Best bank transformation: BBVA
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| Further reading BBVA’s González – The digital banker |
One of the truisms of banking is: ‘Retail is detail.’ When it comes to providing financial services to individual customers, understanding the client is crucial to success.
For decades, banks have only really paid lip service to this mantra. In truth, retail bank chiefs would discuss that detail in the broadest terms. When pushed, that detail became clear for its lack of depth. Banks talked at length about how they understood their customers, and how that meant they should be able to sell them more products beyond just their current account, their credit card or their mortgage.
What they did not do, or did not have the ability to do because their systems were outdated, too unwieldy or simply not up to scratch, was really understand the earning and spending patterns of their retail customers.
Now, as we enter the digital age, banks are finally realizing the potential value of big data. They look enviously at the digital titans of business, such as Amazon, Google and Apple, and wish they could match the way they use data in their businesses. Some banks have even hired executives from these companies to help them get their heads round the challenge.
It’s often said that these new internet companies have more information about people’s behaviour than anyone else through their online profile. When it comes to finance, they can’t match the detail that banks have. But banks don’t yet have the ability to use it.
That last statement should be qualified to ‘most banks’. Some have taken key strategic decisions to help move their businesses forward to become, at heart, digital banks. And no bank is as advanced in this strategy than BBVA.
In March 2013, the Spanish bank’s chairman and chief executive Francisco Gonzalez announced a new structure that included the addition of a new business area, digital banking. But the process started seven years earlier, when Gonzalez decided it was time to shake up the bank’s lumbering IT infrastructure and prepare it properly for the online challenge.
Technology has always been something close to Gonzalez’s heart. He started his career in 1964 as a programmer at IBM, working on one of the world’s earliest super-computers – which had all of 8K of memory. He spent the next 15 years at the technology firm.
He compares most banks’ IT systems to a bowl of spaghetti, with strands from various old networks, from disconnected business lines or often from different businesses altogether because of acquisitions, forming an analogous mass. In 2006 he threw away the spaghetti and set in motion the creation of a single, modern IT system that would allow BBVA to move into a knowledge-based business model.
Gonzalez says that getting the foundations right is crucial. “Many banks look only at the rooftop – the products and services that customers can see,” he says. “The problem is if you only build the rooftop, and don’t change the structure underneath, the whole building becomes very unstable.”
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| Many banks look only at the rooftop – the products and services that customers can see. The problem is if you only build the rooftop, and don’t change the structure underneath, the whole building becomes very unstable Francisco Gonzalez |
Now he wants to create the world’s first truly digital bank. BBVA believes that both its systems and its mindset will enable the bank to use the data it has on its customers to provide a crucial competitive edge, converting that information into knowledge, and using it to offer customers what they want, when they want it. Gonzalez says that customers are looking to their banks for new forms of value in terms of goods and services that meet their needs.
On top of this, the bank has launched products to meet customers’ online needs. These include Wizzo, a standalone smartphone and web app launched in Spain in January; and BBVA Link, a multi-platform Facebook application, launched in Chile in March. Both of these are open to anyone in the country, not just BBVA customers. In the US, the acquisition of Simple in March, which Gonzalez believes set a new standard in digital banking is seen as a crucial step forward.
BBVA also partners with digital thought leaders, such as academics from MIT or experts from Google and Ideo, to drive innovation, including global prize-led competitions for the development of banking apps.
Banks will either groan or grin under the weight of their data. Gonzalez says that in 2006 BBVA did 90 million transactions a day globally. Now it’s 250 million a day. He thinks that number could be as high as 1 billion by 2020 as digital transforms banking.
He acknowledges that if banks don’t get it right, they are likely to lose ground to the digital specialists, pointing out the efforts that Alibaba is making in China through its Alipay business.
But Gonzalez believes BBVA has a huge opportunity to be the world’s leading digital bank and reap the growth that will come with it. He points to the US as a key battleground. “This is one of the world’s most digital societies, but it has some of the most rudimentary banking services. We want to fill that gap.”