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Banking Updated: 29 Nov 2016

Regulation and people, the main challenges for the digitization of the financial industry

The banking business is reinventing itself. The impact of fintech companies, technological maturity, and customers who are used to digital experiences, all mark a transformation that the financial industry is facing in the certain knowledge that innovation and collaboration with new players will play an important role in the future. But what are the most difficult barriers to overcome in this process? For BBVA Research, Santander, Banorte and Tecnocom, all present in the panel on The digitization of commercial banking at the Latibex Forum, the response is clear: the challenges are regulation and the change in corporate culture.

“The bank of the future is an open bank”, says Rodrigo Kuri, director of the Bank of the Future at the Innovation Division at Santander, who believes this transformation cannot take place until the banks open their doors and platforms to collaboration with companies and startups. According to Kuri, the industry must work hard to integrate these solutions in their platforms and incorporate models that offer value services at very low costs.

“Banks have been innovating for a long time”, says Álvaro Martín, head of Regulation at BBVA Research, who noted that the digitization of banking is part of an ongoing process. The real difference nowadays, according to Martín, can be found in the maturity of exponential technologies such as cloud computing and big data, customers with new standards, and the influx of new digital players. All this is leading to the “reinvention of the institutions”. “We are seeing a new dynamic ecosystem comprising the fintech companies, the major digital players, the banks themselves, and the regulators. This is an opportunity to create different value proposals”, he says.

Banorte also believes in this collaborative model, and places the focus of innovation on the millennials. “We're looking to young people to stimulate creativity and encourage innovation, particularly in regard to ideas about new uses of the mobile channel”, says Miguel Ángel Laurencio, director of Financial Intelligence at Banorte.


The road towards a more digital bank is strewn with obstacles. The main one is the cultural change within the banks themselves. “In a disruptive dynamic the main problem is how to implant the new processes, and this is a people-related issue”, says Mario Yañez, director of Financial Solutions at Tecnocom. “We need to convince people to become part of the change”, insists Yañez.

The other great challenge is regulation. The financial industry coexists within a very strict regulatory framework, and is now competing with new competitors working under different conditions so they can carry out their disruptive ideas. Martín believes this is the number-one challenge for the industry. “We are up against a regulation that's unable to respond to the new requirements of these online products”, he says.

For example, BBVA Research highlights the adoption of cloud computing, an essential element for any digital company, but which has so far been hindered in banks due to the complexity of overseeing it. “It's essential to be able to compete, to be more agile, to have more scalability and save costs”, stresses Martín.

The second example is data treatment, as an essential part of the digital economy. Here once again the regulators need to understand the importance of finding a balance between protecting the consumer and protecting the algorithms that lie at the heart of competition in the data economy, something that companies like Amazon, Google and Apple understood some time ago.

It will be essential for the financial industry to work with the regulatory and control authorities and institutions if they want to compete in this new environment.

But it's not all a matter of technology. “The transformation should focus not on the technology but on the customer. And this is not a question of cost, but of providing value. At BBVA we want customers to choose us because we're able to support them in their financial decisions”, says Martín, who cites BBVA Valora as one of the tools that can allow customers to negotiate a price when purchasing a home or make sure they are paying the right price.

Strong points of BBVA and Santander

What is it you most admire about your competitors in this transformation process? was the question the moderator Héctor Romero, general manager of Punto Casa de Bolsa, put to the representatives of BBVA and Santander.

“The level of forward thinking”, answered Kubi from Santander. “They've been quicker on the uptake, although they've also made more mistakes, but this has enabled them to learn more lessons”, he recognized.

“Their disruptive focus. They're very good at diversifying their efforts”, answered Martín.

These compliments to the competition brought the panel to a close, and the conclusion was that the most dynamic companies that look after their customers and succeed in changing their culture would be the ones to come out ahead.