A glimpse into the future of money: Spain's banking revolution shows what's next for your cash

In Spain, where smartphone use is the norm and peer-to-peer lending is taking off, banks' shift from payment processors to financial services advisors is particularly noticeable.


LaCaixa allows customers to pay in checks using their mobiles. Image: LaCaixa

Jean Claude Rodríguez Ferrara, the creator of P2P lending platform Puddle.com, avoids euphemisms. "Banks are dead," he says.

Ignasi Martin, the coordinator of electronic banking at CaixaCatalunya, a Barcelona-based bank with 3.6 million customers, takes a more measured approach: "Banks of the future will have to be more than banks," he says.

Both men agree that banking is undergoing an unprecedented revolution spurred on by technology. Until recently, the industry enjoyed comfortably stable revenues, and flirted with new technologies and social trends without really developing a clear strategy around how to harness them. However, the recent eurozone economic crisis and the unstoppable rise of the smartphone have changed all that.

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Now, with consumer habits changing and new players emerging, offering products where ease-of-use is front and centre, banks know they have to change. Having lasted for centuries in some cases, today's banks know they can't afford to stand still and get left behind - and that's where technology needs to come in.

Over a year ago, Francisco González, chairman of BBVA, a Spanish multinational banking group with operations in 30 countries and total assets of over €637bn, admitted that "banking platforms are obsolete". BBVA has remodeled itself to become a "digital company providing knowledge services".

In March last year, the Spanish bank announced the creation of a digital banking division. The decision was based on a report by consultancy McKinsey, which found that digital transformation can increase a typical bank's income by 30 percent and cut its costs by up to 25 percent.

In late 2014, BBVA had 8.6 million online customers worldwide and 3.7 million mobile customers. "Mobile is crucial and will be even more important in standard 21st century financial services," Ricardo Forcano, BBVA's director of strategy and digital banking planning, says.

The digital transformation of the group is both "internal and external, and involves finding new ways of working, digitizing internal processes, and launching new services, as well as investing in startups such as SumUp [a mobile point-of-sale company]; Taulia, [which offers cloud-based financial management]; or Personal Capital [a new platform to manage assets and investments]. We also purchased Simple [a US online-only bank known for its customer service] and reached agreements with new companies like Dwolla [a platform for sending money online]," he says.

Putting the customer at the heart of the business is the new mantra across the banking sector.

According to a survey by ING Direct, customers expect banks to interact through social networks and would like to get advice on how to better manage their finances. Consequently, the company has designed its site to be customizable and responsive, automatically adjusting according to the type of device it's being viewed on or the user's preferences. Customers can set which details of their account they want to see when they log in, for example.

The client is king

In a country with high levels of smartphone penetration (81 percent of Spaniards own one, according to a report by Fundación Telefónica ), mobile has become the main driver of Spain's banking revolution.

A recent report commissioned by ING Direct found that Spain has the fourth highest level of mobile banking use in Europe, after Turkey, Poland, and Norway.

Smartphones give users access to traditional online banking services, allowing them to perform the same tasks they might on their desktop, while also taking advantage of features like the camera to cash checks or paying bills, and geolocation to get personalized offers, that are specific to the platform.

"Nowadays, in order to provide the highest quality service, we have to meet the new demands brought by communication technologies: availability, usability, and accessibility," says Benjamí Puigdevall, CEO of e-LaCaixa, the multichannel unit of Spanish bank La Caixa. The bank sees 120 million mobile transactions per month and has more than 4.2 million mobile customers.

Angela Sanchez Vignote, director of web and mobile at ING Direct, which has nearly three million customers in Spain, agrees. "Mobile devices allow us to be present wherever the customer is, and this means you can interact with him or her at any time. There are customers who buy new bank products through mobile. In fact, eight percent of all accounts are opened [on mobile devices]."

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But is mobile actually a revenue generator, or are customers just shifting their desktop transactions onto their phones? Banks won't give precise figures, preferring to underline mobile's importance in keeping customers happy. La Caixa's Puigdevall sums it up: "Beyond the contribution to efficiency or volume of transactions, the design criteria for the mobile channel development is customer service."

Are people the new banks?

Mobile may offer ways to improve customer service at the front end, but banks are also overhauling their back-end systems too.

"The most visible results of banking's digital revolution are mobile apps and systems for managing customer relationships over social networks, as well as new ways of providing a digital signature [such as Touch ID]. But there still needs to be a major effort before we'll see the most transformative part of the revolution, which has to allow banks to become what new digital customers expect us to be," Banc de Sabadell's CTO Carlos Abarca says.

The bank has introduced new analytics systems to help it anticipate customer needs - for example, the bank knows that every month you have a fairly fixed set of outgoings, but this month your car broke down and you had to spend extra money to fix it. The bank systems crunch the data and let you know before your account becomes overdrawn.

Last October, the company organized a hackathon to get new ideas about how the finance industry should relate to its customers. The winner was a social cash app called Wallabe, which makes it easier for individuals to send money to each other. One of its developers, Luis Lavin, says, "ATM is doomed to disappear to become Automatic Telling Person".

Rodriguez Ferrara would doubtless agree. Ferrara set up Puddle.com in Barcelona and has since moved the peer-to-peer business to Silicon Valley, growing the company that allows friends to take the place of banks and offer personal loans. "Money is no longer in banks, it's on the internet," he says. "We realized that allowing friends to pool funds to loan to each other was cheaper. We are a society of trust."

Peer to peer lending is on the rise in Spain: Estonia-based Bondora, for example, lent over €1m there in the first quarter of last year. However, for most individuals and almost all businesses, getting a loan is still something you turn to a traditional bank for.

For all the new channels and challengers banks find themselves confronted with, much about the industry remains as it has for decades. "The essence of our business continues to be providing financial services, managing customer savings, and financing their investments," Banc de Sabadell's Abarca says.

VC Marc Andreessen tweeted last year that he's "dying to fund a disruptive bank". He's unlikely to be short of options in future.

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