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Opinion 27 June 2018

Six lessons BBVA learned in pioneering DLT-based corporate financing

In less than a month, BBVA successfully conducted two pilots that demonstrate how blockchain and distributed ledger technology (DLT) can improve financial processes in corporate banking. The first pilot allowed us to close a loan of €75 million euros with Indra and the most recent with Repsol for a credit facility of €325 million.

Both operations are the first in their product segment that have used blockchain development to digitize the negotiation processes. The result is that the process is much quicker as well as more effective and transparent for all parties because it avoids documentation duplication, continuous checks, the use of multiple channels, allowing operations to be closed in hours instead of days.

These trials are a pivotal element in BBVA’s vision to progress towards a new financing model with its corporate customers. We’re convinced of the opportunity we have to turn DIY financing solutions for the business and corporate segment in the cornerstone of our wholesale activity. The lessons BBVA is incorporating into its business will allow us to move forward in the digital transformation process that we are currently pursuing.

1- Innovating is possible in corporate financing

The first lesson we have learned is that it is also possible to innovate in an area such as corporate financing, where traditionally the services offered to clients are not normally digitized.

These projects have shown that technology has a lot to contribute to complex products and has helped us to win over even the most skeptical teams and also our clients. Let’s say, that the blockchain pilots have awakened an innovative fever and a curiosity that had not been experienced in the world of corporate finance until now.

2- Standardize processes and documentation

Another of the great advances is that the effort to integrate blockchain in these processes has made us reflect and define very clearly both the work flows that were normally not well defined and define templates of legal documentation. With blockchain, we are standardizing all the steps that occur during the negotiation and contracting processes and we are also making all the legal documentation generated by the platform, which includes standard pre-loaded clauses, more homogeneous and reusable. All this effort is already bringing great improvements and efficiencies in our day-to-day activities.

3- Partnerships with clients

These projects are allowing us to involve our major clients and share efforts to advance in a disruptive area, which goes far beyond the merely financial. In fact, the Repsol pilot was the first step in a journey that we are going to take together to develop new financial solutions.

One of the most important changes in the relationship with customers is that jointly developing innovative solutions allows us to know their needs more closely and in detail. This feedback is really valuable in building new services for the future but also in improving current ones.

4 – Collaboration

The fact of being a pioneer in the use of these technologies has also led BBVA to be much more open to outside ideas. Our teams are in permanent contact with the most innovative ecosystems to share experiences and knowledge. We are part of the main blockchain consortia such as R3, Enterprise Ethereum Alliance, Hyperledger or Alastria. These collaborations allow us to focus and concentrate our efforts. The idea is to innovate with meaning and avoid innovating for the sake of innovating. And for this, collaboration with the financial sector is essential, but also with startups, technology companies, other industries and regulators.

5- Faster, easier with less risk

Finally, the most obvious lessons are those provided by technology itself. Among all its advantages, blockchain has allowed us to centralize communication, which translates into reducing the exchange of emails, calls, meetings, etc. thanks to automatic notifications of tasks and states. In addition, we have been able to digitally generate documentation of the entire negotiation and contracting process.

This all makes it possible to save time, but more importantly, reduce operational risk since the platform and the blockchain ledger automate processes that are normally done manually.

6- Blockchain improves corporate client experience

All these benefits translate into a great conclusion: blockchain improves the user experience of our clients, both in terms of companies as well as large corporations. Mainly, for its ability to guarantee the transparency and traceability of the contracting process: each step of the negotiation until the contract takes place is registered in the DLT together with the user and the timestamp of when it was made. In this way the parties can know at all times the status of the negotiation where each step of the negotiation is recorded in a private blockchain (Hyperledger).

The ability to guarantee the immutability of the agreed conditions adds to this: the registration of the hash or unique identification code in the public blockchain (Ethereum) guarantees the integrity of the accepted documents.
All these important lessons provide us with the drive and motivation we need to keep making progress towards a new DIY financing model for our business and corporate customers.

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