Case study
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In 2018, Banco Pichincha, Ecuador’s largest bank, knew it needed to take bold action. The 118-year-old institution was the least efficient bank in its region. Market share was in a slow bleed, with thousands of customers leaving each month. Perhaps most challenging, a large percentage of Ecuadorians lacked any sort of savings or checking account and did not see a place for themselves in the region’s traditional banks. Unlike other emerging markets in Africa and Asia, Latin America, hampered by poor connectivity, aging infrastructure, and ingrained non-digital mindsets, had yet to develop a thriving mobile banking industry.
While that may have looked like a clear opportunity for a bold first mover, Pichincha would first need to undertake dramatic change in its existing business to address serious challenges, including limited product offerings, slow customer service, and operational inefficiency. This required change on almost every front: technological, cultural, talent-wise, and operational. To remake itself, Pichincha decided early on it needed a whole-company approach, one that relied on cross-functional teams that could drive lasting change throughout the organization.
In collaboration with McKinsey, Pichincha took steps to rebuild trust and create a stable base of customers with whom Pichincha could build a new, digital business. This was a holistic process that included revamping marketing to focus on end-to-end journeys and implementation of best practices. The new Pichincha uses AI to sharpen its marketing efforts, along with more agile ways of working and new credit models. By 2021, the efforts were paying off. Net profits were up, and market share losses were reversing.
Pichincha was far from done, however. To fully realize its ambitions, the bank needed to attract a younger generation of Ecuadorians who felt excluded from traditional banking but completely at home with digital services like Uber, Amazon, and Netflix. The result: a bold plan to build a digital attacker banking unicorn in five years. To start fresh and avoid conflicts with the existing Pichincha business, the new bank, Deuna!, is entirely separate from Pichincha, though it shares what it learns along the way with the parent bank. Over the previous decade, other banks in Latin America had tried and failed to build digital banks. The Pichincha team studied those efforts and identified the points of failure. They focused on three areas: building market share; developing a minimum viable version of a digital wallet; and rewiring the bank’s IT infrastructure.
Working with McKinsey Technology and McKinsey Business Building experts, including architects, cloud experts, software developers, quality assurance technologists, and others, Pichincha built a minimum viable digital wallet in four months. The new entity, Deuna!, stands alongside Pichincha and welcomes both new customers and those from the mother bank. For the first time, Pichincha customers could make purchases and transfer money from their mobile devices. Just as important, Deuna! introduced payment and credit solutions to Ecuador’s long tail of mom-and-pop merchants who had previously lacked banking services.
A separate team was tackling Pichincha’s IT infrastructure, prioritizing efficiency and security. Over the next three years, Pichincha will modernize and migrate the bank’s 380-plus cloud applications to a new platform. It expects these moves to cut infrastructure and licensing costs by 70 percent, freeing $10 million annually over the next three years.
Driving culture change requires more than frameworks; it takes leaders who have lived the reality of transformation. At Banco Pichincha, team members worked at every level of the organization, with senior leaders receiving coaching and hands-on guidance. This built both the capabilities and confidence to carry the change forward. In addition, Pichincha created new digital roles and trained and recruited the necessary talent to fill them.
Héctor Roldán, a partner at McKinsey, drew on his previous experience as CEO and CIO of major banks to step in as interim CEO of Deuna!, ensuring the bank could find the best long-term fit. “We transformed a bold vision into a fintech platform that is deeply reshaping Ecuador’s financial ecosystem, proving that inclusion can propel us beyond innovation,” says Héctor.
Deuna!, with its leading-edge technology, helps to “future-proof” Pichincha by enabling it to address new markets and stay on top of emerging technologies like generative AI and advanced analytics. It’s both a bank and a banking lab for the larger Pichincha organization.
By working through the strategic initiatives McKinsey identified, Pichincha drove improvements in performance, efficiency, and market share. Bottom-line profits have more than doubled, from $120 million per year to $300 million, and the market share losses have reversed. All told, the efficiency gains have freed $117 million annually for Pichincha.
Deuna! has two million monthly active users. Pichincha believes it has the potential to bring in a total of three million new customers. Just as important, more than 500,000 merchants now accept digital payments. Meanwhile, Pichincha’s five million customers have access to better, cheaper services, including no-cost transfers and immediate access to credit and savings. Pichincha can now bring digital offerings to market in half the time while ensuring best practices in cybersecurity.
Inside Pichincha, more than 2,000 employees have been reskilled. One hundred eighty new digital-native employees are hard at work building Deuna!. By focusing on efficiency and innovation, Pichincha is on track to achieve its goal of becoming the leading bank in Latin America, aided by its new digital bank.
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