"Electronic" has become the banking trend

According to a recently published article by BBVA president and CEO of Spain, the banking industry has faced a challenge of survival. "Electronic" is the trend of the banking industry, based on big data and cloud computing information platform is the core of future competition. The face of Google, Amazon and other online giants snatch, if the bank is not ready, then "dead." The following is the original translation:

(Originally published in FT by Francisco González, president and CEO BBVA, Bilbao, Spain)

Some bankers and analysts think Google, Facebook, and Amazon do not have full access to highly regulated, low-margin banking. But I do not think so. On the contrary, I think banks are dead if they are not ready for these new competitors.

Technology has changed many industries and the next one is banking. In the next two to three years, only 5% of customers interact at the counter. Rules have changed, a large number of new competitors will appear.

New entrants do not have legacy problems with traditional banks: outdated systems and expensive distribution networks. Currently, most businesses such as PayPal, Square, iZettle, SumUp, Dwolla are still considered niche businesses. However, they may expand or seek alliances. And, some global giants with billions of users will join the battle.

Although this makes the banking sector very disturbing, banks also have a significant advantage of accumulated financial and non-financial data over many years. These data show people's habits, tastes, needs and desires. Banks need to turn this into knowledge in order to better provide customers with the products they want. What people need is simple, transparent and time-saving services. Mobile services are not only more flexible in terms of time, but will also provide the world's potential customers two to three times the size of the world in the next decade.

Customers want to enjoy the same services through various channels, such as mobile phones, computers and terminals. And hopefully the transition between channels is free. They also need product and service innovations to meet their changing needs.

So big data and cloud computing will be important tools for improving the customer experience. "Open and innovative platform" is particularly important, such as banks can develop technology platforms to allow external developers to provide services in the above. Employees, customers, partners, shareholders must be closely linked around the platform.

The financial services industry is changing into a whole new industry, which I call the "BIT" industry (banking, information and technology). In this new industry, information is transformed by technology into knowledge, banks are transformed into "digital" banks, or transformed into new types of information services. A platform that integrates massive amounts of data will be their engine. For existing banks this will be a daunting task. Most bank systems are now designed in the 1960s and 1970s and have been patched over many years. Professor Peter Weil of MIT dubbed it "a spaghetti platform." This mainly refers to the complicated and complicated connection between different applications on the platform, which leads to the overall inefficiency of the system.

In view of the difficulties in replacing the core system, some banks have chosen the middle route. They support the front end with a few middleware applications that interact with the core system. However, over time, this temporary solution will require more and more computing power.

A brand new financial ecosystem is taking shape. In the next 20 years, we will experience the transition from the existing 20,000 "analog" banks to dozens of "electronic" banks. Different niche businesses will still exist, but most will become "service providers" of dozens of e-banks, while banks act as "knowledge distributors." Banks will have a platform through which end users can enjoy a large number of products and services. Here, e-banking and new entrants will have fierce competition.

The shift from analogue to digital requires all the bank's technology and culture to be fully reformed. This is a matter of life and death. We, BBVA, have explored this for six years and made significant progress. Now we have an advanced platform, but we also need to continue in the years to come.

Regulators also face major challenges. They are trying to balance the existing banking regulation with the large number of unregulated virtual environments. They want to ensure the security, privacy and system stability of the electronic world. At present, most of this area is beyond regulation and is rapidly growing bigger, faster and more complex. At the same time, they also need to protect fair play and innovation.

Banks are losing their banking monopoly. Each bank should respond to challenges and provide the information services people need.