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Financial system 18 Sep 2016

Banks, in uncharted territories

This is how Francisco González describes the current context for financial institutions in an article he wrote for the Singapore Summit. BBVA’s Executive Chairman took part in this event this weekend, as well as in the meeting of the International Advisory Panel of the Monetary Authority of Singapore (MAS).

“Finally, it is here, and everybody can feel it: banks are facing the impact of the technological revolution.” The BBVA Executive Chairman is referring to the change underway in customers’ habits, who demand new, innovative services and ways of accessing them.  And hundreds of new entrants to the banking business are catering for these needs, attacking different links in the banking value chain.

All these changes are taking place in the midst of a puzzling economic environment of subdued growth, very low inflation (even negative in many countries) and interest rates hovering around – or below – zero. And, on top of all this, regulatory pressure is mounting, says Francisco González in the article.

The BBVA Executive Chairman also maintains that technological advances add to the urgency for a radical transformation of the banking industry. But at the same time, it facilitates improving both the efficiency and the quality of the customer experience, which are crucial to survive in this new, much more demanding environment. “The transformation in banking, supported by technology, is equivalent to a structural reform that will bring enormous benefits for customers and a strong stimulus for investment and growth,” he adds.

The financial industry will evolve to a complex ecosystem with a relatively small number of “platforms” where different providers compete and frequently cooperate. Francisco González imagines that those who “own” the platforms and validate the offering of all the providers in the platform will be at the center of these ecosystems.  These dominant institutions will need to maintain an excellent reputation and have outstanding technological capacities.  That’s why BBVA has been working on this since 2007, he explains, investing not only in its in technological infrastructure, but also in organizational structures, processes, human capital and corporate culture.

BBVA’s Executive Chairman ended the article with a reflection:  “We do not know what the future will bring,” he says.  “But we are gathering everything we need to gain customer trust, which in the end is what will decide who the winners will be in our industry.”

MAS meeting

Francisco González participated in the MAS International Advisory Panel’s annual meeting today in Singapore. He is the only Spaniard to be a member of this select group.

Axel Weber (UBS), Stuart Gulliver (HSBC), William Winters (Standard Chartered), Jean Lemierre (BNP), Yi Huiman (ICBC), Koji Nagai (Nomura) and James Gorman (Morgan Stanley) and other international bankers were also invited to the meeting.  The panel advises the Monetary Authority of Singapore on the global economic situation and current banking issues.  At this year’s meeting, participants discussed the risks Asia is facing in the short-term, growth outlooks and changes underway in global trade.

As part of his visit, the BBVA Executive Chairman had the opportunity to take part in the Singapore Summit, an annual event involving the region’s top economic actors.  This year’s summit analyzed Asia’s role as a driver of global economic growth. Singapore’s Deputy Prime Minister Tharman Shanmugaratnam also participated in the event.

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