BBVA banking on tech to deliver customer experience

On the edge of Madrid’s main artery of urban growth, north of the Paseo de la Castellana – the city’s grand avenue home to major banks, government ministries and Real Madrid’s Santiago Bernabéu football stadium – stands a 93-metre elliptic tower, a recent addition to the Spanish capital’s skyline.  

Complementing the silhouette of the four towers of the Castellana, La Vela – The Sail – is the 19-floor icon of the new BBVA headquarters, completed by Swiss architects Herzog & De Meuron just over a year ago, a landmark clearly visible from within the northern part of the city and to drivers on the busy motorway leading to the Barajas International airport, just 15-minutes away by car. 

Built in accordance with the strictest sustainable construction standards, BBVA’s new campus is situated in Las Tablas, on featureless terrain surrounded by anonymous retail warehouses and residential developments. This area is set to become the biggest urban regeneration project in Europe, with BBVA the controlling shareholder of real estate company Distrito Castellana Norte, which has development rights to most of the land where houses, shops and offices will be built.  

The plan, Operacion Chamartín, also includes diverting railways underground, creating new transport infrastructure, a metro system, and improving road access. 

The campus, which accommodates 6,000 staff, includes a sequence of seven three-storey buildings, each one named after a continent, with gardens and lanes borrowing their names from seas and oceans, leading to a big central courtyard. Like a fragment of urban fabric lifted off the ground, the oval tower frees up space on the side to create a plaza, serving as a meeting place and as a core of the long passageways.

Some Madrid inhabitants like to call the discoid ‘the peseta’, named after the Spanish currency used before the introduction of the euro. 

“La Vela indicates our drive towards the future,” clarifies Paloma Piqueras, head of BBVA Asset Management and Global Wealth. 

A key strategic priority for the Spanish asset management firm, as for the whole banking group, is improving customer experience through digitalisation. 

The Spanish bank is at the forefront of technological transformation, having offered a wide variety of digital services for several years, and continuing to invest in this space, aimed at “setting up a new standard in customer experience”. 

“We have always been very close to BBVA bank, as they are our main distributor,” says Ms Piqueras. “But with the digital transformation the bank is undergoing, this relationship has strengthened and we have found additional areas of collaboration.” 

BBVA Group’s asset management arm has €102bn ($107bn) in AuM globally, of which 60 per cent is sourced from Spain and the remainder mostly from Latin America. Local asset management companies operate in Portugal, Turkey, Mexico and LatAm countries. 

Around 85 per cent of the assets are captive, being distributed through the bank’s branches, both in Spain and abroad, with the balance sold to institutional investors. 

Entering third-party distribution is a challenge in Spain, as most domestic banks have their own asset management company. The focus is on improving and developing internal distribution. The ultimate goal is to move away from a product stance to embrace “a more holistic advisory approach”.

“We want to leverage new technologies to acquire better knowledge of our clients, and build our investment proposition to meet their needs,” explains Ms Piqueras.

Digital and mobile clients are growing significantly, interact more with the bank, and with better data bankers have the possibility to analyse clients’ goals, their financial status, and investment habits. This enables the asset management firm to improve products, adapt them to client goals, and offer them personalised proposals, through digital tools.

A different challenge

With her “second hat on” as head of the global wealth unit, Ms Piqueras leads a team responsible for helping the group’s private banks in the world “to develop their advisory models, trying to create synergies and promote cross-border business opportunities”. She is also in charge of BBVA private bank Switzerland. 

“There is no conflict of interest. Private bankers are responsible for offering the best advisory service to clients, and BBVA Asset Management is competing with other providers,” she claims.

In this very low interest rate environment, the main challenge is to generate positive returns for clients. 

Spanish investors have traditionally been risk averse, their investments biased towards money market, short-term fixed income, and guaranteed products. 

But recently, asset allocation products have boomed in the country. 

In the past two years, BBVA gathered €3.8bn in net new inflows through these multi-strategy funds, while international fixed income has also been very much in demand. 

“Asset allocation products offer the possibility of generating positive return in a negative or very low interest rate environment, for the lower-risk profile investor. Diversification is key to improve the risk-adjusted return of the portfolio,” she says.

Quality Funds, BBVA Group’s platform of third-party products, of which Ms Piqueras is also in charge, has been instrumental to the rise of asset allocation products, as they make extensive use of both ETFs and active funds from third-party providers. 

The platform today oversees €25bn in assets, a dramatic rebound from the years of the financial crisis, when assets slumped to a €10bn low. 

Having shut down its small alternative management operation in 2009, BBVA Asset Management’s expertise lies mainly in European equity and European and international fixed income, as well as LatAm equities and bonds, while it is building capabilities in asset allocation products. A significant team is responsible for guaranteed and structured products, still in demand. 

The selection of third-party products is focused on riskier asset classes, in which the firm has no expertise, such as high yield, emerging markets or corporate credit.

Over the past few years, the platform, which has agreements with 30 to 35 providers, has focused its efforts on illiquid assets, such as private equity, real estate and infrastructure, or absolute return strategies, to improve its offer to private banking clients.

“Distribution of third party products will increase. To offer a good value proposition to client, you must have the best products available, access to smart beta products and alternatives to build diversified portfolios,” she says.

“It does not matter whether we grow with in-house or third-party funds, I would be happy with either or both,” says Ms Piqueras, not disclosing any growth target.

And there is further growth potential in the rapidly expanding Spanish fund industry, which had been badly hit during the financial crisis. Foreign asset managers’ funds assets have risen fast, by 80 per cent over the past four years, and today source 77bn from Spain. Domestic asset funds have risen 47 per cent to reach €236.5bn, according to Inverco, the domestic asset management association.

The low interest rate environment is expected to drive investors partially out of deposits into mutual funds, which represent just 13 per cent of household financial savings in Spain, much below the 40 per cent average in Europe. 

An ageing population and the need to save more for retirement are also significant growth drivers for the fund industry, which is greatly benefiting from wealth expansion, as the Spanish economy is growing at double the speed as the eurozone. 

BBVA AM’ s funds are gathering assets in Spain as well as in most of the countries with local asset management units, such as Mexico and Colombia, says Ms Piqueras, but there is no plan for “inorganic operations”. Assets under management globally grew 48 per cent over the past six years.

Given its “competitive advantage” in Latin America, the firm manages LatAM equities and fixed income on behalf of institutional investors and international private clients in Luxembourg, although this area did not generate the expected growth in recent years, given market headwinds the continent faced.

Developing talent and increasing operational efficiency through investments in technology are additional strategic priorities for BBVA. 

 “Improving efficiency and growing assets under management to reach economies of scale is increasingly important today because of fee pressure, which is driven by the need to offer a positive return to clients, given the low rate environment, wider use of ETFs and increasing competition.”