Digital Convergence

By February 25, 2014Strategy

bank-phone-2“People want simple, transparent services with real-time customized pricing, and it has to be available on the move.”

BBVA Group CEO Francisco Gonzalez, “Banks need to take on Amazon and Google or die,” Financial Times online.

It turns out BBVA Group CEO Francisco Gonzalez was tipping his hand when he wrote the above back in December. The bank’s acquisition of the mobile banking and payments service “Simple” is both an affirmation of the digital future Gonzalez embraces and an acknowledgement of the obstacles that traditional (brick and mortar) banks such as BBVA face in getting there.

Recognizing the potential for culture clash and disruption, BBVA plans to operate Simple as a separate entity from its BBVA Compass franchise.

That’s the case for now, at least. The ambitions at play here mean a lot is unlikely to go as planned.

For sure, the bank’s immediate goal is to learn as much as it can from Simple. That means understanding how to deliver a first-class mobile experience, notably for those customers who don’t really want to go to a bank with their money, and then exporting those lessons to Spain and elsewhere abroad.

A parallel focus will be on integrating Simple into the bank’s new $500 million real-time core U.S. banking system. “By joining forces with BBVA,” Simple CEO Joshua Reich notes, “We will be able to jointly gain complete end-to-end ownership of the customer experience, from our mobile apps all the way through the core banking stack.”

I’m not sure what ‘we’  and ‘jointly gain’ denotes here, because the point of this $117 million acquisition isn’t to grant Simple control of anything, but to allow BBVA to customize the products (and the pricing) delivered via the Simple service.

Indeed, at this point, the Simple brand likely disappears.

Reich himself may decide to vamoose, once he’s had a taste of working in a highly matrixed global organization and under the regulators’ spotlight (he’s now working for a bank, remember?)

The real question, though, is not the players involved but rather the relevance of BBVA’s ‘buy, plug and play’ construct for the industry going forward. Recent models put forward include banks functioning as app stores (the Open Bank Project) or receding to the background as transaction processors, with third-parties such as Simple providing the customer interface. The arguments for these models have been compelling, as banks have proven poor at delivering good user experience. But with this bold move, BBVA seems determined not to cede that ground. Kudos for the bank. The challenge, of course, will be in the implementation.

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