“We want to improve the financial health of our customers with solutions based on technology and data”
BBVA continues to emphasize its digital transformation as an essential factor in achieving its ambitious goals, presented at Investor Day. In this interview, Global Head of Client Solutions David Puente highlights how being a pioneer in digitization gives BBVA an advantage to continue growing in areas such as payments and insurance, create alliances through ‘open banking’ and, in particular, to take a new strategic leap: evolve from providing services to proactive recommendations to help customers improve their financial health and transition to a decarbonized economy.
Q: BBVA has set ambitious growth targets for 2024, what role does digitization play in achieving them?
A: BBVA's objectives continue to be very ambitious and are based on the strategy we set a couple of years ago. One of our objectives is to reach more customers and to do so as efficiently as possible. Currently, scale is a competitive advantage for the banking business, something that, added to our digital capabilities, is allowing us to increase our customer base significantly.
Over the past five years, BBVA has been able to increase its customer base by 35 percent and the number of new customers has multiplied by 2.5. In fact, in 2016 we added 3.4 million new customers and we expect to gain 8.3 million in 2021, 3.3 million of which have been through our digital channels.
Digitization has clearly played an essential role in our organic client growth and will undoubtedly continue to do so, as reflected in our sales through digital channels, which already account for more than two thirds of the total.
Our objective is, on the one hand, to continue to grow both in our own channels and those of third parties, and on the other, in high-value verticals such as SMEs, private banking, companies with multi-country footprint, as well as in payment and insurance products where, thanks to our digital transformation, we are especially prepared to accelerate our growth opportunity.
Q: When you talk about third-party channels, do you mean commercial agreements or embedding your services in third-party platforms?
A: We mean both. At BBVA we aspire to expand our positioning, reaching where we previously did not, either through strategic alliances or through the integration of services leveraged on our 'open banking' capabilities.
Regarding alliances, some examples include the one with Allianz Seguros, through which we offer a range of non-life insurance products, with a special focus on SMEs and the self-employed, or with Telefónica in Colombia, offering consumer loans to its customers. As I said, these are only a small example, since, over the last two years, we have increased our agreements with new partners fivefold.
At the same time, we also want to achieve a natural integration of our products and services in third-party platforms, which will allow us to reach new audiences and markets. We are currently adding 37 percent more customers through third-party channels than in 2019, 10 percent of the new digital customers. So in view of this data, our commitment to alliances takes on special importance.
Q: Has the agreement with Uber started to yield results? Can you comment on any other agreements?
A: This partnership arose with the idea of making life easier for their car drivers, giving them access to a debit card linked to their Uber account. In this way, they have access to their income directly from the application. In addition, through the instant payments functionality, they receive the payments corresponding to the rides they make immediately without having to wait for Uber to transfer the balance to their bank accounts.
This means new users for BBVA and the possibility of expanding similar solutions to other partners and in other geographical areas.
With regard to other types of agreements, we are offering our partners loans, payments or insurance products at time of purchasing, making them truly contextual. For example, in Spain, you can pay in installments when you buy on AliExpress.
With other partners, we are reaching new segments. This is the case for young people in Spain, who find the BBVA App pre-installed in Xiaomi smartphones, or cleaners or housekeepers in Mexico who can open accounts with BBVA through the Zolvers platform.
In short, these types of agreements with third parties seek to capture customers where they interact most frequently in their daily lives.
“The needs of our customers force us to constantly innovate our digital proposal”
Q: Payments is one the most valuable verticals where BBVA is going to focus, but this seems to be an area with a lot of competition and new players...
A: Indeed, over the last few years, the strong acceleration of digitization has led to an ever-increasing demand from our customers for payment methods and, with it, a high potential for this segment to generate revenue. This is why payments will be one of the key growth areas for BBVA. So much so that our card sales have grown by 51 percent this year and our POS sales by 57 percent.
Our objective is therefore to continue developing new payment solutions, taking advantage of a global approach. A good example is Aqua, a card with a clearly differentiated value proposition that already operates successfully in Spain, Mexico, Colombia and Turkey. And Openpay, a 'one-stop-shop' for merchants, which offers omnichannel payment solutions and value-added services through payments, operating under a common infrastructure in Mexico, Colombia, Peru and soon in Argentina.
And in this demanding and, therefore, increasingly competitive environment, BBVA has the digital capabilities, channels, data and products that allow us to be more competitive and grow our business. We gained market share this year in all our geographical areas. But it is really the needs of our customers and, in fact, this competition, which is pushing us to constantly innovate our digital proposal.
It should also be noted that the world of payments is a world of collaboration and open innovation, which allows us to approach other ecosystems with which we are willing to collaborate and embed our services to reach more customers, so it is possible that, in the future, we will see more agreements and collaborations.
Q: What's your opinion on the success of the ‘buy now, pay later’ formula. Do you have any plans in this area?
R: Payment in installments for purchases made in stores is growing exponentially, mainly due to the strong growth of ecommerce and the emergence of fintechs specialized in these payment methods (Buy Now Pay Later).
In Spain, we are seeing how Buy Now Pay Later is beginning to increase its penetration in e-commerce in particular, estimating that, in the medium term, it will reach levels similar to other northern European countries (around 15 percent). Furthermore, in Latin American countries this payment method is in a much more preliminary stage, so we expect its penetration to grow progressively in the coming years.
BBVA's goal is to be a leading bank in this business, leveraging our experience in consumer finance and payment methods. To this end, we are working globally on the development of internal solutions that are integrated into merchants and that enable the financing of purchases in installments, both for existing customers and non-customers. These solutions require a great deal of specialization to be able to offer flexible products, with entirely digital contracting processes, real-time response and reaching all consumer sectors.
By way of example, in Spain we have already launched this type of 'Buy now, pay later' product in large retailers with which we have strategic agreements, such as Inditex and Aliexpress.
Q: BBVA has been a pioneer in blockchain technology and launched the first bitcoin custody and trading service in Switzerland. Do you think cryptocurrencies will become part of banks' offerings like any other asset? What will it take for this to happen?
A: BBVA is at the forefront of digital assets. We have been one of the first financial institutions to use blockchain technology in payments, import/export and corporate lending businesses, through pilots with key clients.
We are very clear about the transformational impact that digital assets can have on the improvement of processes and products in the financial value chain, on the transformation of capital markets through asset tokenization and, more broadly, on the way information is exchanged globally. To give a very specific example, decentralized finance (DeFi) is showing exponential growth (x12 since January 2021), which could have a major impact on the way financial rails work in the future.
Earlier this year, BBVA launched a cryptoasset trading and custody service for BBVA Switzerland's private banking clients, and we will continue to work in the area of digital assets in all our geographical areas, always hand in hand with regulators. We believe it is key to be clear about the regulatory framework for digital assets in order to ensure our clients' protection while at the same time leveraging the innovation that this new technology can offer.
Q: BBVA has also been a pioneer as a traditional bank that has dared to take a full-on digital leap into a new market, Italy, as if it were a neobank. Do you plan to extend this strategy?
A: It is true that this is a pioneering strategy, which is allowing us to expand while maintaining a low cost structure and, more importantly, taking advantage of all the technological infrastructure that we have been deploying in Spain for years.
But it is still too early to think about extending this strategy; we need to see how it works and focus on offering the best service to our Italian customers, adapting our value proposition to this new market.
Q: Businesses, both SMEs and corporations, are segments where BBVA also wants to grow. What makes them so attractive?
A: At BBVA, the SME, business and corporate business (including the wholesale banking area, Corporate & Investment Banking, CIB) represents between 45 percent and 50 percent of the Group's profits, but we believe there is a great opportunity to continue to achieve significant growth in this sector.
On the one hand, with regard to SMEs, BBVA has set out to improve the 'app' for companies and the entire digital experience that goes with it, including online onboarding. We have also incorporated proactive offers, managers who are more targeted and specialized for this type of client, as well as functionalities to manage the business and even help them to be more sustainable (carbon footprint calculator incorporated in the Spanish app).
On the other hand, for companies and corporations, there is the challenge of simplifying multinational treasury services and processes, which involve operating with different currencies, timetables and even regulations. This is where our commitment to BBVA Pivot comes from, which will improve the customer experience with a unique global service. The solution allows centralized operations in 15 countries and 24 currencies through direct channels, SWIFT, the web or the app, as well as expert and comprehensive support throughout the process.
“Our global creation capacity is providing us with advantages in terms of cost and speed of deployment”
Q: BBVA's transformation is closely connected to being efficient and creating global products. Have you made progress in this regard?
A: It is safe to say that global product creation is already a reality, both in the retail and corporate market segments.
Our retail banking app, which has consistently received international acclaim, and is the leader in customer ratings, is a global application, with 75 percent of the software being reused. It has already been deployed in Spain, Mexico, Uruguay, Peru, Argentina and soon in Colombia.
Our app for companies also follows this strategy of reusing more than 80 percent of design and software components, which has allowed us to deploy it in Mexico in less than a year and, six months later, in Peru and Colombia, which is a clearly differential efficiency.
All in all, our global creation capacity is providing us with advantages in terms of cost and speed of deployment.
Q: BBVA wants to move from servicing to advising its customers, both in financial health and sustainability. How can that be achieved?
A: That's right, money is one of the main causes of stress for some people as many don't know how to manage it or feel unable to do so by themselves. One of BBVA's priorities is to help its customers improve their financial health.
More than 10 million people are already interacting with our financial health tools, showing a higher satisfaction rate in our surveys than those customers who have not tried them yet.
This strategy, which we have been working on for many years, is already showing results. In Spain, 25 percent of the new mortgages have used BBVA Valora beforehand to calculate the price of a home, and 17 percent of new investments in funds came through BBVA Invest consultations. We don't just want to offer a catalogue of products and tools, we really want to help our customers meet their life goals and organize their finances to achieve what they set out to achieve with proactive recommendations tailored to each individual's finances in a personalized way.
“Today, our focus is on offering personalized and proactive help around financial health and sustainability, while being supported by technology and data”
This is particularly relevant when it comes to sustainability, where we face one of humanity's greatest challenges.For many of our clients it remains an ambiguous and difficult concept to understand. Our advice is not only about helping to understand the impact we all have on the environment, but also about providing our clients with different ideas and recommendations to reduce this impact.
Q: BBVA's transformation journey started more than a decade ago, do you think it will stop at some point? What are the next steps?
A: BBVA has been undergoing its digital transformation for many years, a transformation that has been global and profound. Getting ahead of the digitization curve has given us results in terms of business and growth. But we are still in a process of constant change. At the beginning of our journey, the focus was on serving our customers digitally, after which we focused on accelerating digital sales and more recently on expanding our customer base via digital channels. Today, our focus is on offering personalized and proactive help around financial health and sustainability, while being supported by technology and data.
We are at a more mature stage but there is still a long way to go. The challenges we must overcome as a society and as a bank are enormous. Technological disruption will continue with quantum computing and asset tokenization, but we also have to face the challenge of decarbonizing our economy and fighting climate change. BBVA wants to position itself as a partner for our customers to take care of their financial health while helping them move towards a greener, more sustainable and fairer society.
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