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Fintech Updated: 28 Feb 2018

In Singapore, BBVA shares its insights about fintech and the challenges of digital regulation

BBVA has presented the case of its digital transformation at the 13th Asia-Pacific High Level Meeting on Banking, held in Singapore. José Manuel González-Páramo explained BBVA’s digital business model to representatives of Asia’s most important central banks and financial institutions. He also discussed some of the regulatory challenges the region is facing, noting the need for international coordination on digital regulation in the financial sector.

José Manuel González-Páramo, BBVA’s Executive Member of the Board, Head of Global Economics, Regulation and Public Affairs took part in this event, organized by the Bank of International Settlements (BIS) and the Monetary Authority of Singapore. He was one of the guest speakers at the panel on ‘Financial Technology, challenges and rewards, and the role of prudential supervision.” González-Páramo was joined by Stephen Murchison, from the Bank of Canada, and Sopnendu Mohanty, Head of Financial Technology of the Monetary Authority of Singapore.

BBVA’s transformation journey

González-Paramo’s presentation focused on how the financial sector is currently at a stage of disruption that demands a rethinking of its way of working, in order to increase its chances of survival. How is BBVA facing these changes?

Where others see a threat, BBVA sees an opportunity. The bank launched its transformation journey 10 years ago, and in 2015, it defined a new corporate purpose: to bring the age of opportunity to everyone. To this end, it defined six strategic priorities, including the development of a new standard of customer experience, driving digital sales, and new business models that are closely related to its digital transformation.

José Manuel González-Páramo’s presentation centered on the latter, BBVA’s new business models. New Digital Businesses (NDB) is the BBVA business unit responsible for participating actively in the digital disruption of the financial industry. How does BBVA do this? Through a multi-faceted innovation strategy:

  1. Acquisitions and investments. BBVA is now regarded as an attractive investor for startups; it has become a potential strategic ally for them. The bank has invested in some groundbreaking startups, including Simple, a U.S.-based financial services startup; Atom, the UK’s mobile-only bank; and Holvi, a ‘neobank’ that operates in Finland and Germany. It has also invested in Madiva, a Spanish startup specializing in big data and cloud computing and Openpay, a payment solutions provider in Mexico.
  2. Investments through Propel Ventures, an independent venture capital firm that manages BBVA’s funds destined for fintech startups. BBVA has allocated $250 million for investment in startups such as Personal Capital (a personal financial management and digital wealth management platform) and Prosper (an online marketplace for consumer loans).
  3. Internal Startups at BBVA:  A success case is TuyYo, a U.S.- Mexico remittance service. In Spain, BBVA has launched Muno (focusing on online insurance for self-employed workers) and Trust·u (an alternative lending platform for SMEs.) Recently, BBVA invested in Azlo, a neobank that seeks to help entrepreneurs and small businesses to manage their financial needs and Covault, which offers biometric solutions.
  4. Fintech entrepreneurship. BBVA is firmly committed to supporting fintech entrepreneurship, through initiatives such as BBVA Open Talent, the world’s top fintech competition, which will be celebrating its tenth edition this year.
José Manuel González-Páramo, consejero ejecutivo de BBVA, en el G20

José Manuel González-Páramo, BBVA’s Executive Member of the Board, Head of Global Economics, Regulation and Public Affairs - BBVA

Regulatory international coordination: the “elephant in the room”

According to José Manuel González-Páramo, the traditional regulatory framework is not sufficient to face the new digital challenges. In his opinion, regulation and supervision need to adopt a holistic and flexible approach. In this process, the “elephant in the room” is the lack of global and cross-cutting coordination in the design and implementation of the new regulatory framework for digital financial services.

As a result, it is necessary to open an international debate on the key issues that demand coordinated action (data protection or cybersecurity, for example), in order to define a common set of principles. For this purpose, it will be necessary to expand the current mandate of international standard-setting bodies or to set up a new organization capable of tackling this task, and supported by the G20.

For the short term, González-Páramo points to the challenge of developing a regulatory framework that guarantees alevel playing field for the different providers of financial services Thus, regulation and supervision must be designed based on the risks entailed by the different products and services, regardless of who offers them.