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By Esther Macías.
BBVA is among the Spanish banks that have aligned themselves most closely with message of innovation and commitment to information technology. Francisco González, the chairman himself, has a background in IT, and often highlights the need to reinvent the traditional banking model, particularly in order to compete with giant digital-native companies such as Google, Amazon and Facebook –just a few of the players that are starting to see in financial services a succulent market that is ripe for the picking. The process which –in the words of González– takes BBVA from being “an analog, efficient and profitable 20th-century bank to a digital knowledge-based 21st-century institution” was begun within the bank several years ago, but last March it took on a renewed impetus with the creation of a Digital Banking area headed by Carlos Torres, one of the company's top executives.
Luis Uguina, Digital Banking Technology Director at BBVA, speaks in this interview about BBVA's new Digital Banking strategy and the technological pillars on which it stands, the projects being developed by their experts for the various communications channels with the customer –and particularly for the mobile channel–, and in general about the future of the bank in a world that is currently seeing more upheaval than practically any other. The executive is firmly convinced that “technology radically transforms the customers' experience”, and explains the bank's approach to the digital world, which he says is based “more than on the concept of ‘mobile first’ on the concept of ‘mobile only’”. It is worth noting –he points out– that BBVA is “the first bank in the world to have a mobile payment technology in mass production for the whole customer base”.
TICbeat.- BBVA has been working on digital banking for a long time, but its commitment to this segment was materialized last March with the creation of a specific division. Can you explain in general terms the bank's strategy in this area and what projects they're working on?
Luis Uguina.- The whole of BBVA's digital banking strategy is articulated in two major vectors or lines of work. The first aims to transform the internal functioning of the company. One of the key differences between a traditional company and a digital company is that the speed of action from the instant an idea is generated to its execution is exceedingly fast, in addition to the fact that all the projects developed are conceived in a digital native way. When traditional companies digitize, they tend to transfer their existing processes from the physical to the digital world, but this no longer works: you have to make digital projects in a native way, and this is why we need to undertake a wholesale re-engineering of our processes. In order to be sure that this becomes a reality we set up the digital banking unit headed by Carlos Torres. The idea is to amalgamate this strategy in a single point so the whole bank has the same vision and capacity for execution.
The second line of work consists of launching products onto the market that genuinely reflect the digital transformation we are undergoing: everything from our website (we launched the new one a year ago), through to mobile banking (we bring out an upgraded version every quarter), and including projects like Wallet, the first mobile payment system to be released by a bank on a massive scale.
TICbeat.- Technology is inseparable from the financial sector, but how much does the first contribute to the second? What is your view?
LU.- The power of technology is tremendous, it's completely revolutionizing a number of industries. Technology is radically transforming the customers' experience, and this is an aspect we are trying to improve in every possible way. We have to bear in mind that the banking sector is highly regulated, and that restricts the products we can launch. For example, we are not allowed by law to launch a deposit with a 15% APR. But we can innovate in technological aspects, and this has a clear impact on the user experience. It's particularly important in ensuring our customers have a native experience in the world of cell phones and the Internet.
TICbeat.- In this area, what are BBVA's technological pillars?
LU.- The first thing we've set out to do is to ensure we have by far the best banking platform on the market. This allows us to do whatever we want in the different channels with which we communicate with our customers. More than mobile first, our approach is mobile only. In fact, our strategy from this point on is that every new product we launch must be conceived in a digital native way, and with the "mobile only" criterion I mentioned before.
Obviously, we'll continue our commitments to the rest of the channels (Internet, the contact center, the branch office) because customers must be able to choose the one they prefer. And nor are we going to get carried away by cell phones, because there are transactions that people are unlikely to want to make from one, like taking out a mortgage. The idea is this: transfers, depositing more money in a fund, displaying the fund basket, checking balances and making transactions, returning a card transaction that doesn't correspond to the customer, purchasing… these are all transactions that are more impulsive in their execution, and we'll put all our efforts into making sure customers can do these from their cell phones. But more thoughtful processes like investing money in a fund or a deposit, taking out a mortgage and so on… we leave those to the PC. The tablet, on the other hand, is halfway between the mental capacity for execution offered by the cell phone and the reflective process we use with the PC, so it would be a hybrid. Each device predisposes the user to a different mindset, and we'll adapt ourselves to those processes.
TICbeat.- Technological complexity is behind it all, however… I mean when transferring these different experiences to the user by means of different devices.
LU.- Everything is done and managed from our platform, which is able to transmit our offering to each device according to the customers, the products they have subscribed, and so on. The customers don't care about the underlying technology –they just want to have the best possible experience from the device and the channel they choose, and we can achieve this by making sure we have a very robust banking platform behind the whole operation, to allow genuine multi-channel banking. Our aim is to make the customers' lives easier, rather than riddling them with fees.
TICbeat.- Earlier you mentioned that you're re-engineering a number of processes. Which ones?
LU.- Many, around 1,500. For example, the customer registration process. So far –although you can do it via the website– a person who wants to register as a bank customer is required by law to go to a branch office, as the bank employee has to confirm that he or she is who he says he is for regulatory reasons. All the banks are subject to the same regulations, and we comply with that. But here at BBVA –without flouting the law– we're going to take advantage of what we've learned from Wizzo [an app created by BBVA for young people so they can ask for their pocket money, set up an online fund between various people to pay for a gift for a friend, create savings plan, use cards to purchase over the Internet or in physical shops, etc.], a totally digital product which permits online registration and enables customers to register in a wholly digital way. Evidently there will be things users can't do until they get to the branch office to identify themselves –as prescribed by law– but there are other things they can do. For example they can have a maximum balance of €50,000, and this would make a lot of people's lives much easier.
In short, the idea is that exactly as certain digital-native companies like Facebook or Google do with their products, we allow users –by providing a minimum of information– to carry out certain functionalities, find out more about our products and our company, and then if they need to make any other transactions they'll have to provide more information or physically identify themselves as required by the regulations. But we'll ask them for this information when it's really necessary, and not before.
TICbeat.- Another of the applications you've launched is BBVA Wallet, which has just been upgraded so users with Android terminals with NFC can use them for mobile payments with this technology. What does this move entail?
LU.- We launched BBVA Wallet in December last year. At that time it enabled mobile payment by means of stickers, but it's constantly being upgraded, and the latest version allows Android users with NFC technology to pay directly with their devices (without stickers); they only have to download the app and start using it. We're the first bank in the world with this technology in mass production for all our customers. It's based on Visa's cloud-based payments specification and represents state-of-the-art innovation, as whereas up to now the payment information was stored in the mobile (or in the device itself or on the operator's SIM card) it now resides in the bank, in our servers, so the user doesn't have this information on the phone –with the extra security that entails– even though the data are updated in real-time.
TICbeat.- BBVA Wallet has been favorably received and already has 200,000 users. How many do you expect by the end of the year? Will they really be active mobile payment users?
LU.- The advantage is that time is on our side. Now in Spain 30% of the total cell phones have NFC technology that allows contactless payment (Android cell phones with version 4.4 or higher) but all the new Android cell phones released from now on will incorporate it. There are even rumors that the new Apple terminal will come with NFC [it doesn't have it yet]. In any case, for users whose terminals don't have this technology yet, we can provide the sticker I mentioned before, so the experience is the same. Our forecasts are to have half a million active users of BBVA Wallet by the end of 2014; that is people who have used it at least once in the previous week.
TICbeat.- What is the business outlook for mobile payments?
LU.- We don't think about the business, but about creating digital user experiences that make the customers see the bank in a different way. What's more, by 2020, any company that doesn't have a native experience for the digital environment will be unable to compete in this world.
TICbeat.- In addition to Wizzo and BBVA Wallet, will we see any other app from BBVA in the coming months?
LU.- Yes, we're working to launch a new app at the end of the year in the area of Internet payments. I can't reveal much more, but it's going to be fairly revolutionary in comparison with other products offered by banks today. We also have a very aggressive plan for updating the apps for Wizzo, BBVA Wallet and mobile banking (which –as it's now the oldest– tends to get overlooked, but which will see new and fairly important developments in the last quarter of the year).
TICbeat.- There's no doubt you're facing some pretty major challenges. What's more, you're no longer competing only with other banks fighting for a niche in the digital world, but also with the technology giants (for example, Google, Paypal…) that are increasingly bringing out products that have traditionally been linked to the world of banking, such as mobile payments… Francisco González, BBVA's chairman, has often pointed this out…
LU.- With regard to its banks, Spain is one of the countries that is most competitive in the area of digital products. The Spanish banking sector is streets ahead of the rest of the world digitally. They have very good products in other countries –for example in northern Europe– but if we look at the whole range of products in mobile banking, payments, channels… Spain is definitely a success story. It's also true that this success is due to the fact that the penetration of smart phones here is nearly 70% of the population. So this combination of a high level of competitiveness of Spanish banks, together with the high penetration of Internet and smart phones, creates a spectacular breeding ground for digital banking projects. And this doesn't happen in other countries.
Obviously this competitiveness between Spanish banks means we're all fighting to bring out the best and most attractive product for the customers. Banks like Sabadell, La Caixa and Bankinter are very good competitors, and they keep us on our toes. Having said that, BBVA's approach is different. Why? Because in the worst years of the downturn we continued investing in technology and innovation, and right now we've got possibly the best banking platform on the market, which we're also exporting to other countries like the US and the rest of Latin America. Second, we're the only bank in Spain to have created a digital banking area, in this case headed by an executive as distinguished as Carlos Torres, a member of the bank's management committee under Ángel Cano –the COO– and backed by Francisco González –the CEO– who is himself a genuine technology and innovation enthusiast; not for nothing is his background in IT, as is abundantly evident.
In short, digital companies will go as far as they can, and that's where we banks can play our trump card, because we're good at our business.
TICbeat.- But let's look at the specific case of mobile payment, where you have competitors of every description: major Internet players, operators…
LU.- Yes, it's a tricky landscape with a large number of players: card issuers (Visa, Mastercard…); operators; digital native companies (Paypal and Facebook…); manufacturers of devices and operating systems (Apple, Google, Microsoft…); and the banks themselves.
The card brands (Visa is somewhat ahead of Mastercard) are creating protocols so the rest of us can play securely and correctly. They aren't developing a proprietary product, but one that can be used by the banks –as we issue the cards– and other players.
The position of the operators is complex, and time is against them. They were the first to have a secure element that enabled mobile payments –the SIM– but they've been slow off the mark. What's more, they're not all working to enable mobile payments. Some 62% of our customers in Spain (out of a total of 8 million people) have Telefónica, Vodafone or Orange as their operator, and they have opted for NFC payment with the SIM. But we have to provide this service for the rest. What's more, the process of allowing customers to make mobile payments through an operator is more complex; for example, they need to change the SIM in the terminal. Our view is that we need to make these services easy for the customer.
The major technology providers such as Google and Apple –and to a lesser degree Microsoft– all have their own strategy. Google Wallet is an agnostic banking and operating solution; Apple has Passbook (although it's not a payment solution as such) and it also looks like they'll end up bringing out a phone with NFC for mobile payments; and Microsoft also appears to be opting for NFC.
Finally we have the banks, the ones who provide the payment system for the customers and issue the debit, credit and prepayment cards. We're also the ones who have the relationship with the customers at the level of the financial model.
My view in this scenario is that it's not going to work until everyone in this ecosystem can win. Apple is opting for mobile payment because it'll sell more devices, Visa because that way people will use its platform, businesses because their customers will have an improved experience, banks because we make the transactions and can get to know our customers better… Even the operators can win, although they'll have to bear in mind that in this financial world the margins are extremely low.
TICbeat.- One of the big new trends in the market are wearables (wearable devices like bracelets, watches…). Some banks are already working on the apps for these gadgets. What's BBVA's strategy in this department?
LU.- Our strategy is twofold. On the one hand we're waiting see what value services we can offer the customers in a gadget that's worn on the wrist all day long, and on the other to see the potential scope of the technology, which –in the case of wearables– is completely fragmented according to the brand and the device. In general terms we don't want to limit ourselves to bringing out a “dumb” app which simply shows you your balance every morning, just so we can say we're the first to have a banking app on a smartphone. If that's what brings value to the customer, we'll certainly do it, but we have a lot to learn before we can create useful financial services in this type of devices, and generally speaking in the whole area of the Internet of Things. More and more devices are becoming connected (from watches to home thermostats) and the opportunity to do things is enormous.
The best thing is that we have a small team of people whose only job is to find out how to bring value to customers who have this type of device. I'm confident we'll see the preliminary tangible results by the first half of next year.
TICbeat.- One aspect I wanted to ask you about is the purchase of the digital banking company Simple last February. What does this mean for BBVA and what's their strategy in this regard?
LU.- Simple is not a bank, but a company offering digital banking services via a website and a mobile app, and which has been spectacularly well received by users –it has genuine fans. We bought the company because of the talents of its employees, who've succeeded in re-engineering a large number of financial products. So far they have very simple products like current accounts, a debit card and a part for expenditure targets, savings plans… but the plan is that now they're part of the BBVA group we can bring them more complex products like loans, mortgages, deposits and so on so they can totally re-engineer the product from the focus of customer experience. Thanks to Simple we'll learn how to make very simple products that are tremendously attractive to users. And they'll have all the power of our IT platform and our products which no one except a bank can offer.
In any case, both companies will continue operating separately. However, we'll see the first fruits of this purchase in September, when we bring out a search engine based on what Simple does but on the BBVA website. For example, customers will be able to look for the receipt from a gym they went to years ago, or a dinner… and all in real time. Customers can have all their movements classified and take a photo and add it to the transaction on their card… These are services that work extremely well in Simple and which we'll gradually introduce into the bank.
TICbeat.- How would you classify the role of the BBVA Ventures risk capital project when contributing disruptive technologies like Simple to the bank?
LU.- BBVA Ventures plays a key role in our innovation model. Its mission is not only technological. It also allows us to be in contact with staff all over the world who are developing the financial services of the future, either by using disruptive technologies or else by using the same old technologies to create a new and radically different product. It's the best possible vehicle for exploiting and channeling know-how and talent, and “infecting” (in the best possible sense of the word) others with the way of working of a great company like BBVA. The end result is that we learn to do things differently, which enables us to design products that are more closely adapted to the needs of our customers.
TICbeat.- There are multiple technologies around the concept of big data that may revolutionize the financial sector. What is BBVA working on in this area?
LU.- We've been working on big data for years. We have a very large team at the bank, and we decided to create a spin off in this area to move forward as quickly as possible in these projects while maintaining our levels of security and compliance. The company –of which I am also the CEO– is called BBVA Data & Analytics and employs over 20 people. The aim of this project is to get to know the customers better in order to make their lives easier –of course, not to sell their details on to third parties or bombard them with products. We already handle nearly 5 billion information records that we use to segment the customers more effectively so as to be able to improve the offer and the service we provide. We could remind them when their car payment is about to fall due, for example, because big data makes it possible to predict events. And if the occasion arises and they need it, we could offer them a loan if they're interested.
TICbeat.- So is this technology already mature?
LU.- Yes, we're quite advanced. I know other banks like La Caixa and Santander are working with other providers. We do it internally, and integrate it in our IT department. With regard to the technologies we use a range of architectures: Cloudera, Hadoop, Map Reduce, Elastic Search…
TICbeat.- In BBVA you've also created some gaming projects. Was the experience successful? Are you going to undertake any more projects of this kind?
LU.- BBVA has what is probably the only gaming project marketed on a massive scale in the world banking sector. The experience, which we began three years ago in the bank's innovation area, has been very satisfactory. We've learned a great deal, and particularly in the last year and a half. Discovering which elements make games attractive so we can apply them in an environment like the banking sector has been a considerable challenge for the marketing, innovation and channels teams, among many other participants. Because although play is the most important activity for children, unfortunately this is not the case for adults. Recovering the essence that connects us with creativity, discovery, curiosity, passion… and applying it in something as "unplayful" as online banking is absolutely thrilling.
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