BBVA Brings a Real-Time Core to the U.S.

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Sergio Fidalgo, chief information officer of BBVA Compass, is deploying a new core, real-time transactions across all channels and a new CRM system to support long-term customer relationships, instead of one-off product sales at the bank.

Although he's too polite to come out and say it directly, a theme that emerges when Fidalgo talks about the core banking overhaul he is overseeing is that European banks tend to take a more careful and customer-conscious approach to technology than those in the U.S. The point of this huge project, an upgrade of all foundational technology at the $62.7 billion-asset BBVA Compass, is to build long-standing customer relationships — the refined European way — rather than to innovate on and sell individual products, the American way.

BBVA, of Madrid, bought Compass, in Birmingham, Ala., in 2007. The parent company is gradually shifting the bank from being product-oriented, with one head of deposits and one head of consumer assets, to a management divided by customer segments — there's now a consumer group and a small-business segment. One level below are the product specialists. "This is a clear sign of trying to move the organization from, instead of bringing the product to people, figuring out what customers need, and then from that answer, working on delivering products," Fidalgo says.

To make the bank's technology infrastructure match its customer relationship vision, BBVA is migrating the bank to a new core system, Accenture's Alnova, and deploying a new customer relationship management system created by BBVA Group. "We're breaking the silos we have, not only the product silos but also the line of business silos," Fidalgo says. Before, each division had its own CRM database; the new CRM system being imported from the central BBVA group will be a single storehouse for customer data for retail banking, wealth management and commercial banking. "This will ease a lot of the dialogue between lines of business," he says. The CRM software is up and running for retail and wealth management. The bank is still modifying the commercial portion, which is expected to be ready in the second quarter of 2012.

"We're working to provide employees with that full view of the customer portfolio," Fidalgo says. "We'll be working in the future on referral systems between these lines of business."

The Alnova system has one central customer information file that will store basic information from customers (even commercial customers), such as name, address, Social Security number and phone in one place, which Fidalgo refers to as a "golden file."

The conversion from a fragmented architecture to a single CIF was somewhat challenging, Fidalgo notes. "You have to clean the data, and you have to make sure you're populating the database with the right data that you might have had in six different places," he observes. "But we're already working actively on that conversion. The cleaning of the data is being done as we speak."

The customer data is replicated between current and new systems, so that all will be ready when the bank goes live with deposits on the new system. This will be rolled out state by state. "This is something we're planning very carefully," Fidalgo says.

A Phased Approach
The bank has broken down the project into three releases. First is an infrastructure/architecture release. "It's not a business release, it's not something we put in branches, it's something we have yet to give to our operations people, but it's a foundation for the rest of the modules that are going to be sitting on top of it," Fidalgo explains. The architecture and the customer information file went live at the end of May. "That was a big step. It doesn't really impact the business, but it's absolutely critical to be able to put the rest of the modules in place."

The next release is for deposits, including checking accounts, savings accounts and CDs. The bank is still testing this part of the system. An integration test has already been done. Next to be tested are performance and user acceptance. "It's a complex project; we have people working all over the world, we have 20-hour-a-day support for the development and testing from Beijing, Manila, India, Madrid and Mexico," Fidalgo explains.

This attention to testing is somewhat unusual and may be the key to the success of this project. "You have to test everything, not only your mainframe and backend operations, but also your branch, call centers, ATMs, Internet banking and mobile banking," Fidalgo says. The goal is to avoid any disruption in customer care due to the conversion.

"Their approach is very measured in terms of approaching this step by step, which allows them to be more diligent and to focus more on customers as they go through the process," says Wayne Busch, managing director of financial services at Accenture.

In the first quarter, the bank will take the deposit system live in pilot branches, to find and clean any issues that arise. Then it will start a project rollout throughout its footprint in the U.S., state by state. That will take about six months, with full rollout expected within the year. The bank has 716 branches in Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas.

Release two will involve consumer loans. "We're in the middle of the build phase at this moment," Fidalgo says. At the end of October, the bank will start integration tests, then move on to the performance and user acceptance tests. The plan is to go live at the end of the third or fourth quarter of 2012.

Regulatory Hurdles
This is the first implementation of Alnova in the U.S., and Fidalgo's team is adapting the software, which BBVA has already put in place in Mexico, Puerto Rico and other Latin American subsidiaries, compliant with U.S. regulations. "That's big," Fidalgo says. "In the U.S., regulations are getting tougher, so this is where we are putting a lot of focus." Indeed, other large core banking projects have failed because of the difficulty of making foreign-built software compliant with U.S. rules.

The software also has to be adjusted to accommodate products unique to the U.S., such as mortgages, mortgage securities and mortgage servicing.

Alongside the core and CRM conversions, BBVA Compass is developing an online banking platform with an improved user experience and more robust features. It plans to have an online banking pilot test by the end of the year, and a rollout in 2012. "We are defining what the rollout is going to be," Fidalgo says. "We have to make sure we design this rollout for the Internet channel side and also the core banking side so that both plans align and there's no customer disruption." As for mobile banking, BBVA Compass has apps for the iPhone, Android, iPad, BlackBerry and Playbook. It will modify these applications so they work with the new core banking system.

Among some large and regional U.S. bank CIOs, there's a lot of concern and fear about core conversions. They look at a few recent projects where banks have tried to do core overhauls and either crashed and burned or gone way over budget and past deadline.

Fidalgo is aware of these concerns. "We're doing this because we're 100% sure it's the right thing to do to help change our business model," he says. "We think it's perfectly aligned with the business. But we know this is not risk-free. So we allow that the core banking is a challenging opportunity, but we think it's worth the effort."

He points out that his parent company has the expertise to leverage from the core conversions it's done in other countries, so that it's already brought real-time transaction posting to all its U.S. banks except Compass.

"We're conscious of the challenges, we're conscious of the risks, but I think we're putting everything in place to navigate those risks," Fidalgo says. "I feel confident that we're on the right track, that we're able to make advances. This will be the best foundation for going to a real customer-centric model, which is the aspiration of BBVA in the U.S."

The biggest challenge has been moving the bank from the batch-processing and memo-posting technology commonly used in the U.S. to real-time posting. "In the analysis-and-design phase, we had to invest more time than expected in those discussions, because the impact on the back office of the bank is huge," Fidalgo says. "The way this works today, if something happens in the branch, the process continues in the back office. It's a two-phase process. With the new core banking system there's going to be a single process, there will be one click in the branch or on the Internet, and two seconds later the process is finished. That changes the way people in the branches and operations work."

In a related project, the bank is installing check scanners and imaging software at the teller line and migrating to check truncation at the point of deposit.

"That will improve the customer experience. You can check a mistake or note that the check is unreadable while the customer is sitting in front of you; you don't have to call him two days later and adjust whatever mistake has been made." He also expects operational efficiencies from the use of the teller technology. BBVA Compass was completing the rollout of this technology at the end of September.

"Part of innovation is continuous investment in technology. We'll keep improving this core banking platform far down the road," Fidalgo says.

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