Long ago, banking seemed like a solid business. For a few years now, everything has been a threat to this sector, which lives, one would say that even stupefied, a situation of negative interest rates, but which also suffers from an excess of structure and the effects of the pandemic shortly after recovering of the Great Recession. All of them are factors that have jeopardized profitability and that are behind the new round of mergers, with Bankia and CaixaBank in the first place. There is a conditioning room on the table: the emergence of digital and new technologies that have definitively disrupted this activity, especially in its relationship with customers.
The expert in the financial sector and deputy director of the Valencian Institute of Economic Investigations (IVIE), Joaquín Maudos, assures that “among the many challenges that banks face to face their problem of low profitability is the competition of operators non-banking, and especially technology, among which are bigtech (such as Google, Amazon, Facebook and Apple) and fintech. In the first case, this threat will depend on regulation (it should be just as strict for bigtech if They do banking). And in the case of fintech companies, they are more allies than competitors, as evidenced by the investment that banks themselves are making in these types of companies. Fintech companies respond to customer requests, who demand more and more services through channels other than the traditional bank branch. And they create value that is also a source of income for banks. And with the experience of the covid, which has greatly promoted the use of digital banking (incl. using apps), banks must bet on fintech as a source of income and to face their competitors “.
What are the large financial institutions in Spain doing? Pol Navarro, CEO of InnoCells, Banco Sabadell’s innovation hub, expresses a kind of general law that is practically observed in the largest firms in Spain and that responds not only to the need to undertake changes in order not to be left behind in the fast-paced world of the new technologies, but to do it at forced marches: “To innovate quickly you have to ally yourself with smaller firms for flexibility and speed, since these are concentrated in a market niche. We can give them access to customers in exchange and distribution channels “. In other words, what is produced is a synergy. Ignacio Cea, Bankia’s corporate director of innovation and cybersecurity, adds that a large company “can do the usual, which is to open its own innovation department, which is slow, or go to open innovation. Open a mechanism to collaborate with other companies, such as fintech. In the bank we are 15,000 thinking heads, but in the world there are 7,500 million people. ” In relation to this, Manuel Silva, managing partner of Mouro Capital, the venture capital fund through which Santander invests in fintech, adds that this entity “has a very strong internal innovation strategy, but the innovation that occurs outside of The bank’s borders, originated by small technology-based companies, can set the trends of the future. Investing in these early-stage startups is the best way to keep these new trends on the radar, learn from the entrepreneurs who drive them and in some cases promote ways of collaboration between Santander and said companies, either commercially, through co-creation of solutions, or distribution to Santander consumers, to give some examples of use cases “.
It is, in fact, what their competitors are doing for the most part, who, in different ways, have one of their keys to the future in participating in this type of emerging company. BBVA sources assure this newspaper that “these investments contribute positively in terms of the development of core competencies, new digital products, new platforms and purely digital relationship models. In general, the startups in which we have invested have successfully developed new ways of doing business in banking and have targeted customers and income streams that BBVA had not previously taken advantage of. ” This entity uses two channels: direct investment, such as the one it has in Atom Bank, the first bank in the United Kingdom built for smartphones, or that carried out through its Propel venture capital fund, which participates in more than 30 companies , like Coinbase (a bitcoin transaction platform) or Hipoo (a mortgage finder).
There are other trails. Cea, from Bankia, which ensures that the bank “does not seek a financial benefit, but an industrial one, because we will not invest so that in a few years another company buys our participation in a fintech”, recalls that this entity maintains a pioneer in the Marina de València technological innovation hub with the Innsomnia manager since 2016, which is governed by the following guideline: “We detect a series of internal needs and then we make a call in Bankia Fintech that can help us achieve them. We choose the firms that present a technology and solutions in accordance with our strategic plan. We work with them and then we do a test with our clients. If it interests people, we go one step further with that company, because we invest in it, close a commercial agreement or sign a joint venture “. In the six calls held to date, 700 companies from 30 countries have participated. 65 projects have gone ahead and twenty of them have ended up working with the bank. For example, the Valencian Logic Value, which allows Bankia to improve fund management. Another firm has provided them with tools to improve early alerts of non-payment and a third help in marketing techniques through mobile phones.
These are some examples of the (non-financial) return that the bet on fintechs is bringing to large banks with a disparate investment. At Bankia, the money allocated to innovation varies between two and three million euros. At Banco Sabadell, the total invested in fintech amounts to 30 million, according to its manager Pol Navarro. The entity has invested to date in 15 fintech companies in the United Kingdom and Spain, in which it remains a shareholder. Two other companies – PayComet and Instant Credit – whose “products complemented us”, have become subsidiaries of the bank.
It also participates in two funds, one American (Base10) and the other Israeli (Cardumen), specialized in artificial intelligence and data security, and in the accelerator Antai Venture Builder. Navarro assures that the Catalan entity seeks three types of returns with these investments: multiplying the capital in the future, that fintech “helps us improve the bank’s offer with its solutions” and “learn from these companies, which give us knowledge of businesses where the bank is not. ” And he gives the example of Nemuru, which has allowed them to offer financing solutions at the point of sale, that is, it gives the customer the option of paying for a product or services in three installments. Another case is that of BiometrixVox, which has developed a solution that allows contracts with voice.
While BBVA does not want to specify what contributions from fintech firms it has introduced into its business, from Santander Manuel Silva details “some important successes related either to the implementation of technologies from our portfolio in the bank or to the creation of joint businesses. To mention some cases, Santander has implemented the automated customer service technologies of the Israeli Personetics, has originated car loans through the online car purchase processes of the American company Autofi, has based a currency conversion business on technology from Ripple or has improved its mortgage process using technologies from the American company Roostify “. His vehicle, Mouro Capital, has a venture capital fund of 330 million euros with a horizon of several years, although his investments range from 1.5 to 12 million.
And what is the one that will be the first bank in Spain doing when it absorbs Bankia? CaixaBank points out that it promotes co-creation initiatives with startups and fintechs and makes a special mention of the mobile platform for young people imagin, which in addition to financial services offers its users digital content related to lifestyle, such as music or video games.