Collaboration, technology and globalized regulation will be the drivers for success in banking
BBVA’s Group Executive Chairman Carlos Torres Vila explained just why cooperation between banks and the fintech ecosystem is key. He also made a powerful case for a G20 coordinated approach to digital regulation to foster innovation and drive competition at an event in Paris, alongside the IMF managing director, Christine Lagarde.
Carlos Torres Vila was taking part in a panel session at Paris Fintech Forum alongside Ms. Lagarde; Stefan Ingves, governor of the Sveriges Riksbank - the Swedish central bank, and Kathryn Petralia, president of fintech business Kabbage.
Outlining the need for change, Torres Vila explained how digital transformation was profoundly changing both the financial sector and society in general.
Much of this change, he said, was of course positive, and offered societies tremendous opportunities, but there was also significant challenges embedded in the change too.
He elaborated in the cross-cutting and complex nature of those challenges, such as data protection, cybersecurity, access to data or competition. Torres Vila added that what was really needed was a joined up approach to those challenges and that regulation needs to happen globally, across countries, and across sectors.
He said: “It should be a global, maybe minimum set of rules that apply everywhere. And the problem is, we don’t have a forum today for doing this. So maybe it should be with G20.”
To an audience of around 2,500 people, BBVA’ Group Executive Chairman also outlined how investing, acquiring and partnering with the best fintechs had allowed BBVA to accelerate its digital transformation. For this reason, he stressed the importance of fostering collaboration with fintech ecosystems in order for banks to improve their products and value proposition to customers.
BBVA’s Group Executive Chairman Carlos Torres Vila, alongside Christine Lagarde, the Managing Director of the International Monetary Fund.
He said: ”We are embracing technology to bring about productive solutions. For example in South America, BBVA Microfinance Foundation is really bringing productive technology-driven credit solutions to, mostly women actually, bringing them out of poverty.
“So that’s just one good example of how technology can be used to bring about more convenient solutions to problems, making things cheaper, faster, simpler and more accessible.
“But really when we talk about bringing the age of opportunity to everyone, what we mean is helping people in their whole financial life. Not just in the money side of things, but in the decision making process too.”
He added: “Bad decision making creates a lot of frustration in people’s lives and a lot of unhappiness. And I think banks that contribute to solving that problem, that really help people in their lives in their decisions around money, and reducing the stress involved in that decision making process, they will have a strong value proposition.”
He said that the role of fintechs in this was critical, because this advisory role had to come from banks being part of a wider ecosystem - both in terms of technology but also as part of a natural blurring of industry lines.
The BBVA Executive Chairman, alongside the rest of the panel, was also asked what he felt the biggest risk to the banking sector was. All the panellists agreed that top of their list was the risk of cyber attack, which was an especially high area of risk given the digital and interconnected world that customers and clients live in.
However for Carlos Torres Vila, there was another risk too - the asymmetry evident in the way businesses operating in the financial services world are regulated.
He explained that the issue stemmed from the lack of a level playing field between how big tech businesses - who are increasingly offering some financial service products like payments and smaller business loans, and traditional banks, who are highly regulated - and rightly so he said - but whose regulation also limits their full ability to compete against big tech.
He concluded: “Our competition is really coming now increasingly from the big tech players. And as we move into deriving financial insights, actionable financial insights that support decision making from data, as we move into that, for sure, it will be the big tech players who will be offering those services and they don't have the financial regulation now that we have. Could we carve out things from our activity that are not subject to production regulation? If we don't, I think we're going to be an increasingly at the risk of not being able to play on a level playing field. And that is a risk to banking.”
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