Client
Banco Azteca
Project
Banking/Information Technology
Executive Summary
A groundbreaking software/platform combination has enabled
Mexico’s newest bank to provide a wide range of services to the country’s
middle and working classes for the first time.
Download the full case study (PDF, 68K) PDF Help A Bold Experiment at Banco Azteca By Lucy Conger Outlook Journal, May 2003
From the day in late October 2002, when Banco Azteca opened
815 branches in 250 Mexican cities, it was clear this was no ordinary bank.
Azteca was, after all, the first new bank launched in Mexico
in eight years. It was also the first Mexican bank to target the country’s
middle and working classes, some 70 million people who had been overlooked by
the banking system. And with a goal of servicing 3 million new savings accounts
and 2 million loan applications within its first year of operations, Banco
Azteca has been nothing if not ambitious.
One of the bank’s biggest initial challenges was to find a
technology capable of supporting this extraordinary undertaking—and have it up
and running, within budget, in four months. After considering a number of
proposals, Banco Azteca turned to Accenture and its subsidiary Alnova
Technologies Corporation, an independent software vendor that specializes in
retail banking applications.
Alnova was “more flexible and agreed to meet the timetable,”
notes Juan Arévalo, Banco Azteca’s systems manager, “and they had experience in
Mexico.” The company’s proposal was based on combining one of its software
products, Alnova Financial Solutions, with Microsoft’s .NET platform. Accenture
would act as project manager, coordinating all the hardware and software
installations.
A Double Bet
It was a bold
experiment, according to Iñigo Redondo, an Accenture financial services partner
based in Mexico City. Azteca would be the first bank anywhere to use Alnova
Financial Solutions on the .NET platform. “The bank made a double bet,” says
Redondo—that this first-ever software/platform combination would actually work,
and that Alnova Financial Solutions would enable efficient operations at the
bank.
  Banco
Azteca is a wholly owned subsidiary of Grupo Elektra, Latin America’s largest
specialty retailer and Mexico’s leading consumer finance company. This meant
that the bank began operations with an existing customer base built up over
nearly 50 years of retailing at the parent company’s stores.
Banco Azteca’s branches are located inside Grupo Elektra
stores, where the parent has long offered installment-plan financing for
merchandise purchases and boasts a database with the credit records of 3
million customers. Azteca also inherited Grupo Elektra’s 830,000 savings
account customers, who have limited or no access to credit at Mexico’s
conventional banks. The Elektra network of stores effectively provided Azteca
with a ready-made branch system and greatly facilitated the bank’s launch.
Market Potential
Elektra has a
half-century’s experience dealing with small transactions, and Banco Azteca
will adapt this tradition as a strategy for reaching middle- to lower-income
customers with minimum family incomes of $250 per month. Customers can open
savings accounts at the bank with as little as 50 Mexican pesos (about $5); a
monthly average balance of 50 pesos is required to earn interest.
Elektra’s installment financing typically extends over a
year, so weekly payments on purchases of appliances like stoves and
refrigerators can be as low as $15. By accommodating the financial needs of
lower-income families this way, Banco Azteca believes that its potential market
is more than 15 million households, or about 70 percent of the Mexican
population. The bank has grown far more rapidly than anyone expected.
Within only two months of launch, the volume of business
had reached the projection for six months. Azteca has added 400,000 new savings
account customers, while the Alnova software is being used to consolidate risk
information on the loans of 2.1 million existing Elektra credit customers. As
the one-year loans are paid off, Elektra will wind down its lending operations,
and beginning in 2004, all new loan activity will migrate to Azteca.
It already is proving to be a highly successful arrangement.
“The sophisticated technology and collection systems already in place at Grupo
Elektra will provide us with invaluable data about our customers’ buying habits
and financial needs,” notes Carlos Septién Michel, CEO of the new bank.
Alnova combined two financial operations systems—its own
software and the software used in the front-end terminals at Elektra’s retail
stores—to set up the bank. Alnova Financial Solutions had to be integrated into
the Elektra stores’ system for recording installment loans and savings
accounts. “We developed [our software adaptation] based on their terminals,
adding what was lacking for setting up a bank,” says Redondo.
The software vendor is implementing new system components
for handling deposits and, in the initial phase, continues to use the loan
system that Elektra stores already had in place.
Banco Azteca’s Alnova software on the .NET platform now
handles 1 million savings operations and 150 million retail sales and financing
transactions every month. In addition to these operational functions, the
software includes risk management tools for monitoring the health of the loan
portfolio; it also tracks the fiscal and accounting information required by
Mexican banking authorities. As Accenture’s Redondo puts it, best banking
practices are implicitly built into the software.
In its first three months of operation, the number of Banco
Azteca accounts increased by nearly 50 percent, to 1.2 million, while deposits
grew by 150 percent, to 1.1 billion pesos. On some days, as many as 10,000 new
savings accounts were opened. “Alnova software is what has allowed us to grow
rapidly,” says systems chief Arévalo.
Azteca currently has installed capacity to process up to 90
transactions per second; capacity can expand to 250 transactions per second,
based on using 24 processors. This is theoretically sufficient for a
medium-sized bank, notes Redondo, with about 8 million customers, 1,000
branches and 6 million accounts.
Alnova Financial Solutions not only met Banco Azteca’s need
in the frenetic run-up to launch; it also will enable the continued expansion
of the bank. “It is flexible and secure and has high availability,” says
Arévalo.
A team of 50 staff members from Banco Azteca and 70 from
Alnova and Accenture worked together to install the bank’s operating system.
Staff from both organizations worked together on each module of the system to
ensure that when the installation was completed, Banco Azteca technicians could
manage operations without requiring the assistance of Alnova personnel.
One of Banco Azteca’s requirements was a cost-effective
operating system, and use of the .NET platform was the key to achieving
significant savings. The cost of launching Azteca’s core operating system for
all 815 branches was $10 million; the system’s annual operating costs will be
$2 million. Alternative technology would have required an initial investment of
about $20 million plus annual operating costs of $7 million, says Arévalo.
Banco Azteca is currently running its systems operations
with fewer than 40 people. “Everything in the bank is automated,” says Arévalo.
An additional 50 technicians are working to develop the capacity in the
software to process new products that will be launched in the next year. These
include debit cards, automated teller machines, mortgage and used-car loans,
trusts for institutions, and Internet and telephone banking. In this second
phase of Alnova’s work, a more robust terminal that will coexist with the
front-end terminal of Elektra’s stores will be developed for the bank.
The operating system meets rigorous standards for security.
Banco Azteca demanded coverage 24 hours a day, 7 days a week, with no more than
4 hours per year of downtime. Because the bank’s headquarters is in
earthquake-prone Mexico City, Banco Azteca also required a backup location
capable of handling banking transactions within 24 hours after a disabling
disaster.
The alternative site will be located in the headquarters of
TV Azteca, a sister company. Both Banco Azteca and TV Azteca headquarters are
located at the far southwestern reaches of Mexico City. “With any problem in
our installations, in one hour we can pass over to TV Azteca” and reestablish
complete service, says Arévalo.
Alnova Financial Solutions originally was developed in Spain
and has since been implemented at nearly 100 sites in Europe, Latin America and
Asia. The software vendor is the market leader in Latin America; in Mexico, the
software was already in place at top-tier banks, including BBVA Bancomer,
Santander Central Hispano and Grupo Financiero Banorte.
Alnova’s work with Banco Azteca has important implications
for the software vendor beyond this particular partnership. By delivering an
innovative operating system for Azteca at a reasonable price, Alnova has
demonstrated that it can operate in a new market niche: medium-sized banks and
specialized financial institutions like mortgage companies.
 Lucy Conger is a Mexico City-based
business writer.
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