Innovation in Spain: A Way Forward for Banks Globally?

Innovation is global. This isn’t too revolutionary of an idea, neither is it new nor original. Yet, increasingly, conversations with banks, especially in the US, reveal that many institutions aren’t looking too far outside of their market, let alone their vertical, industry, or country, for inspiration on how to innovate. In effect, this is giving an outsized impression by bankers of innovation in banking. The figure below, taken from a Celent financial services firm survey, and featured in the report Innovation in Financial Services Firms: The Leadership Gap, highlights the disconnect. It might seem intuitive at first glance—51% of respondents think their bank is worse at innovating than other industries. No surprises there. Digging into the other half, however, reveals that a startling 42% of survey respondents think that financial institutions are on par, better, or much better (!) than other industries. It begins to look a lot like Stockholm syndrome, where a hostage is kept for so long in a state of captivity that they begin to empathize and feel positivity toward their captors. [caption id="attachment_4441" align="alignnone" width="150"] How well do financial institutions innovate compared with other industries?[/caption] Source: Celent The disruption of traditional financial services is very much a global phenomenon, with financial services tech startups filling the gaps where traditional services have lagged behind evolving consumer demand. Moving in step with innovation is a shift in the way in which banks can foster innovation. There are plenty of examples globally. In Spain, innovation is coming from some of the largest banks themselves. La Caixa recently set out to make Barcelona the first ‘contactless city,’ improving in-store and ATM experiences through a new contactless payment system. BBVA launched innovative customer assistance platforms like a video-conferencing service that allows users to connect to branch personnel for specialized help, the intelligent assistant called Lola, and the Contigo initiative which gives users unprecedented control over contacting personal advisors. Banco Sabadell launched mobile cash withdrawal through “Instant Money,” and one of the first Google Glass banking apps globally. Spain, however, is an anomaly in the financial industry, and while financial institutions in countries like the US have attempted to innovate, success has varied. One bank, BBVA, has been a leader in innovation, broadening the way in which new technology and value is discovered, fostered, and funded. Consider the following ways BBVA approaches innovation:

• BBVA Innovation Center: Headquartered locally in Madrid, the BBVA Innovation Center is where many of the innovative ideas and designs are cultivated. Acting as an incubator for creativity, the bank is able to internally design and test prototypes for new ideas. Products like Tu Cuentas,BBVA Contigo, and ABIL ATMs have come out of the work done there.
• Acquisition: BBVA, in the highly publicized acquisition of the US-based neo-bank, Simple, has ventured into new territory by leveraging acquisition to adopt innovation. It remains to be seen how the two businesses come together, and what role Simple will play in the larger BBVA vision, but the deal offers an example for other banks to follow. As institutions start to look more like software companies, they will begin to do what businesses in industries like tech and pharmaceuticals have been doing for a long time: letting others innovate, and then acquiring them.
• Venture capital: Innovation needs resources, and with BBVA Ventures, the bank has taken the step to partner and invest with entrepreneurs to help ideas grow and become successful. BBVA Ventures has already invested in companies like FreeMonee,SumUp, and Radius, and last year announced $100 million for investment into new projects.

BBVA is a mixed bag of approaches to innovation, but perhaps the most telling theme is the way in which it has viewed fintech startups as partners or investments, rather than future business threats. Look forward to the upcoming Celent report, Innovation in Spain: Profiles of Spanish Financial Services Tech Startups, where the state of innovation is examined by looking at some of the most interesting new startup companies. Innovation doesn’t exist in a vacuum, and gaps in financial services are often global phenomena. Taking a US-specific view of innovation limits the potential for finding the next great idea, and institutions should broaden their horizon.