchio
C6 Bank’s co-founder explains how to compete in a digital ecosystem
3. Security challenges: Banks struggle to cope with rising cyber threat
The expanding digital footprint fuels a rising cyber threat
And to quicken the pace of innovation, C6 is recruiting early stage start-ups with fresh ideas. In exchange for sharing technology, the bank offers mentoring and funding through its own in-house incubator.
In addition to credit and debit cards and checking accounts, C6 offers certificates of deposits with yields tied to the Brazil interbank rate and no-fee money transfers via SMS and WhatsApp. Insurance products, even foreign exchange trading, are among the new products to be introduced.
Calicchio recently sat down with LatinFinance to discuss the digital banking environment and how C6 hopes to set itself apart from competitors. The interview was edited for space and content.
Was it necessary to develop C6 from scratch? Could you have done this while remaining at BTG?
I think yes. It could have been another option. BTG had several diverse digital initiatives. But we always thought that doing things from scratch would give us an operational advantage in time to market. We always believed that. It also better allows you to listen to your client, process information, and create a product the client wants. You don’t have to keep modifying your product and don’t risk it becoming obsolete by the time it launches.
You can but perhaps not as efficiently. There was a consensus among us founders that doing things from scratch would give us a large advantage from the most basic things to the most complex.
What are some examples of the advantages?
You can create your own unique company culture. That’s super beneficial. It’s not possible to alter the culture today of an incumbent bank. The majority of large incumbent banks were formed with a focus on products. Today the focus has shifted to the customer. But your systems are designed and prepared to develop and distribute your product, not for you to listen to your customer and process that feedback. So customizing products is much more difficult inside an already established bank than a new one. All of this is what we thought about. It was part of the calculation. I sincerely think that.
We hear a lot of people say that we can innovate and the large banks can’t innovate. No, I don’t think that’s true. It’s arrogant to say that. Everyone can innovate. The advantage we have is being smaller, being faster, and the time to market is shorter. Being able to focus on what the customer wants gives us a big advantage with time to market.
Things seem to be moving quickly, no?
In January of 2019, we got our Central Bank approval and the first employees got invited to open accounts. In May, we sent invites – employees could invite 6 guests and then 10 guests. On August 5, we launched. You no longer need an invite.
Many fintechs offer just one or two products when they launch. Why did you launch as a full-service bank?
Our reading of the market was that to be profitable, the bank has to be complete. And we all came from a bank that already had a license to be a complete bank.
Also, we believe in re-bundling of financial services. A part of our strategy is not to try to be another player [like fintechs are doing] in the unbundling of banking services. Customers are getting tired of it. So we’re re-bundling. Re-bundling is completely the opposite of what’s happening these days.
When do you expect to be profitable?
From our biz plan, 2021 is when we expect to start being profitable. It could be a little earlier or a little later. It depends a lot on our growth and investment in other areas. By the book – our five-year plan – we estimate in 2021 we’ll be profitable.
Do you have external investors?
No. Just the founders’ money,
Are you considering it?
We have to be open to it. This banking market is not one that’s about to be disrupted. It’s already happening. It’s clearly under big disruption and on two fronts. That’s why we constantly need capital.
What are the two fronts?
First, people are opening checking accounts at banks without branches.
It’s done. It’s already happening on an enormous scale. And it’s not true that it’s only happening among young people. Digital account adoption in Brazil is huge and it’s ongoing.
What’s the second?
Do people move money to banks that are not among the top 5 incumbents? Yes, they do. Deposits slowly by slowly are being made on other platforms that are not owned by the incumbents.
Maybe customers won’t want to return to traditional banks?
I think in the end that they are not against incumbents. They’ve been with incumbents for the last tens of years. It’s just a question of changing their habits on how they consume financial products, and in such a way that the incumbents have not been able to respond as fast as they should.
At the same time, there’s a legacy client base. They have a huge client base. They have a low cost of funding. They have lots of data. They understand very well their client. They will continuously compete in such an efficient way with the newcomers. Of course they will.
If you think about the overall strategy, it’s simple to analyze it. The one thing incumbents have that most of the other banks don’t have is access to funding and the origination of credit so you control the entire chain. You absorb the funding, you process the products that your clients need and then you spill out the products your clients want.
What are the biggest challenges C6 faces today in cybersecurity?
All of the banks are being attacked on a daily basis including us, especially when you’re new. We’ve been succeeding in protecting our clients’ data and our systems here. So far, so good.
I think this was one of the main tasks when we decided to start the company.
We knew that something that would kill us is a poor job in cybersecurity. That’s why we brought people with differentiated expertise and a track record already established in the sector protecting much bigger systems than ours.
Are there any digital banking trends that are more hype today and will likely lose importance or disappear over time?
It’s very difficult to talk about what’ll happen tomorrow. It’s so dynamic. A lot of financial institutions are testing blockchain.
People love to talk about it and I’ve been hearing them do so for the last five years. I still don’t see a great success story. In our day to day, the key questions are how we’re going to improve the lives of people, lower costs, and add value. I still don’t see blockchain making a big difference.