BBVA promotes dialogue among Latin American regulators regarding technology and how to regulate it

That was the view expressed by Hugo Nájera, Director of Business Development at BBVA Bancomer, during the opening of the Seminar on Regulation in Mexico City, organized by BBVA and the Inter-American Development Bank (IDB). The sessions close today with the regulators participating in two panels about cloud computing and digital onboarding.

Derek White, Global Head of Customer Solutions at BBVA, along with Hugo Nájera, welcomed the more than 70 participants - including regulators, government authorities and executives of large technology companies - who attended the first working session, held in the Innovation Center at BBVA Bancomer Tower. Diego Herrera, senior specialist in financial markets at the Connectivity, Markets and Finance division of the IDB, stressed the importance of having a regional encounter of this kind, which allows participants to “connect the regulators with the people who are really making the disruptions in the financial sector.”

“We already have countries in which digital sales surpass 40%

According to Derek White, who attended the event via telepresence from Madrid, the change in the model of interaction between customers and their banks offers enormous opportunities for institutions such as BBVA. “The interaction of the customer with his/her money is increasingly being done through technology, in the digital world, and we already have countries in which digital sales surpass 40%,” he said. But the changes will go much further. Derek White estimates that by 2020, 30% of all the Internet searches will be done via voice (hands-free).

From the cloud to artificial intelligence

Nájera shared with the regulators the principal aspects of BBVA´s transformation journey at a global level. He underscored the potential of disruptive technologies and “the need to utilize them in a secure fashion, under the aegis of regulation.”

In this regard, the Head of Business Development at BBVA Bancomer pointed to the fundamental role of cloud computing in the new paradigm of bank services in the future. “If the finance industry cannot use the cloud, it will not be able to use algorithms or artificial intelligence, which means that a large part of the value proposal to help customers make financial decisions will not be possible, and the algorithms will not learn,” he said.

According to Najera, the broadening of customer channels has been highly positive, because the consumer has grown accustomed to operate and “add” channels over which to interact with his/her bank - from offices, ATMs, Internet banks or mobile banks. Of these, mobile banking is the one that has caused a true revolution in financial services because of the large amount of data it provides. “Technology has turned us into addicts of the mobile device, connected all day long and increasingly demanding. They have given us power; we like being able to do things ourselves and making the best decisions.”

The BBVA Bancomer representative recalled that the technological giants already use cloud computing for their activities, which allows them to know their users better. And they are the ones that are entering into business segments of financial services. “We have to act like them, in order to be competitive,” Nájera said.

Another technology that promotes disruption in financial services is blockchain, that highway of trust, which in the future will allow us to sign contracts and make transactions with people, and which will replace the current options. Nájera also called attention to crowdfunding, or loan platforms that enter directly into a segment of the banking business. These are companies that have no capital risk; the risk is borne by those who invest. “We must have transparent regulation, so that those who assume risks know that they are doing so,” he said.

Towards a new value proposal

To conclude his talk, Nájera told regulators of the need to review the banks’’ value proposal, because the competition today is not with other banks but with technological players, who have much greater capacities. They acquire a foothold in the financial system and are not regulated by any norms. “We have to see that the financial system can compete on those terms. The technology firms should work in an orderly fashion, without creating problems in the financial system,” he said.

The Head of Business Development at BBVA Bancomer defined four key elements, which are used by startups, which will help financial institutions to define a new value proposal.

Design. It´s not just about UX (user experience) or colors, but also about thinking globally. Design thinking helps to the outline the customer’s “journey” with respect to the bank. The “journey” of a mortgage customer is not the same as that of a customer that seeks a loan to buy a car or to buy gifts. It helps us to identify the moment in which the bank becomes relevant.

Data.  Using it is key to making the bank´s offer reflect our knowledge of the customer. Data helps us to identify the moment at which that person needs the bank’s services.

Mobile. Everything should be done with the mobile customer in mind. It´s the way to accompany the customer at the right moment so that he/she can make a financial decision.

Open. Opening the heart of the bank´s systems will help third parties to have a guarantee that their relationship with the customer is well regulated. The interest in using API´s responds to this goal, which will lead to a better offer and future for the customer.

Summary of the session

On the first day, the regulators were the protagonists of a unique activity: a workshop dedicated to creating a digital product, in which they learned the principal aspects of design thinking, one of the methodologies used by startups in developing their solutions, and which puts the customer at the center of product development.

As for financial inclusion, Gabriela Zapata, advisor to the Consultative Group to Assist the Poor (CGAP), reckons that technological advances will drive new digital models that facilitate the rapid access to financial services, with a lower operational cost and a greater scope of financial inclusion. She explained that one of the challenges to driving financial inclusion is to also promote confidence in the institutions and show the advantages that financial products have to people in the non-banked sector.

Technological progress will drive new digital models that facilitate a rapid access to financial services.

The European regulatory experience also had its space in the seminar. Speaking to the Latin American regulators, Álvaro Martín, Chief Economist for Financial Regulation at BBVA Research, provided details of how the European authorities respond to those challenges. “Technological innovation always goes head of regulation, which makes it key to have agile regulation of the new business models,” he said.

The session concluded with a round table on “regulatory sandboxes,” or controlled testing environments. The participants included Diego Herrera of the Inter-American Development Bank; Ana Laura Villanueva, general manager of Banking and Securities at SHCP; Jamie Campbell, co-founder of the startup Bud, which was part of the first sandbox of the FCA (United Kingdom) and Álvaro Martín, an expert at BBVA Research. They analyzed the suitability and the advantages of initiatives of this type, in order to move forward in the regulation of financial services with a techn0logical component.