Banking on Uncertainty

The impact of digitization, of new multi-use platforms like smartphones, and of the focus on customer experience has changed the game for consumers and increasingly enterprise customers alike.

Faced with this ever changing landscape, BBVA runs a specialist unit within the bank called New Digital Businesses which is charged with scouting out the future of the sector as well as actively disrupting it. At the recent EFMA Banking Transformation conference in Paris, BBVA’s Global Head of NDB, Ian Ormerod, outlined the strategies this unit enacts to build the future of banking.

Ormerod started by telling the audience how in his view, there were a number of trends currently disrupting the future of financial services.

The first of these was technology, ranging from Artificial Intelligence powered virtual assistants driving people’s day-to-day lives to the emerging potential of quantum computing – which could have a significant impact on the banking sector in areas like economic predictions or investment banking.

A second powerful trend centred around consumers and businesses themselves, and how behaviour and preferences for service delivery needed to keep abreast. For example, the convergence of online platforms and the impact of network effects meant there was a significant battle to keep the client relationship and to be the partner of choice around online activity.

A third trend Ormerod highlighted was geopolitical change –an example being the fight underway between the U.S. and China over domination for world trade.

Lastly, he outlined how all of the above then impacted banking itself, ranging from banking consolidation to the embedding of financial services products in third party experiences, to the potential for big tech players to start offering banking services directly themselves.

Ormerod said: “These are significant challenges to the sector, and will have wide-ranging consequences, but our view at BBVA is these should be seen as positive opportunities for change and for growth, rather than reasons to hunker down and be overly protectionist.

“We believe we will see financial services become more automated, and even invisible at the extreme, with technology able to predict problems or solutions and – with the right consent – enact decisions on behalf of the customer or client.”

“The battle for customers relationships is converging and being led by big tech, true, but where banks can offer great customer experience – such as BBVA does through its world-leading mobile banking app – we create our own space.

“Our job therefore is to be better ecosystem players ourselves, whether that is around technology, or advice that supports peoples financial lives, or integrating third party services that people need, or managing risk for companies – whatever is needed that builds on our position as trusted advisors around money and increasingly, data.”

For BBVA’s New Digital Businesses unit, the manifestation of this was done through four key levers, Ormerod added.

Firstly, through experimentation – such as BBVA was doing around areas like quantum computing, where the bank partners with both start-ups and big tech players to gain knowledge and build competitive advantage.

Secondly, by building its own disruptive startups – like Azlo or Covault – that aim to find opportunities in the financial service sector that can be filled by the bank itself rather than necessitating a third party partner.

Thirdly, through acquiring or investing in industry disruptors and innovators – businesses like Atom in the U.K. and Simple in the U.S., or DocuSign or solarisBank.

Lastly, by partnerships that deliver win-win-win outcomes for customers, third party businesses and BBVA itself. Here Ormerod referenced the recent deal the bank had signed with Uber in Mexico or the recently announced partnership between Amazon Web Services and BBVA Next Technologies in achieving AI competency to help businesses develop AI solutions.

"The key is embracing the changes in the world and adapting your business model to meet these, rather than fighting against the change ”

All of this work also translated into key learnings for the bank.

He said: “Perhaps the first thing we learn is to be comfortable with uncertainty – building the future of the banking sector is not something you can simply do from the comfort of a soft chair – it’s hard, its unpredictable, it has risks – but it also has immense rewards.

“We also need to keep focusing on use-case not just technology, ensuring everything we do has real world, real person, benefits and delivers tangible impact – both for customers and the bank and its shareholders.

“And we need to shift a little to taking smaller, growable bets, replicating the real world and customer behaviour, and appreciating that people are your real asset.”

Ormerod concluded that the output of all of this was a bank that was more sustainable, because it was more open to change. For example, being comfortable having indirect customer relationships, at times, through third party platforms and ecosystems. Or, maintaining the direct relationship but doing so as the platform provider and advisor of choice, not necessarily the product owner.

He said: “Perhaps the key thing is, as I started with, embracing the changes in the world and adapting your business model to meet these, rather than fighting against the change and trying to silo yourself and own your customers. The digital revolution is unstoppable, and it is a catalyst for change, so you have to be part of that change yourself if you are going to succeed.”