Tuesday, 22 December 2015

BBVA, the Fintech Bank and the Innovation in the Spanish Banking Industry



BBVA made it again in the headlines of digital banking as the bank announced it is purchasing a 30% of Atom Bank, a digital-only bank in the United Kingdom. As BBVA has explained to the market, it is the latest investment in M&A in Digital Banking that the Bank makes and that already sums up $285.6 million (interesting that they do not include in this list the investment of $24 million in Strands in December of 2007).

But, a part from being a new M&A transaction in Digital Banking, what strategic considerations can we take from this acquisition? There are, from my point of view, three main considerations: 


1. - The Fintech Bank

This investment is in certain way similar to the acquisition of BBVA in Simple in the US in February 2014 and I believe it seeks the same: to learn to develop the Fintech Bank, the new generation of banks with an open platform that will allow the bank to connect itself with third parties and that will offer different services (of third parties) to the customers. This means a very important evolution not only of the technological platform but also of the retail banking business model.
 
Obviously, this learning and its later application will require time that´s why these two investments are long term investments. 

2. - BBVA enters the United Kingdom

The interest of Spanish banking in the United Kingdom has been very important since Banco Santander acquired Abbey at the end of 2004.  Now renamed Santander UK, it is the geographic segment that contributes the most (22%) to the ordinary profit of the Grupo Santander (Spain is a 13%) and it has become one of the Big Five Banks in the United Kingdom. 

This year Banco Sabadell has invested €2,350 million to acquire the 100% of TSB. With this acquisition the Banco Sabadell will have 22% of its assets outside Spain when it had only 5% before the transaction. Nevertheless, it will take the Bank two years to integrate its technological platform, time that their competitors will used to continue innovating.

The purchase of BBVA is very different because it does not increase neither the size nor the diversification of its retail operations. Unlike the Banco Sabadell that has acquired a Larger Challenger, BBVA has entered the capital of a digital-only bank that lacks the problems of legacy of the Big Five and the Larger Challengers and that will try to be a disruptor force in the British banking market. And if this is fulfilled, these digital-only banks or Digital Challengers can become mainstream banks over time

The financial data we already have about Smaller Challengers (those that have appeared right before the Digital Challengers), indicate that there is a market for these new players. According to a KPMG* report, this group of banks has obtained a ROE of 18.2%, compared with 2.1% of the Larger Challengers and a 2.8% of the Big Five.
 
Therefore, BBVA, with a minimum investment, put a foot in the country and through a player that aspires to play an important role, first as Challenger Digital Bank, and if the disruption makes effect, as a Mainstream Bank. But we won´t see it at least in 10 years time. For that reason, again, this is a long-term investment.

3. - The innovation of the Spanish Banking Industry

Last year, in another post I asked: Where is the Innovation Headquarter of the Spanish Banking Industry? And this is how I ended that post:

Therefore, the question arise, is it possible that an “internal outsourcing” is taking place towards those ecosystems that act as poles for the attraction of talent and investment?. In the last years, the return on equity of both big Spanish banks has been above the ROE of their national peers as Banco Popular or Banco Sabadell, due to its greater margins in developing countries, mainly in Latin America. But perhaps in the future, that greater return does not come from their subsidiaries in developing countries, but from the capacity of these banks to apply in all the organisation, the innovation that their subsidiaries good fitted in the great fintech ecosystems are able to generate and to integrate in the rest of the organisation.

This movement from BBVA is deliberate as it seeks to be part of the most important Fintech ecosystem in Europe (and perhaps soon of the world). And for that reason I still think that the Innovation Headquarter of the Spanish banking industry is more Anglo Saxon than ever.
 


* KPMG: The Game Changers, Challenger Banking Results. May 2015

20 comments:

  1. Hi, just desired to let you know, I enjoyed this blog post. It had been funny. Carry on posting!
    blogger

    ReplyDelete
  2. Now that is the thing that I call an enormous blog. Flawlessly composed.
    guaranteed approval loan

    ReplyDelete
  3. In the same way, a car purchased with the help of a Bank loan, is the primary security for that loan. Bank creates a charge against this primary security, to secure its loan.payday loans no credit check henderson tx

    ReplyDelete
  4. Great job for publishing such a beneficial web site. Your web log isn’t only useful but it is additionally really creative too. https://www.prizebondlucky.net

    ReplyDelete
  5. Excellent article! We are linking to this particularly great article on our website. Keep up the great writing. silk bank - hbl car loan

    ReplyDelete
  6. Thanks for sharing this valuable content. In my view, if all webmasters and bloggers made good content as you did, the web will be a lot more useful than ever before. payday loans no credit check

    ReplyDelete
  7. a discussion on the uncertain financial future among a group of 18 to 25 year olds could be a signal to banks to offer long term investment products to a segment that was previously not considered a target.Banks in India

    ReplyDelete
  8. Computerized Marketing is a gigantic subject and you can't transform into a legend in 30 hours! It is a sort of showcasing system.blog comments service in 1$

    ReplyDelete
  9. Great post, and great website. Thanks for the information! UnitedFinances.com offer $500 loan

    ReplyDelete
  10. Nice post! This is a very nice blog that I will definitively come back to more times this year! Thanks for informative post. Syndicate bank customer care

    ReplyDelete
  11. I’m going to read this. I’ll be sure to come back. thanks for sharing. and also This article gives the light in which we can observe the reality. this is very nice one and gives indepth information. thanks for this nice article... script mutasi bank

    ReplyDelete
  12. Even the remotest villages of the country can now access banking facilities, which has increased the involvement of farmers and marginalized people in banking activities.https://myifsccode.com/bank-of-india-ifsc/

    ReplyDelete
  13. I wanted to thank you for this excellent read!! I definitely loved every little bit of it. I have you bookmarked your site to check out the new stuff you post. One Pearl Bank

    ReplyDelete
  14. Get mortgage rates in UAE to bank bank in UAE for your home or business.

    ReplyDelete
  15. Because of this , appear you should important researching previously penning. It's possible in order to healthier put up in such a manner. credit card debt relief

    ReplyDelete
  16. I wanted to thank you for this excellent read!! I definitely loved every little bit of it. I have you bookmarked your site to check out the new stuff you post. Parc Esta

    ReplyDelete
  17. Banking Fraud is presenting danger to Indian Economy. Its energetic impact can be comprehended be the way that in the year 2004 number of Cyber Crime were 347 in India which rose to 481 of every 2005 indicating an expansion of 38.5% while I.P.C. routing number on check

    ReplyDelete
  18. Know your privileges - The Consumer Credit Act 1974 states that in the UK if a card is abused, and as long as the card holder has no part in the criminal demonstration, at that point everything taken must be discounted. dumps with pin shop

    ReplyDelete
  19. At the point when you're away from home, with card assurance, you can likewise profit by money advances that can be wired to you as practically as could be expected under the circumstances and reimbursed inside 28 days, and you could even be made up for the loss of your satchel or wallet in the burglary. gsm atm data receiver

    ReplyDelete