BBVA: Fintech's New Best Friend?

By Madhvi Mavadiya | 8 March 2016

The fintech acquisition boom continues. BBVA, the Spanish lender, has been dipping its toe into the fintech pool for a few years now and due to the abundance of announcements, it could be said that BBVA is fintech’s new best friend now. Let’s take a look at the bank’s activity in the financial technology sector and how BBVA are innovating and moving into the future.

Holvi

This week, Helsinki based online business banking service, Holvi, was acquired by BBVA in order to expand on their digital business portfolio and move forward with the bank’s transformation process. The company describes its offering as “Banking for Makers and Doers” and provides entrepreneurs and SMEs with business services and traditional banking through an online platform.

Chief development officer and general manager of new digital businesses at BBVA, Teppo Paavola, highlighted the bank’s excitement for the acquisition. “They use digital to bring a new approach to small business banking, where services essential to a business’ future such as invoicing are built into their core offer.”

Alongside this, CEO of Holvi, Johan Lorenzen, said that they have found the ideal owner in BBVA, as the lender is “a bank with the understanding of the digital world to give us the necessary room to grow, and then the scale and expertise to underpin that growth with sound foundations.”

Open API

Last month, BBVA entered the emerging industry of building Open API (application program interface), which is an area that many new challenger banks are getting involved with. This could be because of the 2018 deadline that the European legislation PSD2 has put in place which will mean that all banks would have to reveal their data to third parties through APIs.

However, BBVA is embracing this and according to Business Insider, will invite Spanish partners from the P2P, personal finance management and biometrics industries to assist in making the Open API platform and give access to the bank’s resources. Shamir Karkal, co-founder of banking startup Simple, has been recruited to build the platform so that external software developers would have easier and controlled access to the bank’s data, according to American Banker.

15 months after Simple was acquired by BBVA, Karkal stepped down from his position as CFO, but has now rejoined to “mimic in banking what Amazon created with its Web services division”, according to American Banker. “When Amazon Web Services launched in 2006, people wondered why an online retailer was launching a new business offering companies server capacity from its own technology platform. I think that question has been answered fairly robustly,” Karkal wrote.

Karkal went on to say that “Amazon has built the world’s fastest-growing technology business (yes, faster than Google and Apple) by letting third parties build businesses using its technology platform. Of course building an open API platform for banking is a huge challenge as well.”

Propel

BBVA also announced that they would be increasing its fintech fund to $250 million and would invest this into a partnership with Propel Venture Partners (Propel). This figure includes the original $100 million that creates the BBVA Ventures fund in 2013 to form a US and a European fund. This will help Propel develop extensively in London by opening an office and in turn, be involved in UK’s fintech ecosystem and in European opportunities.

Paavola believes that this is an excellent decision for both companies. “In an increasingly competitive fintech venture capital environment, we believe that our increased capital, Propel’s independence and a presence in London can enable us to invest in the best fintech startups and better support BBVA’s vision of using technology to change financial services for the benefit of the customer.”

Propel will focus on payments, insurance and security and managing director, Jay Reinemann, highlighted that “the future of financial services will be realised by rethinking and rebuilding, not merely disrupting.”

FutureAdvisor

At the start of the year, BBVA Compass revealed its partnership with BlackRock’s robo advisor, FutureAdvisor. This is a leap in the fintech world as robo advisors are becoming increasingly popular as programs that use computer algorithms are a cheaper alternative. Director of the digital consumer segment at BBVA Compass, Jorge Moller explored how BBVA is trying to be at the cutting edge of fintech.

We started looking for a simple, highly automated sophisticated technology to drive advice for our tech-savvy customers. We felt FutureAdvisors were the best team to offer investment management solutions to help our clients realise greater control of their finances,” Moller said. CEO of FutureAdvisor, Bo Lu, said that the company offers a comprehensive multi-account household-wide view of its investments. “We are not about trying to sell a particular securities issue but to improve a portfolio and align it with the client’s goals.”

Lu said that the partnership between both companies is a first of its kind. “I’m not aware of another announcement of a partnership between a robo advisor and large financial services firm with goal of giving a better experience to the digital investors.”

Atom Bank

The biggest news for BBVA was the bank’s £45 million investment for a 29.5% stake in Atom Bank, the UK’s first mobile only bank, which is a cog in the Spanish lender’s strategy to lead financial services digitally. As the first bank to be given a license by the PRA, Atom Bank are truly innovative as they recently announced the implementation of face and voice biometric customer authorisation.

Atom will use software company Daon’s mobile biometric authentication platform IdentityX, which is already being used by USAA, American financial services company, who have one million registered users. 80% of their customers prefer the biometric authentication to the PIN and password.

bobsguide spoke to Conor White, president, Americas, at Daon last year and he believes that this form of technology will help the industry move away from defining a person by their password. “If you’re authenticating a person and not something that represents a person like a token or a password, then it can remove most of the issues that we have with online commerce today,” White explained.

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