Index

1. Towards a New Digital Enlightenment: The Financial Industry’s Role

Landmarks

1. Cover

2. Index

3. Start reading

Francisco González

Group Executive Chairman, BBVA

Francisco González graduated in Economics and Business Administration from the Complutense University in Madrid. He has been Executive Chairman of BBVA since 2000 and is a Member of the Board of Directors of the Institute of International Finance (IIF), where he is also a Member of its Executive Committee. He is a Member of the European Financial Services Round Table (EFR), the Institut International d’Études Bancaires (IIEB), the International Advisory Panel of the Monetary Authority of Singapore (MAS), and the International Business Council (IBC), of the World Economic Forum (WEF), among other international fora. He is also a member of the Board of Trustees and a member of the Global Advisory Council of The Conference Board (TCB). He represents BBVA in the International Monetary Conference (IMC). He is also Chairman of the BBVA Foundation. Prior to the merger between Banco Bilbao Vizcaya and Argentaria, Francisco González was Chairman of Argentaria from 1996 to 1999, where he led the integration, transformation, and privatization of a diverse group of state-owned banks. He began his professional career in 1964 as a programmer in an IT company. His ambition to transform twenty-first-century banking with the support of new technologies dates back to this time.

Recommended book: The Age of Perplexity: Rethinking the World We Knew, OpenMind/BBVA, 2017.

The last decade has been a turbulent one. The financial crisis and uncertainty about the effects of globalization and the technological revolution have led to broad questioning of the global order of representative democracy and free markets. This article argues that to materialize the enormous potential growth and well-being for all offered by the technological revolution, and to dissipate the climate of discontent and pessimism, we need a New Enlightenment: a renewal of our philosophical and ethical bases, and of our political, economic, and legal architecture. This may be a long and complex process, but some steps can be taken immediately through economic and legal reforms. The digital transformation of the financial industry is one of the reforms capable of improving productivity and driving more inclusive growth.

Towards a New Digital Enlightenment: The Financial Industry’s Role

A Momentous (and Turbulent) Decade

Ours are turbulent times, where political, economic, and social patterns that seemed sturdy and practically permanent are being radically questioned.

Undoubtedly, this is largely due to the financial crisis that has marked the last decade. Eighty years after the Great Depression, and following the greatest known period of global prosperity that began at the end of World War II and ended with the “Great Moderation” at the beginning of our century, the world has again experienced a profound and worldwide economic crisis.

This crisis, with its ensuing unemployment, rapid deterioration of public accounts, and austerity policies, has particularly affected the most developed countries. There, the drop in production and income was greater and more long lasting, and social-policy cutbacks had a more powerful impact on their inhabitants, who have traditionally been much more protected and caught up in a process of rapid aging. Doubts about the sustainability of the welfare state, which had already arisen earlier and had led to liberal-oriented reforms in many countries, have grown stronger.

Moreover, these doubts have spread to other key aspects of the liberal democratic system. This has led to a proliferation of populist political options and proposed authoritarian solutions that have weakened citizens’ participation and trust in institutions and in the practice of politics and democratic representation. Populist solutions unfettered by institutions or traditional party politics are on the rise as a supposed representation of the “people” or the “real people” (Müller, 2017).

The result is increased political polarization, with a much more biased and less transparent debate that focuses more on the very short term and less on problem solving; more on the fabrication of enemies and confrontation rather than the quest for agreement.

At the same time, political information and communications are deteriorating, social networks favor media fragmentation, and polarization adds “spin” to the news or to deliberate forms of disinformation such as “fake news.”

Ours are turbulent times, where political, economic, and social patterns that seemed sturdy and practically permanent are being radically questioned. Undoubtedly, this is largely due to the financial crisis that has marked the last decade

In this setting, citizens tend to feel less safe and more pessimistic; they turn to more simple and drastic solutions, assuming much more defined and monolithic national, ethnic, and religious identities, among others.

The result is a less cohesive and more divided society that shows greater hostility toward those perceived as “different” or “other”—especially immigrants.

And yet, these doubts and fears (of the other, of the future) did not begin with the crisis, and, in fact, they have continued to grow, even with the recovery of global growth in recent years. In the 1990s, the great sociologist Zygmunt Bauman (1998) coined the term “Unsicherheit” for the combination of uncertainty, insecurity, and vulnerability that he perceived in contemporary developed societies and that he attributed to the economic, social, and cultural effects of globalization and its difficult assimilation in those contexts—national, regional and local—closest to the people. Moreover, even before the crisis, economists such as Mary Kaldor (2004) explained phenomena such as the so-called “new nationalisms” as reactions to globalization.

Many of the new political and economic proposals certainly define themselves as explicitly anti-globalization. Globalization is being questioned, and that very questioning has reached the geopolitical framework in which that phenomenon has developed.

At the end of the Cold War, the United States emerged as the only superpower, the guardian of an increasingly open and interconnected (globalized) world in which the liberal democratic regime seemed to have prevailed and a world order of increasingly integrated democracies and market economies would evolve.

But this view of the future is increasingly less certain. For two main reasons, the United States’ hegemony is no longer so clear: first, because that nation’s weight in the global economy is waning as other areas, especially China, expand much more rapidly. And second, since Trump’s election, the United States has adopted a more unilateralist approach that focuses on its most immediate interests at the expense of its former role as champion of democracy and free trade.

At the same time, supranational initiatives aimed at cooperation and economic integration (including the most ambitious of all: the European Union), international accords and organisms (such as the WTO, which is fundamental for sustained globalization), and organizations for coordinating global policies (the G8 and the G20) are growing weaker.

But this is not only a matter of globalization. Its repercussions (attributed or affirmed, positive or negative) are increasingly intertwined with those of the ongoing technological revolution. Technological advances drive globalization through improvements in telecommunications and greater connectivity, and the global setting is home to the technological revolution. That is where it can develop and make the most of its potential. In fact, throughout history, periods of globalization have normally been associated with accelerated technological progress.

The current period of globalization began after World War II, following the Great Depression of 1929 and the protectionist and nationalist reactions sparked by it (and here, it is certainly possible to recognize a disturbing parallel to the crisis of 2008 and our situation today). The so-called information revolution began at almost the same time as the global political and economic reorientation, and its ceaseless acceleration is ongoing.

This has been a period of unprecedented global prosperity; the world’s population has tripled in number and living conditions have vastly improved on most of the planet, with a considerable reduction in the number of persons living in poverty (World Bank, 2018).

It is impossible not to attribute much of the world economy’s outstanding performance to globalization and the technological revolution, as well as to the strengthening of institutions in many emerging countries. The extension of free-market principles, the rule of law, and the improvement of legal protection have helped many countries, especially in Asia, to make unprecedented advances in development, thus leading and driving global growth. As has always occurred in the past, such periods of globalization and technological progress have increased prosperity and created more jobs than they have destroyed (Mokyr et al., 2015).

Why, then, is there such a sense of uncertainty, frustration, and pessimism?

As we mentioned above, the crisis and its aftereffects are part of the explanation. But if they were the only cause, we would be experiencing temporary phenomena which should have improved as the post-crisis recovery took shape. It is, therefore, necessary to look deeper into the outcomes of globalization and technological progress, one of the clearest of which is increased migratory flows.

Emergency meeting at Lehman Brothers’ London office in that city’s Canary Wharf financial district on September 11, 2008, four days before the company’s bankruptcy and the start of the worldwide financial crisis

Emigration to developed countries is necessary, and even essential for sustaining growth and social-welfare systems. And yet, immigrants are frequently viewed as “unfair” competition for local employment. They are accused of contributing to the maintenance of low salaries and of a disproportionate use of social services.

At the same time, while globalization and technological advances have had no negative effects on income or aggregate employment in developed countries, they have affected its makeup and distribution.

Employment and salaries have particularly dropped in the manufacturing sector, first because many jobs have been outsourced to emerging countries where salaries are lower; and second, because automation and digitalization have made many of that sector’s routine and repetitive jobs redundant.

There has, however, been an increase in employment in the service sector, which is more difficult to automate. Most of this work, however, is unskilled, poorly paid, and open to competition from immigrants (Autor and Salomons, 2017). Simultaneously, the instability of the job market and greater job turnover has generated a growing portion of part-time, temporary, or freelance jobs in what has come to be known as a “gig economy” (Katz and Krueger, 2016).

Weak salary growth in developed countries is one of the most clearly established effects of globalization and technological progress. On the other hand, the number (and most of all, the remuneration) of highly skilled jobs has grown. Moreover, strong increases in productivity, as well as economies of scale and the network economies of the most digitalized sectors that drive the emergence of global monopolies, have led to major accumulations of income and wealth by very reduced segments of the population.

Stagnating salaries and increased inequality in developed countries, caused by globalization and technological change, as well as concern about the future of jobs in light of what has happened in many sectors, are at the base of the current climate of uncertainty and pessimism

In summary, the distribution of wealth generated by globalization and technological advances has been very unequal. The winners are the richest sector of the population in both developed and emerging countries, as well as workers and the new middle classes in many emerging countries—principally China and India. The losers are the poorest of the poor (fundamentally in areas such as Sub-Saharan Africa) and the working and middle classes in developed countries and in many countries from the former communist block (Milanovic, 2016).

Stagnating salaries and increased inequality in developed countries, caused by globalization and technological change, as well as concern about the future of jobs in light of what has happened in many sectors, are at the base of the current climate of uncertainty and pessimism (Qureshi, 2017).

A New Society for the Digital Era

Discontent with what has already occurred is accompanied by the anxiety (perplexity) generated by the speed and magnitude of scientific and technological advances. The bioscience and digital revolutions emerge as forces capable of transforming not only our economy and society but even our bodies and minds.

The Industrial Revolution was based on machines capable of surpassing the physical limitations of humans and animals. Today’s revolution employs digital and biotechnologies that surpass not only our physical but also our intellectual limitations, and even the natural limitations of our lifespans. Sooner, rather than later, all of this will impose a radical rethinking of our economy, society, and culture, as well as of our ethical principles and even the fundamental philosophical bases of our existence as individuals and as a species.

The bioscience and digital revolutions emerge as forces capable of transforming not only our economy and society, but even our minds and bodies

It is certainly impossible to foresee the nature and depth of the changes that will result from the monumental and rapid technological revolution that has only just begun.

We can fear all sorts of dystopias, but we can also view the technological revolution as a great opportunity to improve the well-being of all of the world’s citizens.

Throughout human history, economic progress and social welfare have gone hand in hand with technological advances, and there is no reason why the present occasion should be an exception.

Those positive effects, however, have only emerged after long and difficult periods of transition, with winners and losers. We may recall, for example, the misfortune of farmhands and small landowners, dismal wages and factory work, as well as the exploitation of children and of the colonies at the dawn of the first Industrial Revolution.

Moreover, all technological revolutions since the Neolithic era, which ushered in agriculture and villages, have required long and profound processes of change in different areas.

For example, the development of the first Industrial Revolution that began in England in the mid-eighteenth century required, at the very least, numerous earlier relevant technological innovations, not least of which was the printing press, three centuries earlier! Equally necessary were the great discoveries made between the late fifteenth century and the end of the sixteenth century, which increased the availability of resources to Western Europe and, most of all, changed its worldview. Another crucial element was the scientific revolution of the sixteenth and seventeenth centuries, when Bacon, Galileo, Newton, Leibniz, and many others fathered science as we know it today.

Political systems were changing at the same time, with the birth of the nation states and the transition to the earliest (and limited) parliamentary democracies, followed by the American and French Revolutions.

All of this shaped a radical departure from what had formerly been the dominant thinking. The new model, which adds up to what we now call the “Enlightenment,” was a major step away from a basically religious and institutional mentality toward an approach based on reason and facts that recognized the individual rights of every person regardless of their status. This fundamental philosophical change sustained the processes of economic, political, social, cultural, judicial, and institutional modernization, among others and led, in turn, to the contemporary parliamentary democracies and free-market economies that, after decades of growing success and prevalence over the communist alternative, are now being questioned.

Today, we are witnessing a new scientific and technological revolution that has been called the Fourth Industrial Revolution (Schwab, 2016). We have the economic and human resources to insure its advancement, but in essence, it is operating on bases that correspond, essentially, to the industrial age.

Oxfam activists wearing masks with the faces of political leaders (in the photo: Vladimir Putin and former Italian prime minister Paolo Gentiloni) demonstrate at a G20 meeting in Hamburg, Germany, in July 2017

These bases need to be updated to drive the Fourth Industrial Revolution, to channel it, limit its risks, maximize its benefits, and extend them to the global population as a whole. In short, we need a New Enlightenment to organize scientific and technological advances in a new philosophical framework, to help adapt our ethical criteria and to guide the necessary legal and political changes.

This is unquestionably a very complex process. It may take decades to complete, and it certainly surpasses the capacity of any state or supranational organization.

We are facing years of profound debate among different and often opposite views, but we must stimulate and accelerate this process as much as possible. How? By fostering dialogue and the confluence of hard science and technology with social science and the humanities, including philosophy, ethics, and even the arts. Today, we have the tools to make this debate truly transparent, global, and open to all who have something to contribute.

And while this process is underway, it is important to concentrate on what can already be revised and adapted to new situations: especially in two closely connected areas: the economy and the law.

A New Political Economy, a New Legal Architecture

In the area of political economy, it is important, first, to encourage and boost the positive effects of digital technology with reforms that foster research, development, and innovation, support entrepreneurship, increase market transparency and competitiveness, and finally, favor the infrastructures needed for the deployment and adoption of digital technologies.

As we have seen above, the job market is another priority. It is necessary to develop better policies for addressing unemployment, with social protection that is adequate but does not discourage job seeking in an environment marked by high levels of turnover. Active policies are needed to favor workers’ recycling and mobility. And it is also essential to modernize regulations to better address the questions posed by a much greater diversity of work situations, including part-time jobs, freelancers, and so on.

The most important element of all is certainly education, because that is the most powerful means of insuring equal opportunities and social mobility. We definitely need more and better education to close the currently growing inequality gap.

The technological revolution will undoubtedly require improved technical training, as well as the provision of complementary, rather than alternative, skills required by technological advances. And, of course, we must also push for continuous training and recycling.

But that is not all. It is not even the most important. We live and will continue to live in a world of accelerating changes. It is, therefore, fundamental for education to promote certain values and attitudes: courage in the face of change, entrepreneurial spirit, resilience, the capacity to adapt, and teamwork, among others.

The extraordinary advance of biotechnologies and information technologies also poses very complex challenges to existing regulatory and legal frameworks.

Facing these challenges requires finding a fundamental balance that makes it possible to control the risks associated with technology without unduly hindering innovation or limiting its positive effects. This should lead to improvements in productivity, growth, and quality of life, and should be coordinated, as much as possible, at a global level.

Potentially, the regulation of all these activities will need to be revised in all spheres of life; however, five closely related areas stand out as particularly pressing.

The first is privacy, and there are already important initiatives in this area, including the General Data Protection Regulation (GDPR). This is a fine first step which will have to be further developed and improved in the coming years. It only affects Europeans, however, and ultimately we need to advance on a global scale toward more precise definitions of individual rights with regard to personal data, and more straightforward and efficient mechanisms for protecting and enforcing those rights.

The second aspect is market power. Digital technologies involve enormous economies of scale and scope, with the consequent “natural” tendency toward monopolies. Today, for example, Apple and Google have a duopoly on the smartphone-operating systems market, while Facebook and Google dominate the digital publicity market and Amazon is becoming increasingly dominant in online distribution and data-center infrastructure. These are just a few examples of similar phenomena visible in many other sectors, including urban passenger transit, the distribution of audiovisual content, and so on.

In this respect, there is cause for concern. Are new technologies undermining the competitive structures that drove growth in the twentieth century? And beyond the phenomenon of the previously mentioned platforms, a variety of macroeconomic evidence points to a growing polarization of productivity and sales in different industries (Van Reenen, 2018). Production appears to be concentrated in a small number of companies with high profit margins.

It has also been argued, however, that new technologies are not so much weakening competitiveness as changing its mechanisms. In that sense, concentration would not be reducing incentives and opportunities for equal competition among all to become new, globally successful mega-companies. But how could that happen? The argument is that new technologies are easily scalable and replicable. That should favor the spread of innovations generated by any company (even small ones) and limit the abuse of power by Internet giants. In fact, while there have been some instances of abuse of market share, there has yet to be evidence of systematic collusion: the Internet giants compete with each other to capture clients and expand into new activities and markets.

The matter has yet to be resolved, but, in any case, the risk of a permanent drop in the efficiency of multiple markets should lead us to develop adequate policies for fostering competition in digital settings.

Another important aspect is the concentration of income and wealth in a very small group of people linked to large technology companies while overall salaries have grown very moderately, or not at all, for some years. This produces aggravation that grows when those large companies are seen to be minimizing their worldwide fiscal contribution by paying taxes where it is most convenient for them.

Control of these companies’ income and profits must certainly be improved, as must be the distribution of taxes among the different jurisdictions where they have clients and activity. Nonetheless, that requires a high degree of international coordination and the maintenance of adequate incentives to innovation.

It is also necessary to address the problems arising in the area of information. The emergence of new digital media, including social networks, has had a distorting effect on the transmission of news and on its transparency.

Finally, high priority must be assigned to cybersecurity, from crimes committed through social networks to threats to countries’ national security.

All of these elements will have to be taken into account in future technology policies and their regulation. This is an extraordinarily complex task, but it is fundamental if we want the technological revolution to generate prosperity and well-being commensurate with its potential.

At a municipal vote in Seattle, various demonstrators hold signs demanding that locally based multinational corporations, such as Amazon, be taxed to combat rising housing prices

Beyond regulation, which will inevitably lag behind technological and business developments, we need to define and extend an ethical approach to the generation and application of scientific and technological advances. That approach needs to include moral and cultural values in the development of biotechnological applications and artificial intelligence.

If, for example, we believe that the democratic political system deserves to last through coming generations, then the information systems used by democratic governments must be designed to favor human rights, pluralism, separation of powers, transparency, fairness, and justice. Likewise, we must be certain that artificial intelligence algorithms used for contact with people in any business or activity are unbiased, do not discriminate against certain groups and do not unduly interfere in their freedom of choice.

For all these reasons, we need to change the manner in which we work with technology, generating more open, participative, and multidisciplinary ecosystems where more people can contribute ideas, talent, and resources.

We undoubtedly have the capacity to develop technology that does not enslave us and instead helps us to live better. But for this to happen we need to build ethical values into the design of that technology.

If we manage to do so, the Fourth Industrial Revolution may effectively become much less disturbing and more inclusive than the earlier three, a source of prosperity and well-being for all.

New Banking for a New Society

Reaching this goal would be considerably easier with a “digital” financial system. Its far greater agility and efficacy would help improve people’s lives and contribute to much more inclusive growth.

Digital technologies have huge potential for driving this transformation, with enormous benefits for individual consumers and companies in terms of product quality, variety, convenience, and price. They will also allow thousands of millions of people from the lowest layers of society around the world to obtain access to financial services, thus increasing their possibility to prosper.

The last decade has been very difficult for banking. Following the extremely harsh impact of the financial crisis, including the failure of many banks and very negative effects on that industry’s reputation, banking now faces a period of reduced business growth and lower profitability in an environment characterized by low interest rates and greater capital requirements.

Clients, too, have changed. They demand different products and services and new ways of accessing them. And thousands of new service providers (start-ups or, for some services, major digital companies) are already meeting these demands (Lipton, Shrier, and Pentland, 2016).

Therefore, banking’s digital transformation is a case of both convenience for the common good and the needs of the sector itself.

The panorama in which this transformation will occur is very complex. On a global level, banking is growing more fragmented due to the annual entry of hundreds of competitors in a field that already includes 20,000 banks, worldwide.

At the same time, the banking industry is splintering. The immense majority of new competitors are breaking banking’s value chain, offering very specialized products and services.

But this trend will have to undergo an about-face in the future. First, because the banking sector already suffered from overcapacity in the past, and this is now growing even more acute. It is, therefore, likely that many banks will disappear, along with a multitude of start-ups whose mortality rate is always very high.

On the other hand, user-convenience calls for complete and integrated solutions, and that, in turn, points to supply side regrouping.

In light of what has occurred in other sectors, this regrouping will very likely take the form of platforms where different service providers compete—and they may frequently cooperate as well—to improve their offers to clients (González, 2017). The “owners” managing these platforms will control information generated by transactions and access to the end users. This control represents a major source of value.

What sort of companies will attain this position? Possibly some especially successful start-ups, certainly some of today’s major digital companies, and probably a few banks capable of transforming and adapting to this new scenario.

Banks have a good opportunity to successfully compete because they know the business, they are accustomed to operating in regulated environments, and have client confidence in the delicate area of handling their money. On the basis of that confidence and the client information they possess, they can build a platform that includes many more services. But the necessary transformation will not be possible for all banks, and the competition will be severe.

That competition is precisely what can lead to a much better financial system—one that is more efficient and productive, capable of providing better solutions to a larger number of users, including the hundreds of millions who currently have no access to financial services, and therefore capable of supporting growth and increased well-being for all.

On the basis of the confidence and the client information they possess, banks can build a platform that includes many more services. But the necessary transformation will not be possible for all

Of course, in the financial world, as in others, materializing technology’s positive impact depends largely on the decisions we make, both as private agents and as public powers (especially, in the latter instance, regulators and supervisors).

Clearly, while technological advances offer great opportunities, they also involve risks. Grave disturbances of the financial system have a very important negative impact on growth, employment, and well-being, which is precisely why the financial system has been subject to particularly strict and detailed regulation.

On this occasion, financial regulators face an especially difficult task. First, because digital means global, and the new regulatory framework requires a far greater degree of international uniformity than presently exists. Second, because in a setting characterized by downturns in prices and margins of the sort imposed by a digital world, the consolidation and regrouping processes mentioned above, new competitors unaccustomed to operating in highly regulated environments, continually evolving business models and relentless technological change, the number of businesses that fail will greatly increase, as will the probability of systemic problems (Corbae and Levine, 2018).

The present system of financial regulation and supervision, which focuses on consumer protection and capital and liquidity requirements, is not adequate for handling the challenge of digital innovation faced by this industry in three main areas: consumer protection, financial stability, and the maintenance of a balanced framework for competitiveness.

New financial regulation must be constructed on very different bases, and rather than focusing on certain types of institutions, it must focus on activities and the risks they entail: a wholistic regulation that also considers data protection, cybersecurity, and competition. To do so, it must also approach matters from all relevant angles (technological, legal, financial, and competitive).

From the very start, such transversal regulation based on close cooperation among authorities from different sectors and countries must also involve the private sector in its design process. And finally, it must be capable of adapting to an environment in constant evolution, both technologically and in terms of business models.

This is certainly a highly ambitious model but it can be approached in a pragmatic manner beginning with six priorities: data protection and access, the development of cloud computing for the financial industry, cybercrime, new developments in the area of payment, fostering the development of innovations in controlled environments (“sandboxes”), and finally, constructing a level playing field for both newcomers and established entities.

With regard to data, however, financial regulation is an extension of much more general regulation of overall personal data, including such delicate aspects as medical records. Its development must therefore be tied to progress in more general settings.

Various authorities, including the IMF, the Basel Committee on Banking Supervision, and the European Banking Authority, are already analyzing these questions, but their range is limited and partial, and in the face of insufficient global coordination, national authorities are approaching these subjects from different standpoints.

It is essential to open international debate on key subjects in order to define a shared body of principles. This will be a long and complex process in which progress will be slow, frequently partial, and always subject to revision as technology and business models evolve. It is, however, imperative to the construction of a better global financial system.

Rather than focusing on certain types of institutions, new financial regulation must focus on activities and the risks they entail: a wholistic regulation that also considers data protection, cybersecurity, and competition

Moreover, and even more than new (and better) regulation, we need solid principles and ethical values. In this digital world, reputation and client confidence is as valuable an asset (or more so) as the finest technology.

These values must be fully integrated into the culture of entities seeking success in the digital age. And here, despite past errors and problems with their reputation, banks may have an advantage over competitors from other sectors: banks have always known the importance of reputation, and they have learned a great deal over the last few, very difficult years.

BBVA, Driving the Transformation of the Financial Industry

BBVA began its digital transformation, or “long digital journey,” over ten years ago, in 2007, and we did not start from zero. From the very beginning, we had a very clear understanding that technology was going to radically transform our industry. It was not simply a matter of improving (even drastically) the efficiency of banks, or endowing them with new “remote” distribution channels. Instead, a bank had to become a different kind of company, capable of competing in a completely new ecosystem with clients unlike their predecessors and other sorts of competitors.

At that point, we began to turn our vision into reality, undergoing a profound transformation that rests on three pillars: principles, people, and innovation.

We began acquiring the finest technology and we applied it to our operations, that is, to our business. But we never lost sight of the fact that technology is a tool for serving people: our clients and, of course, BBVA’s staff.

We rapidly grasped that carrying out this transformation requires the finest talent, and the application of that talent and technology as a means of offering the best solutions to our clients and earning their trust to insure long-lasting relationships with them. They must trust in our technical confidence, but also in our will and capacity to treat them honestly.

Having the best staff and an excellent reputation among one’s clients are key elements in banking, and that is why we have always assigned maximum importance to the values of prudence, transparency, and integrity.

The years that have passed since we began this transformation have been very difficult ones for the banking industry. The crisis was followed by a period of reinforced regulation and supervision, with the corresponding demand for increased capital and a drop in the industry’s profitability.

Our solid principles have allowed us to emerge from this difficult period with new strength and, unlike many of our peers, without having needed any injection of public capital—not even to increase capital due to the crisis.

At the same time, technological advances and their adoption by the banking industry have continued to accelerate. When we began our transformation, there were very few smartphones, and their capacities were vastly inferior to the present ones. Apple launched its first iPhone in 2007, and, in one decade, the telephone has become clients’ leading means of interacting with their banks.

At BBVA, we have been working on a profound cultural transformation. Our basic principles have not changed, but our working processes, organizational structures, and talents have certainly changed, as have the attitudes that needed to be promoted: a positive attitude toward change, flexibility, teamwork, and obsession with our clients and with the need to continually improve their experience

This has also been the age of burgeoning cloud computing and big data, and, more recently, artificial intelligence and the distributed-ledger technologies underlying blockchains. These may become the bases for even more profound future transformations that are largely unforeseeable at the present time.

All of these developments have affected our project and required us to modify its original design (sometimes in highly significant ways).

Another key element is the configuration of our staff. Carrying out a pioneering project requires the finest talent, and for some time it was difficult to attract digital talent because conventional banking did not seem like an obvious destination. That, in turn, slowed progress and created a vicious circle. But with considerable effort we became a much more attractive place to work, a successful mixture of digital and financial talent—the latter of which we already had in abundance. This has turned the situation around and produced a reciprocal situation in which the advances in our project made it more and more attractive to new talent capable of helping us to advance even farther. Of course, the finest staff requires excellent leadership, with directors capable of both sharing and driving the project.

Staff employing the Agile working method at BBVA

Last, but not least, we have been working on a profound cultural transformation. Our basic principles have not changed, but our working processes, organizational structures, and talents have certainly changed, as have the attitudes that needed to be encouraged: a positive attitude toward change, flexibility, teamwork, obsession with our clients, and with the need to continually improve their experience, a focus on getting things done, the ambition to constantly grow better, to adopt the loftiest goals and to pursue them tenaciously.

Over the last decade, we have made many mistakes, with technology and with certain personnel, but we have learned from our errors and we have continued working. Today, we lead the industry in technology, but, most of all, we have the staff, the talent, and the agile organization, leadership, and culture needed for advancing at an ever-faster rate. The results have been very significant.

Our mobile banking application in Spain has been rated best in the world in 2017 and 2018 by Forrester (with Garanti, our Turkish bank’s application, rated second in the world).

In June 2018, forty-six percent or our clients were digital and thirty-eight percent were mobile. Those numbers will surpass fifty percent in 2019. Moreover, digital sales are approaching fifty percent of our total.

More importantly, our digital clients are even more satisfied than our conventional ones, and this is largely the reason why our overall client satisfaction index continues to rise, making us leaders in the majority of the countries in which we operate.

Today, BBVA is at the forefront of the global financial system. There is still much to be done: technology changes constantly, new ideas arise, as do new business models and new and ever-stronger competitors. But this competition is what allows us to live up to our vision of “bringing the age of opportunity to everyone” on a daily basis, while contributing to the improvement of the global financial system.

Select Bibliography

- —Autor, D., and Salomons, Anna. 2017. “Does productivity growth threaten employment?” Article written for the BCE Forum on Central Banking, Sintra, June 2017. —Bauman, Zygmunt. 1998. Globalization. The Human Consequences. New York: Columbia University Press.

- —Corbae, D. and Levine, Ross. 2018. “Competition, stability, and efficiency in financial markets.” Paper presented at the Jackson Hole Economic Policy Symposium, August 23–25, 2018

- —González, F. 2017. “From the age of perplexity to the era of opportunities: Finance for growth.” In The Age of Perplexity: Rethinking the World We Knew, Madrid: BBVA OpenMind.

- —Kaldor, Mary. 2004. “Nationalism and globalization.” Nations and Nationalism 10.1–2: 161–177.

- —Katz, Lawrence F., and Krueger, Alan B. 2016. “The rise and nature of alternative work. Arrangements in the United States 1995–2015.” National Bureau of Economic Research.

- —Lipton, A., Shrier, David, and Pentland, Alex. 2016. “Digital banking manifesto: The end of banks?” Cambridge, MA: MIT.

- —Milanovic, Branko. 2016. Global Inequality. A New Approach for the Age of Globalization. Cambridge, MA: Harvard University Press.

- —Mokyr, Joel, Vickers, Chris, and Ziebarth, Nicolas L. 2015. “The history of technological anxiety and the future of economic growth: Is this time different?” Journal of Economic Perspectives 29(3): 31–50.

- —Müller, J. W. 2017. “The rise and rise of populism?” In The Age of Perplexity: Rethinking the World We Knew, Madrid: BBVA OpenMind.

- —Qureshi, Zia. 2017. “Advanced tech, but growth slow and unequal: Paradoxes and policies.” In The Age of Perplexity: Rethinking the World We Knew, Madrid: BBVA OpenMind.

- —Schwab, Klaus. 2016. “The fourth industrial revolution. What it means, how to respond.” World Economic Forum.

- —Van Reenen, John. 2018. “Increasing differences between firms: Market power and the macro-economy.” Paper presented at the Jackson Hole Economic Policy Symposium, August 23–25, 2018.

- —World Bank. 2018. Consulted October 6, 2018 at http://databank.worldbank.org/data/reports.aspx?source=poverty-and-equity-database.

LISTEN TO THE ARTICLE HERE

READ THE FULL BOOK

- ¿Hacia una nueva ilustración? Una década trascendente

- Towards A New Enlightenment? A Trascendent Decade

ACCESS THE ARTICLE IN SPANISH

Hacia la nueva ilustración digital: el papel de la industria financiera

HOW TO CITE THIS ARTICLE

González, Francisco. "Towards a New Digital Enlightenment: The Financial Industry’s Role." In Towards a New Enlightenment? A Transcendent Decade. Madrid: BBVA, 2018.

RELATED ARTICLES

MORE ABOUT #ECONOMY #FINANCE

- From The Age of Perplexity to the Era of Opportunities: Finance for Growth The Age of Perplexity: Rethinking the World We Knew, Francisco González

- The Next Step in Finance: Exponential Banking The Next Step: Exponential Life, Francisco González

- The Past, Present, and Future of Money, Banking and Finance The Next Step: Exponential Life, Chris Skinner

ALL THE OPENMIND COLLECTION TITLES