BBVA Bancomer is Mexico’s leading financial institution, with a market share of 23% in its lending portfolio as of March 2018. During the first three months of 2018, the bank’s net income was 12,851m pesos ($693.3m), which represents a year-on-year increase of 8.9%. This result reflects the generation of recurrent revenue (net interest income and fees and commissions), sound risk management and cost control. The bank also continues to confirm its commitment to fulfil a healthy demand for loans, both for individuals and enterprises, helping to drive the Mexican economy with an increase in its lending portfolio of 53bn pesos ($58bn) higher than previous year.
In line with global trends, technological innovation has been making its mark on the Mexican financial system. BBVA Bancomer has become the only banking institution in the country to adopt a total transformation policy, which means new ways of working and changing its user experience through a value-based approach: design, data, mobility, and openness.
A new financial landscape
The BBVA Group, specifically BBVA Bancomer, recognises that traditional banks are no longer the competitors – it’s the current boom of fintechs which are changing the market landscape. This new wave of companies have been developing products and services focused on the specific needs of a targeted range of customers. Traditionally, banks have been creating the same products for many years, but fintechs are focused on reducing the “pain points” and improving a customer’s user experience. Even though fintechs are only targeting a small section of clients and potential clients, the accumulative effect is a threat to banks. This ever-changing landscape means BBVA Bancomer has shifted its strategic focus: the bank is now set on identifying new industry players, highlighting new customer needs and ultimately evolving to meet the disruption within Mexico’s financial system.
Achieving this entails designing products and services that focus on customer needs – based on an analysis of behaviour – and ensuring they are always accessible through user-friendly digital solutions via mobile devices. It also includes the ability to share this information to allow interaction with new fintech players. For BBVA Bancomer, being disruptive in a traditional financial world is a big challenge; embracing disruptive forces such as AI, blockchain, crowdfunding and cloud computing means a complete shake up of the commercial banking model – but it’s a challenge the bank is equal to.
Eduardo Osuna, Vice President and CEO of BBVA Bancomer, emphasised the development of various financial products and services that customers can access through both traditional and digital channels. This has significantly increased the number of customers using these channels. Currently, the bank has 5.7 million digital customers representing 30% of BBVA Group’s total.
Mr Osuna highlights that the bank’s digital transformation is characterised by the development of technology-based solutions that improve time to market: “A few years ago we launched an aggressive investment, around $300m per year over five years starting in 2017, to help to strengthen technological, operational and informational platforms, redesign applications, and reinforce security. It also focused on the creation of new products and services that will be reflected in our digital sales, which hit 31% of the bank’s total in the first quarter of 2018 and which we aim to increase to 41% by the end of the year.”
Hugo Nájera, Head of Business Development at BBVA Bancomer, explains that the synergy between traditional and digital channels is possible because they complement each other, bringing customers to bank branches by engaging them via technology: “We are evolving and revolutionising banking not only to maintain our leadership in the sector. We are designing experiences because the most important aspect for us will always be the customer. Their relationship with the bank should be at the core of all we do and we aim to meet their financial needs, which we adopt as our own.”
Mr Nájera continues: “The change not only implies the bank’s organic transformation using agile methodologies implemented through multi-disciplinary teams who are empowered to make decisions and deliver products within three months. There are two other variables on the agenda: first, the inorganic transformation, which means that areas within the bank which look for companies with solutions that cover some of our customers’ needs and in which we invest to adopt their processes.
“Secondly, open transformation through the New Digital Business unit, which closely collaborates with the fintech ecosystem to boost innovation that brings together entrepreneurs and investors. Financial technology companies and startups play a key role in the transformation of the banking sector.
“Transforming the traditional financial model in Mexico requires a level of strategic disruption. BBVA Bancomer is leading the way by developing a brand new digital banking platform, one that is open and secure for its customers. The system is full of features – through a click on the smartphone or computer, customers can get a contract on a car loan, secure consumer or mortgage loans. They can make investments, open digital accounts, manage their finances and savings, pay for services, and access mobile applications that are available to the bank’s clients and non-clients alike.”
As part of the plan to boost financial inclusion, BBVA Bancomer is addressing the low-income segment of its customer base through the financial education programmes. This also helps to complete the branchless banking strategy using banking agents, specific products and services for the segment. It also includes a mobile banking platform that is scalable and can be replicated in other Latin American markets where the BBVA Group has a strong presence. To better cater to low income groups, banks and the fintech community should collate and process information aimed to identify needs and therefore offer better solutions. Building the financial future of this section of the population is only possible by working together on participation models.
Consumer behaviour in the past few years has been disrupted by technology, bringing about a rapidly changing and competitive environment across different sectors. Industries that fail to grasp the need for transformation and continue to work in traditional ways will become obsolete. BBVA Bancomer is a bank with the spirit of a startup and will continue to design experiences based on intelligent interaction with its customers. BBVA will innovate and collaborate to achieve positive transformation, not only for the banking system, but for all of society.