BBVA: Lessons in Innovation, Working With Startups and Acquisitions

FinTech is exciting but not easy. Banks will always play a crucial role, especially the ones that understand the nuances of the change that is happening and move along with it. Startups are making their presence felt, shaking up many sleeping behemoths. The startup culture is rebellious and unpredictable, unbounded by heavy heritage and large assets to keep an eye on. So how do banks design their innovation programs, enable symbiotic relationship with startups, acquire right assets, take the right technology calls and work with innovative minds?

At LTP, we have been studying and discussing the nature of relationships between the corporate world of traditional banking and the FinTech world. The first observation is that some banks like BBVA have been able to establish through example that banks and startups are not competitors and that, in fact, collaboration is the key. Having the same idea in mind and realizing the power of innovative disruption coming from startups, a wide range of the banks started seeking for collaboration in various ways. In this article, we will explore what industry giant BBVA is doing to foster innovation.

The LTP team has been covering BBVA's activity in the startup sector actively. Among the most interesting initiatives run by the company is the BBVA Innovation Center. As described by the bank, BBVA is implementing open innovation models in order to overcome existing limitations in organizations and attract the best talent. It is creating a knowledge network around the Innovation Centers, such as those in Madrid (Spain) and Bogota (Colombia), which are the areas where the BBVA Group's most disruptive projects are being carried out. The group is relying on ecosystems for innovation and talent worldwide, with the aim of fostering a culture of collaboration with entrepreneurs, startups and developers.

BBVA’s Innovation Center is a place where another initiative by BBVA is organized: the Open Talent 2015, a global startup competition focused on innovative startups that are transforming financial services and those related to e-commerce, user experience, big data, etc. Each of the six winners will receive €30,000 euros to develop a project in collaboration with BBVA. In total, more than €180,000 euros will be distributed among the six winners. In addition, companies are offered a two-week immersion program with the opportunity to network with BBVA experts and industry professionals in London and Mexico. Among the finalists are companies like Coinalytics, Draft, Token, LendingFront, Volabit, Safello, etc. The winners of the Open Talent 2015 were: Everledger, Origin Markets,, Bitnexo, Modernlend and LendingFront.

This September, Barcelona hosted the European stop of the Next Bank world tour organized in partnership with BBVA Open Talent. The goal of the tour is to source the most promising and disruptive FinTech startups to compete for cash prizes and long-term partnerships with the global banking giant.

BBVA Open Talent is a part of the company's open innovation strategy through which BBVA collaborates with entrepreneurs, developers and the main players who are changing the financial industry. These initiatives are combined with the investments made by BBVA Ventures that provides funding and expertise to promising technology companies disrupting financial services. BBVA Ventures works with the entrepreneurs and co-investors in the US and the EU to become a long-term partner in their success. The merger and acquisition activity by BBVA Ventures resulted in such companies as Simple, Madiva and Spring Studio added in the portfolio along with established and influential market players like Prosper, DocuSign, Coinbase, 500 Startups, Personal Capital and others.

Last year, online banking startup Simple was acquired by BBVA for a phenomenal $117 million. This acquisition was a step for BBVA to extend its presence in the US and give Simple an opportunity to gain markets abroad.

BBVA Ventures takes a very interesting approach to innovation. We want to be backing the best entrepreneurs, Jay Reinemann, Head of BBVA Ventures, said to the New York Times, the ones that will have the best success at disrupting the industry. This approach is quite different from the one we usually witness with the Silicon Valley investments approach where the biggest assets are not bright entrepreneurs, but a groundbreaking idea or product.

The LTP team covered the news of BBVA acquiring Spring Studio for digital banking initiatives earlier this year. Spring Studio creates innovative products and customer journeys with its extensive experience crafting digital solutions for some of the most renowned and disruptive firms in finance, e-commerce and tech. The firm will now focus on BBVA projects in the US and South America. Spring Studio’s acquisition was listed by the LTP team as one of the biggest acquisitions made between January 2015 and October 2015.

Active collaboration is part of the BBVA's strategy to take the leading position in driving technological transformation in financial services industry. This has led the company to another beneficial partnership with Dwolla to enable real-time payments in the US. The deal made BBVA the largest bank to partner with Dwolla and the only major bank to open its platform, at this extent, to digital developers like Dwolla. The partnership allowed BBVA account holders to make real-time payments to each other in a safe, fast, direct and transparent way. Dwolla’s proprietary architecture and tools allow any business, organization or individual with a US bank account to move money at a cost that cannot be matched by traditional networks.

Along with above-mentioned initiatives, BBVA is not shy to put significant funds on the table. The Spanish banking giant paid €2 billion to Garanti, Turkey's largest bank in terms of market capitalization. After the deal was sealed, Turkish bank launched iGaranti, a new mobile service that offers users a comprehensive array of innovative personal finance tools within one service, devised specifically for mobile devices. The service aggregates wallet, savings, loans and offers apps, enabling users to customize it according to their needs.

BBVA is also pursuing initiatives in transforming banking with design consultancy studio Continuum: Easy Bank is BBVA's initiative to shape the branch of the future. This amazing and revolutionary concept of the banking of the future stuns with simplicity and minimalism, bringing innovation into branches and transforming the idea of banking.

Another interesting example of BBVA getting into innovation and the startup space is the board membership in startup incubator in Birmingham called Innovation Depot. Similar to the experience with Dwolla, BBVA plans to open application development interfaces to the startups in Innovation Depot to enable them to build apps that would work with the bank's programs and data.

All those fresh examples demonstrate the seriousness of BBVA when it comes to innovation. However, BBVA’s commitment to innovation goes way back to 2008 when BBVA announced the launch of BBVA Tú Cuentas, the first personal money management solution that revolutionized the way users manage their finances and make decisions in banking. The new tool, which had been developed by BBVA and Strands, Inc., was made available to BBVA's 4.1 million online banking customers through the group's network. BBVA Tú Cuentas aggregates all types of information that are relevant to the customer not just from BBVA, but from other entities the user is a customer of, and also non-financial information such as electricity and phone consumption.

BBVA leads innovation not just in the financial space: big data is also part of the global innovation strategy of the company. An example of open innovation here is Innova Challenge, which has become a pioneering initiative by BBVA aimed at promoting an open culture of continuous exchange between the bank and developer communities globally. As described on the official website, the purpose of the competition has been to find—together with the developer community—new and innovative ways to harness the potential offered by processing bulk data. Among the first prize winners were Qkly, Chances and BBVAPlaces. This marks the first time in the history when a bank has opened it real business activity data. That is how strongly BBVA believes in innovation.

The list of BBVA's activities in the innovation sphere can be continued, but we will bring the last recent example of BBVA's success in its devotion to innovative disruptive ideas. BBVA along with Yodlee and Ignite Sales won Barlow Research’s 2015 Monarch Innovation Awards. The winners were chosen based on their innovative products and features. BBVA’s winning ticket was its Mobility Bundle, a simple, bundled digital solution that includes checking, online, mobile, mobile remote deposit, alerts and merchant payments, which can all be conducted digitally through a smartphone or tablet, as described in the announcement. The solution offers unlimited digital transactions at no charge while limiting the number of checks written and branch transactions each month. The Mobility Bundle is designed to migrate transactions away from paper and out of the branch, and is best suited for micro businesses that are more comfortable transacting digitally.