The 'To-Die-For Customer Experience' Starts with Tech
For Manolo Sanchez, the chief executive of BBVA Compass, the future is about sharing technology and the basics of banking with fintech partners, and getting help from them in turn, without relinquishing customer relationships.
BBVA Compass, the U.S. unit of a Spanish bank, has been a tech leader in the U.S. since 2011, when it became one of the rare regional banks to implement a real-time core banking system (Accenture's Alnova). More recent moves have included buying the neobank Simple; creating a fintech venture capital arm that the BBVA Group spun off earlier this year called Propel; and partnering with the real-time payments provider Dwolla, which made it one of the first banks to offer fast payments to business customers.
It has also partnered with the robo-adviser FutureAdvisor and is building a marketplace in which it, along with parent company BBVA, will offer APIs to others for the purpose of creating innovative products and services.
BBVA's purchase of digital-only "neobank" Simple provides both parties with new strengths. For the bankers on the sidelines, it shines a spotlight on the need to attract affluent young customers with trendy mobile services.February 21
As it launches instant payments using Dwolla, BBVA Compass joins a growing list of banks that are seeking "internal disruption" by giving innovative tech companies access to their inner workings.April 8
In its new 80,000-square-foot development center, the bank is adopting the look, feel, and practices of fintech startups. Its also moved some of its developers into an incubator to collaborate directly with local entrepreneurs.May 18
Several large banks, including Citi and Bank of America, have begun sharing proprietary code with fintech startups and others. The new level of openness brings benefit to both sides.July 8
Sanchez discussed where BBVA — and banking, for that matter — will have to go next to capitalize on such experiments. Partnerships with innovators are essential to ensuring banks don't fall behind in the race to turn new technologies such as APIs, real-time payments and mobile wallets into services that customers will crave, he said.
The following transcript has been edited for brevity and clarity.
A lot of banks are thinking about providing application programming interfaces (connectors that let people access pieces of their proprietary software) for fintechs and other banks to use. Only a handful, including BBVA Compass, have actually started creating such APIs. What is your vision is for APIs?
MANOLO SANCHEZ: We have a vision that I would describe as banking as a service. It's providing functionality to other developers and other companies to use as part of their solutions. We've built a lot of these APIs on partnerships we have developed — Simple and Dwolla, to name two. Our Simple and Dwolla APIs are already up and running. Simple is a front end for its own bank; we're creating connectivity for that front-end banking solution to talk to other banks. We're creating an API market we'll make available to developers. It's not unlike what you'll find at Google or Facebook for, say, their APIs for credentials management.
Think about all the banking functionality we provide that we can bring to those API markets. We have what we call a sandbox: We let developers in a nonproduction environment play with those APIs and eventually bring their technology to production. It's a win-win because other folks that are very talented, that have great ideas about customer service and about providing solutions to clients, can use our rails and we start to build a relationship with those players.
Does the bank become the back-office engine while these other companies provide front-end services like financial planning, robo-advice and budgeting?
There are two themes in the Fintech industry: You have the unbundling part of financial services but you also have the Uberization of financial services.
There's the much-talked-about discussion of utilities, where you have unbundling of the financial services value chain and banks are just providers of the rails. That would be falling into the low-value execution of this opportunity. We're not so fond of the unbundling part of the fintech opportunity, but we've seen this happen before. Our industry has gone through huge unbundling processes. There were the monoliners that sprung up in the U.S. in the '90s — credit card companies, mortgage companies like Countrywide, even the auto lenders took away a lot of the ABCs of banking, so banks were disintermediated from car loans and mortgage loans.
We now have a system that drives a lot of talented people who have access to capital to find a way to take pieces of the business of the big incumbents in the fintech industry. I think of PayPal and Square. What evidence are you looking for that this is a big revolution and it's happening and they're here to take part of the value chain? It's already happened.
Then there is a high-value opportunity, which is partnering. That opens the door for a lot of things we're exploring at this stage. Partnership is more of a win-win that creates new businesses so you're not left behind as just a utility provider.
So the bank keeps the customer relationship and you're still in charge?
Eventually that would be one way to do that. Or solutions that are jointly owned. You can be a partial owner of the revenue streams the solution provides. The script has not been written yet. We have the ability to start seeing how this plays out, because we've built the infrastructure for it. It's a production environment — it's not a PowerPoint presentation.
So you're working with a payment company [Dwolla] and an online mobile banking company you now own [Simple]. Ideally, what other types of partners would use your APIs?
I like to use the word "Uberization" to explain to the stakeholders I deal with on a daily basis what is so attractive about the future in the financial services industry. We're not able to provide that experience where you know the where the car is, you know who's driving it, you know the rating of that provider. That's what you like about the Uber service. The thing that's furthest away from an Uber experience is a mortgage application. How do we bring that kind of experience to our clients? This is very exciting. This is the ultimate driving force behind everything we're doing. We want to create this customer experience that for whatever reason we banks have not been able to deliver for many years, though we've been doing our best.
What kinds of tech partners might help with this?
We're trying to build a to-die-for customer experience. For instance, tools that allow you to take advantage of your finances. That's why we bought Simple. If they gave me the budget to write code for a new banking front end solution, would I have been able to write Simple? To be honest, no. And I have very good engineers and people who write code. But it's not just about code. Simple is about connecting to the millennials. It's about viral and spreading that word of mouth that millennials are able to exchange. It's about purpose, it's about controlling your finances first and foremost and being believable. At the end of the day, that is our priority, to create that very unique customer experience, mostly on digital rails, that has the ability to serve the needs of our clients. That's why we do all these things.
What emerging technology most interests you?
The mobile wallet is probably one of the most exciting things we see. That may sound crazy because in most of the articles I read, people are feeling that market is too crowded. There are competing solutions, you have the original equipment manufacturers creating their own wallets. We have a wallet that we have great plans for. We're getting a lot of traction on the wallet, the alerts are fantastic, both from a fraud but also a how-to-control-your-finances perspective. Already, you can use the BBVA Wallet to turn on and off your card, you can report fraud, and instantly redeem reward points.
BBVA Compass put out a paper a year ago that said blockchain technology could disintermediate everything in financial services — payments, loans, securities, derivatives, and more. Do you still look at it that way, or have you taken a step back?
For the very long term, I can see blockchain having a huge impact. We as a bank are working on groups that are building protocols and standards for blockchain. We're one of the founding members of R3 and we're closely watching what Ripple Labs is doing. We've invested in Coinbase, which is also giving us a close view of the action. This is an area where we see potential, and in the long term we see a great deal of incredible applications that will revolutionize a lot of things.
We envision the title business, which is very close to our lending activities when you have title verification for homes or vehicles, running on something like blockchain. It creates a whole new set of opportunities for transparency and availability of information. It's still a work in progress.
I think a lot of the industry is lost. What I like about the bitcoin story is that a lot of energy is spent on dealing with anti-money-laundering challenges. Yet bitcoin has the ingredients to resolve those problems for itself, because it's a system where ownership can be traced for a fact, and I think we'll see a generation of tools that disentangle some of those shortcomings that are seen, because it's such a data-driven platform.
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