10 October 2015


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Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.

WhatsApp and the future of the Banking Industry

24 February 2014  |  7875 views  |  0

Blinded by the mega deal between Facebook and the 50 employees company WhatsApp for obscene amount of 16 Billion USD, for many followers of digital gossip, the news about the acquisition of Simple Bank by the Spanish group BBVA went almost unnoticed. It’s true that the value of the deal, EUR 100 Mio looks ridiculous in comparison, however I want to highlight in this post, the critical importance of this deal for the future of the Banking Industry.

Firstly the value per user, Facebook paid US40 per user; qualified as scandalous in at least dozens of articles from Financial Times to Forbes and in CNBC, while speculating the real worth of such price. I was wondering why nobody commented how much did BBVA paid (per user) to Simple Bank? Well, according to the Financial Times BBVA paid 100 million EUR for 100,000 clients from Simple Bank: This makes a price per user to 1000 USD. Just imagine the potential value of PayPal or Square? Not to mention the potential and priceless value of Facebook in case they decide to build some kind of Financial Services. 

Surprising, isn’t it? It’s true that according to their records, Simple Bank showed that its user’s logs twice or more times at day into their website or thru the nice smart phone APP. So we can conclude that what BBVA is paying for is Customer Engagement.

It’s maybe worthwhile to recall that Simple Bank is rather a technological platform than a Bank, although their clients have credit cards: Simple Bank was born with what the Banking Industry (at the least the American side of it) considers the highest Nirvana of the operations: no branches, no advisors, almost no paper work.

The second point to be highlighted is that BBVA (the second largest Bank in Spain) is not an American Bank but a European and, of course international, Bank with large operations in both parts of America. We’re not talking about a small innovative new Bank, but about the number 18th in the European ranking of the largest Banks and the number 33th in the world league, with more than 800 Billion in Total Assets: just 100 Billion behind Credit Suisse.

Is this a Defcon 1 alarm for the Banking Industry? And we’ll soon see Banks buying left and right any imaginable technological startup active in the financial sector? It’s hard to say, regulation and compliance being a heavy straitjacket to remove by the Banking Industry.

Anyway, the signal seems to be clear. The new threat posed to traditional bricks-and-mortar lenders was highlighted by the CEO of the BBVA himself in a recent opinion piece for the Financial Times. “Some bankers and analysts think that Google, Facebook, Amazon or the like will not fully enter a highly regulated, low-margin business such as banking,” he wrote. “I disagree. What is more, I think banks that are not prepared for such new competitors face certain death.”

Well. Maybe it’s DEFCON 1, after all.


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