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Technology> Big Data Act. 12 Apr 2022

How BBVA uses data to look after its customers’ financial health

Del servicio al asesoramiento: Asi usa BBVA los datos para cuidar de la salud financiera de sus clientes

BBVA has set a huge digital challenge for itself: to go one step further in the banking services it provides and offer personalized suggestions that improve its customers’  financial health. To do so, it uses data science to identify the characteristics that define them (always with their prior consent) and therefore offer suggestions on how to manage their everyday finances, lower their debt, save or plan for the future.

This month, Álvaro’s loan matures for the university degree he is studying, and Susana just finished repaying the loan she took out to remodel her home. Both just received a message on the BBVA app that suggests that they continue allocating the same amount to something that helps to improve their financial health. But while it suggests that Álvaro use the money to create a financial cushion for unexpected expenses, it suggests that Susana think more of the long-term and start to save to ensure her financial well-being.

Why does BBVA give them different suggestions? Because, thanks to data science technologies, with their prior consent, it has analyzed their everyday finances and suggests actions that could be more appropriate given their profiles. She has had a high level of set income for several years now, good savings habits and sufficient financial cushion. On the other hand, he combines his university studies with modest income for the past couple of months, so he should focus on establishing his ability to save before considering other options.

For customers who have given their permission, BBVA calculates multiple variables related to their income, expenses and debt. Based on this information, with analytical engines developed by the bank, they identify the historical and daily characteristics that define financial health for each customer: their average income from the past year, ability to save, financial cushion available, whether or not they have debt, their most common expenses and their investment products. “In order to do the calculations, it is essential that the person has been a BBVA customer for at least a 12 months with frequent transactions,” explained Elena Krasheninnikova, Product Owner of Personalization at BBVA AI Factory. “This way, the algorithms will have a more accurate picture of what occurs in their finances on a daily basis.”

Various BBVA teams work together on the definition, calculation and production processes for these characteristics: business (on identifying new features and needs), data (on collecting data), data analytics (on implementing, monitoring and extracting information from the data) and engineering (on developing the engine that does the calculations and doing quality control).

“Our suggestions are always adapted to the potential financial status of each customer.”

Once these variables have been calculated, a set of rules are programmed with optimal values established as global standards of financial health. For example, in general, financial literature has defined as suitable values that a person’s debt should not exceed 35 percent of their income, 20 percent of the income should be allocated to savings (50/20/30 rule) and that the financial cushion is allows them to cover their average monthly expenses for six months if the person does not have an income. “Our suggestions are based on these optimal values, but they are always adapted to the potential financial status of each customer,” explained Nancho García, Global Product Owner of Personalization in BBVA’s Advice Area. “This also applies to the different locations. When we implement the suggestions in other countries, we have to readjust these optimal values to our customer data. For example, we have analyzed that the ideal amount of financial cushion for our customers in Mexico is three months.”

Reduce your debt, save, create a cushion and plan for your future

Combining the characteristics that define customers’ financial health, they are offered personalized suggestions that give them different options that could help them improve their specific situation, based on four plans:

  • The ‘Debt’ plan is activated when the customer has exceeded the assumable monthly debt payment based on their typical income.
  • The ‘Ability to save’ plan is designed for those who need help keeping costs under control.
  • The ‘Financial cushion’ plan is geared toward customers who already have the ability to save. They are given suggestions of actions to take to build a financial cushion equal to at least six months of expenses.
  • Meanwhile, the ‘Plan for your future’ plan is for customers who have the last two issues covered and are in a situation in which their money could generate returns or be used for long-term savings.

“In each of them, different suggestions are created, which are adapted to each person’s needs, based on automated alerts and rules,” Krasheninnikova said. “It is important to stress that none of these actions take place automatically. It is the customer who decides whether or not to implement them.”

For example, a person who has a hard time saving can detect (either on their own or because of the BBVA app alert) that every month the amount they spend in the restaurant category is high. The bank gives them the possibility of setting a rule that puts a spending limit on eating out the next month. Therefore, the amount they manage to save will be automatically transferred to a Savings Goals Account at the end of the month, for example, if the customer has previously set it up this way.

If a person already has the ability to save and what they need is to create a financial cushion, the actions may entail proposing a rule to allocate a certain percentage of their paycheck to savings, for example. If they are already doing that, the analytical engine detects this and suggests other options, such as using BBVA Invest’s personalized digital advice tool to start to invest.

For customers who are already in a position to plan for the long-term, the suggestions could be something like increasing their contributions to funds or pension plans they already have, or optimizing their investment portfolio with the help of an advisor.

“We have designed a wide range of suggestions,” Krasheninnikova explains. “Each customer receives one, based on the rules we have previously implemented.”

The plans work both ways. If a customer who already has a good financial cushion changes their habits and is saving less than the amount BBVA working teams have established as ideal, the analytical engine detects this and will suggest steps to take to get back to the ideal level of savings.

Del servicio al asesoramiento: Asi usa BBVA los datos para cuidar de la salud financiera de sus clientes

Detecting relevant events

Thanks to the sophistication of these tools, the bank is able to detect relevant events, or situations that are not normal in their customers’ finances: a higher electricity bill, lower income from a tenant, or an isolated transfer that had never happened before. In these situations, BBVA informs them through alerts to give them the opportunity to prepare for unexpected expenses and address possible errors.

But these relevant events can also sometimes activate suggestions. This is the case for Álvaro and Susana when they finish paying the loans they had taken out. The suggestion to continue setting aside the same amount is an option the bank offers them to continue making progress in the plan that best fits their needs.

Therefore, BBVA is evolving everything from the provision of banking services to personalized advisory services, which thanks to technology, can help millions of people improve their finances at the same time. David Puente, the Global Head of Client Solutions, explained: “We don’t want to simply offer a catalog of products and tools. We want to really help our customers meet their goals in life and organize their finances to achieve the objectives they set for themselves with proactive suggestions that are adapted to each customer’s personal finances.”

Financial health, a strategic priority for BBVA

Financial health suggestions are presented to customers in Spain, where they are currently being used by more than 10 million people. BBVA recently started to offer the first suggestion related to a relevant event in Mexico, and has plans to bring the strategy to new countries in the coming months.

BBVA considers that good financial health is the key for individuals, families and businesses to be able to handle unexpected expenses and undertake the future plans to which they aspire. It feels that improving financial well-being should be within everyone’s reach. For this reason, it has made financial health one of its six strategic priorities.