BBVA Compass Takes Emulating Startups to Another Level

BBVA Compass has taken several new steps toward its goal of transforming itself into a digital bank, one that can quickly create consumer- and business-friendly apps.

The $85 billion-asset lender, a unit of the Spanish giant BBVA, has opened a new software development center in its former headquarters city of Birmingham, Ala. BBVA Compass has also made a commitment to agile development methods, moved some of its developers into a startup incubator, and formed plans to open its programs to innovative startups.

With these moves, BBVA Compass is keeping a step ahead of many of its peers, which are also accelerating their software development cycles with agile development methods and working with tech startups to jump-start innovation in their organizations. Bank of America, for instance, works with dozens of fintech startups all year round and holds an annual conference for them in Silicon Valley. Wells Fargo has begun a mentoring program for startups. And Deutsche Bank's IT executives have committed to meeting with 200 fintech startups this year.

To create its new development center, BBVA Compass spent $13.5 million renovating the top floor of an operations center it already had in Birmingham, which is now the bank's headquarters and technology hub (its holding company's headquarters is in Houston). It set up an 80,000-square-foot, open collaborative environment in the manner of many fintech startups; Apple co-founder Steve Wozniak came to the grand opening. (BBVA hopes to attract more fintech companies into the Birmingham area.)

"We took down all the walls of the offices and created agile pods," said Jeff Dennes, chief digital banking officer at the bank. "They're teams of six to eight people, business and IT, sitting together and collaborating as a team and empowered as team."

BBVA Compass' modernization project started four years ago when it began implementing a modern, real-time core processing system, which lends itself more readily to innovative new apps than the older and multi-part cores many U.S. banks have. BBVA's purchase of the "neobank" Simple last year also gave it strong mobile and online banking street cred (although it had developed high-end mobile apps on its own).

The new space is the bank's primary development center and will ultimately house 30 to 40 teams of programmers. "Innovation will certainly happen there; more innovation there than anywhere else," Dennes said.

The teams work in two-week sprints rather than the six-to-nine month projects they're used to. They don't create entire applications, but pieces of them, in the two-week intervals. One benefit of this is that if a defect is discovered at the end of the two weeks, there isn't a lot of reworking to do.

"There are hundreds of white boards, it's a very high-energy place to work, and teaching everybody how to work in this new method is underway and maybe a third done," Dennes said. "More than 100 people have already started working in this new format. We're trying to create collaboration inside a bank."

One project under way in the new development center is to improve the bank's online account origination system.

Living with Startups

The bank also recently moved ten of its developers into a startup incubator in Birmingham called Innovation Depot.

"The Innovation Depot is taking all that collaboration and digital transformation we're doing out of the development center and opening it up into the community," said Chad Ballard, director of mobility and new business technologies for BBVA Compass.

The developers at the incubator are doing "innovation prototyping" — looking at technology concepts that are three to five years out, he said.

"We want to look at things that simplify the customer experience, new concepts in payments. We also look at things in and out of the financial industry," Ballard said.

One Innovation Depot startup has created mobile technologies that combine Apple's FaceTime and augmented reality, letting someone on the other side of a screen provide instruction to the app user. "So if I'm a surgeon I can use that to be able to do collaborative surgery," Ballard said. "Imagine that same technology used in healthcare having a financial application." (USAA recently unveiled augmented reality for its home-buying app, letting users see real estate listings in their area superimposed on the view they see on their smartphone camera.)

As it has done in its partnership with the payments firm Dwolla, BBVA Compass plans to open up application development interfaces to the Innovation Depot startups, to let them build apps that would work with the bank's proprietary programs and data. It's rare for a bank to give outsiders access to its internal software (though Citigroup has also committed to opening all its consumer banking software APIs to outside fintech companies to help it develop better digital experiences).

"We're also sitting down with the startups, understanding their business models, and figuring out how fast the bank can collaborate on their technology," Ballard said. "We're building technology from within the community rather than from the outside."

Sometimes the young hipsters at tech startups don't see eye to eye with traditional bankers; there can be cultural and philosophical differences or prejudices. Dennes claimed that this is not a problem for BBVA Compass.

"The kind of people Chad has on his team are more suited for a startup than for a bank," he said. "They don't come to work with a tie on. We're putting the like minds together."