Big tech’s threat to banking is no longer a headline.It is close to consensus.China is the clearest example:Tencent and Ant Financial absorbing huge parts of the payments market,and a new league of competition is in the making.
Some investors are undervaluing banks and paying over the odds for shares in fintech companies that they think will supplant them.Dutch fintech group Adyen is due to float shortly at a price that would give it a valuation of up to 7.1billion euros.It posted net profits of 24.1million euros in the first quarter.By contrast,Spanish bank BBVA has a market capitalisation of 40 billion euros and net profits in the first quarter of 1.3billion euros.
No doubt,the threat is out there.But at BBVA we have been trying to transform ourselves to meet the challenges of the digital age for more than a decade.
Along the way,we have realised that some of banking’s core strengths—security,privacy and compliance—are not easily replicable and are increasingly significant,as we all learnt from Facebook’s tribulations.At the same time,we have learnt how to use technology to improve customer experience.
But the need to protect all forms of data against everything from cyberterrorism to customer exploitation has never been more acute.We are also starting to understand that data are an essential input with an impact on competition,and I believe this will lead to a crackdown on monopolistic behaviours by the big search and social media groups.
A new regulatory model is needed,one that understands the complexities of data and balances privacy,security and competition across sectors.As we develop one,the playing field between lenders that have adapted to digital on the one hand and tech and fintech companies on the other will become more level.
Consumers will see the merit in having their data assets—whether financial or not—safeguarded within a trusted environment,but they will also benefit from a competitive and transparent market.Companies need to appreciate such changes.
Big tech is extremely successful at building ecosystems:networks of interconnected products and services,and nodes that share data.They create huge volumes of interactions every year.Banking creates fewer interactions,but typically each one is of higher value.Making a transaction or buying a service is“worth”more than liking a friend’s photo or searching online.
The more we adapt to the digital age,the more clearly we see our opportunities.We have been preparing for more than a decade,making many mistakes but also learning from them.We are girding for the battle ahead:there is room for a reduced number of providers.