The Power of People in Digital Banking Transformation

The Power of People in Digital Banking Transformation

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The Power of People in Digital Banking Transformation

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    Bringing It All Together at BBVA

    In 2006, Francisco González, the chairman and CEO of BBVA, attended an event with high-profile tech leaders, including Steve Jobs, which prompted his vision to radically change the bank. He later declared his vision to “build the best digital bank of the 21st century.” He considers digital transformation to be the top priority for the organization. As he wrote in the Financial Times, “Banks need to take on Amazon and Google or die.”

    The entire C-suite now buys into the extensive changes needed to disrupt the status quo at the company. Many executive-committee heads have extensive digital experience, having been recruited from external digital innovators or promoted from their company’s internal digital unit.

    BBVA’s transformation journey comprised several stages. At first, digital responsibility resided with IT. Several digital centers of excellence emerged to address high-priority issues, such as mobile banking, big data, and advanced analytics. Next, responsibility for digital moved into a digital banking unit reporting to the CEO, with a separate team and a mandate to lead the digital agenda across the business and the bank. Currently the digital unit is embedded in the business. A new customer-solutions unit leads the global development of an end-to-end customer experience, with real-time customer trials conducted by an innovation lab. The company encourages risk-taking with a budget allocated to projects that have strategic value, such as digital wallets, even though they may not have a viable short-term business case. Anyone can submit and vote on an idea; top ideas get funded and delivered.

    With the goal of accelerating its digital banking expansion in the United States and beyond, the company acquired Simple, a US-based digital bank whose disruptive business model features no overdraft or monthly fees, a network of fee-free ATMs, and automatic saving and budgeting tools.

    While past performance is no guarantee of future results, and even though all the company’s results cannot be entirely attributed to BBVA’s digital transformation plan, so far many signs are encouraging. The number of BBVA’s digital customers increased by 68% from 2011 to 2014, reaching 8.4 million in mid-2014, of which 3.6 million were active mobile users. Because of the increasing use of digital channels and efforts to reconfigure the bank’s branch network—creating smaller branches that emphasize customer self-service and larger branches that provide higher levels of personalized advice through a remote cross-selling support system—BBVA achieved a reduction in costs of 8% in 2014, or €340 million, in the core business in Spain. Meanwhile, the bank’s net profits increased by 26% in 2014, reaching €2.6 billion.

    The digital world offers both major opportunities and threats. To succeed with digital transformation, companies must understand their starting positions and plan the right path forward. We see two potential routes for financial institutions to become attackers: a step-by-step transformation journey over several years, moving through the interim organization models above, and a reverse takeover of an existing digital bank that eventually cannibalizes the traditional bank.

    But without the right people and organization, those strategic and operational plans will likely falter. Financial institutions need to evaluate their current leadership, structures, talent ecosystems, cultures, and ways of working and then invest strategically in areas where they fall short. With a thoughtful approach, incumbent banks will be better prepared for the next wave of digital disruption—before it hits.