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Four growth tactics for banks in the age of big tech

 

Sunil Dixit
Sunil Dixit, managing director of BBVA Client Solutions

In an increasingly digital world, industry lines are blurring. Big techs like Google, Amazon, Apple, and Uber own the market in part by being ever-present in their customers’ digital lives.

“These big techs have leveraged their platforms and created relationships with billions of users,” said Sunil Dixit, managing director of BBVA Client Solutions within BBVA New Digital Businesses (NDB). ”Everything is digital end to end, and these companies are getting a bigger piece of the pie.”

Business lines are blurring, with big techs moving into financial services and financial services companies moving beyond traditional banking.

Dixit believes financial institutions that think more like big techs will not only survive in the ever-digitizing global economy, but thrive in it. To succeed, banks need to think bigger — and more digital. Inspired by the most successful big techs, here are four growth tactics to consider.

Build Value With Data

In 2018, digital users worldwide generated more than 2.5 quintillion bytes of data every day. By 2020, it’s estimated that 1.7 MB of data will be generated per second per person on earth.

“You can do so much with that data, and the big tech players know that,” Dixit said.

Banks have an advantage in the value-additive nature of the data their users generate: They’re directly related to financial profiles and transactions, Dixit said — and monetizable.

BBVA’s New Digital Businesses portfolio companies are leveraging financial customers’ data in forward-looking ways, all with the goal of becoming essential parts of customers’ daily lives, Dixit said.

“Data is the new currency,” Dixit said. “Whoever uses data in the smartest way will be the most successful.”

Personalize, Personalize, Personalize

Big techs are easily monetizing the billions of customer interactions they see in their products by creating more offerings to fill gaps in their customers’ lives.

Banks must also use the volume of data they generate to create tailor-made solutions for customers.

“Even 10 years ago, when digital was just coming up, the amount of data we produced was not that significant, so we had to try to segment based on assumptions,” Dixit said. “But every individual is different, and everybody’s needs are different.”

Back then, bespoke or hyperpersonalized propositions were neither tehcnically nor commercially feasible, and when financial services businesses did make an effort to create them, the offerings were subpar.

Today, with artificial intelligence and machine learning, banks can take that personal data and build customizations “on the fly, with scalability,” he said.

For example, NDB portfolio company Upturn, a credit-improvement service, hired a full-time data scientist in early 2019 who is currently building a machine-learning engine that offers personalized recommendations to help customers improve their credit scores.

Leverage Trust

The big techs of the world have a leg up on banks simply because they don’t deal with the volume of regulations that banks do, Dixit said. That has allowed them to expand without any constraints to date.

But thanks in part to the regulations banks have historically faced, banks actually have an advantage: trust.

“Big techs have had a lot of privacy and data security issues — consumers don’t trust them like they do banks,” Dixit said.

As banks make the shift to increasingly digital ecosystems, they can continue to leverage that trust if they continue using customers’ data responsibly.

Build Strategic Partnerships

Reinventing the wheel for every customer acquisition is a costly endeavor. Strategic, innovative partnerships with other organizations is a lower-friction way to generate a larger user base, Dixit said.

In 2017, BBVA launched a partnership with Alibaba that allows Chinese tourists to use their Alipay wallet to make purchases in Spanish stores, creating a great opportunity to service this growing market of visitors to Spain.

“BBVA has expanded their user base significantly through this partnership,” Dixit said.

Strategic partnerships are one of NDB’s four-pillar approach to growth:

  • Buy: Purchase innovative fintech businesses outright
  • Partner: Build relationships with businesses that will help the bank move the needle
  • Invest: Put money into businesses to amplify their growth
  • Create: Build new businesses from the ground up

Banks that think beyond strictly banking and imagine a bigger place in the digital ecosystem are already ahead of the curve. BBVA New Digital Businesses exists to address the ever-changing needs of financial consumers. Learn more on NDB’s website.

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