Digital banking: BBVA’s González – The digital banker

Duncan Kerr
Published on:

BBVA has embarked on a bold transformational strategy to become the world’s first digital global bank, and reinvent itself as a knowledge-based information company, fit – it hopes – for the modern era and beyond. Could the Spanish bank be providing a blueprint for the future of banking? CEO Francisco González certainly believes so.

Francisco Gonzalez wires-400

About 20 kilometres to the north of Madrid lies the small and nondescript town of Tres Cantos, best known for two things: it was dictator general Franco’s first planned town in Spain; and, second, it was runner up to the bid from France to host the 2018 Ryder Cup.

Less well known, even among the locals, is that Tres Cantos is home to an operation in the vanguard of the digital banking revolution.

BBVA’s Tres Cantos data processing centre might sound far from the frontline of banking innovation, but this super high-tech building tucked away on what appears to be no more than an industrial estate, is a powerful physical manifestation of the Spanish bank’s digital vision.

Under the command of its long-serving chairman and chief executive, Francisco González, BBVA is embarking on the type of bold transformational strategy few other global bank CEOs seem to want, or are indeed able, to grasp fully.

To transform into the first truly global digital bank, reinventing itself as a knowledge-based information company along the way, is a profound ambition – one very different to the strategic visions set out by most other CEOs of large global banks in the post-financial crisis era.

Underpinning this strategy – something that González, once a software engineer for IBM in Argentina, has been thinking about for a long time – is the pervasive impact new digital technology is having on every possible aspect of life.

The US is going to be one of the best markets because it is one of the most digitalized societies and has one of the most rudimentary banking services. There is a big gap to be filled
Francisco González

González, who is 70 this year, believes he knows exactly what the digital era means for the banking industry.

"Some bankers and analysts think that Google, Facebook, Amazon or the like will not fully enter a highly regulated, low-margin business such as banking. I disagree," says González. "What is more, I think banks that are not prepared for such new competitors face certain death."

The threat of encroachment from big internet players, and even start-ups, to the financial and banking world is getting ever more real and visible. Payments, money transfers and foreign exchange are already areas of traditional banking where technology firms are active. That Google has a number of banking licences throughout the world should provide bank CEOs with more than just food for thought too.

Indeed, if that isn’t enough to make bank CEOs sit up and take notice of the new tech barbarians approaching their gates, the prospect of Google or Apple deploying billions of dollars of spare cash to buy a large bank might just be.

"Why not?" says González. "That could happen… You cannot stop the rising tide."

Further reading
Awards for excellence 2014
Awards for excellence 2014:
Best bank transformation

Even though González believes certain aspects of banking won’t change dramatically from one day to the next, he does fire another warning shot at the industry and bank shareholders when he says that the "market valuations of banks will change dramatically, and probably over the next couple of years".

There is no doubt this is why BBVA is undergoing such monumental change. Change that González is convinced will win the bank he leads recognition.

"Frankly, we think we have a huge opportunity to become the first bank in the world to successfully transform into a pure digital house. It’s not just about being a bank, it’s about being a knowledge-based information company."

He adds: "My view is by the end of next year, BBVA will be perceived by the market as a new digital player, and as a result we should be able to capture quite different and ultimately higher valuations from investors."

Understanding exactly what this transformation means for BBVA and its customers and clients will be crucial.

González says: "As banks, we have huge amounts of information, but we store this in different parts of our business. For us, what we are doing is transforming that information into knowledge and then that knowledge into products. For our customers, it’s about being able to access everything they need in real-time, using our digital applications or platforms."

He adds: "Digital is a tool. In banking, it doesn’t just mean financial products, but information and insight for our customers."

Reinventing banking

Some of this might sound familiar. Since the turn of the century the banking industry has been grappling with using the internet to try to reinvent itself. Online-only banks such as Wingspan in the US and Egg in the UK were born around the time of the last technology bubble in 2000. Then in the mid-2000s some banks such as Iceland’s Landsbanki launched online-only savings accounts. Unfortunately neither development went particularly well.

In recent years, greater success in online-only banking has come in the form of Hello Bank! in France, Simple and Moven in the US, Holvi in Finland and Rocketbank in Russia. What’s different this time around?