Fintech and Banking:
Disruption and Transformation

Michael Krigsman: When you think about digital transformation, what does that actually mean in practical terms, for Banco Sabadell?

Rüdiger Schmidt: Ok. First of all, it’s not just digital transformation. It’s a transformation of the whole bank, and digital is just one important piece. But in fact, we talk about transforming the bank, and not just digital transformation. And the branch network is a very important part of that transformation. First of all, let’s have a look at what is happening: Why are we transforming? What is happening out there? There is, of course, a digital revolution and it is now. When a client comes with his or her mobile device into the bank, it has probably more CPU in their hand than the computers we have on the desks. And, there is this cloud with nearly unlimited network bandwidth, which makes it very easy for newcomers to get into the business. So digital is a big trend, but there are others.

Nowadays, we have to think about new ways to make money. Our CEO described it best this week on a conference, and he said, “We have to transform our clients from balance sheet consumers to platform users.” And that is what it’s all about, the bank has to become a platform while we keep our business and being a servicer for lots of transactional business. And for the money, we have to become a platform for much more, in order to grow and be profitable in the future.

We developed our digital platform, and we are continuing to develop it. It’s called Proteo. And we are now at Proteo 4, where we built that layer on which we want to create our services to publish them to the outside world. Our ambition is to do a bit like Amazon; every service we build should be built in a way that we can use it also for third-parties. We are not there yet, but working on that one, and, it all moves into ecosystems in both directions. So we will own more interfaces that others can use our bank as a service. So for example, we have an ERP provider here in Spain who is directly linking their ERP system with our core banking system. Of course, always when the client gives the authorization. But, we also want to look in whether we, in our secure environment, could sell things that are services which are not directly related to our banking offering.

Michael Krigsman: Can you give us an example of the kind of services that you provide to customers that rely on this platform, and why the platform makes it possible to deliver these services in a better way than your competitors?

Rüdiger Schmidt: Ok, so just recently this Monday we launched our new wallet application, where we have the classic wallet function of the bank with credit cards. And we added to that the new instant payment platform, which is an industry platform in Spain for instant payment, person-to-person. We integrated that immediately into our wallet platform and into our digital capabilities like electronic signature, fingerprint lock-on. So we were able to launch it on time with added functionality and we have seen after a few days that the percentage of adoption of instant payments via mobile overall in the Spanish banks is higher than our market share in retail banking. That means, we have higher adoption among our clients to that new service than any other bank in Spain. And that was possible by combining this new functionality with existing services and our architecture to build that new app.

Rüdiger Schmidt: we developed standard open API for classic account balance, transaction inquiry, money transfer. And, what we saw is that on one side, there are currently more than 20 startups, but also, SMEs, who are in the process of adapting to that API and using that API. In the beginning, I told you about this ERP system in the cloud which is connected to that.

But, on the other side, what we have seen, the open API is not only interesting for the outside world. In our innovation labs, for example, we started experimenting with a tangible bank hardware device for clients in the client’s home. That means for our own product, we saw that the easiest way to build that is using the open API. So suddenly, the open API becomes an enabler for an internal project, because it’s much easier, more standardized to use that. And, that is very interesting. And now this open API will enable us very quickly, if for example one day  Amazon Echo is translated to Spanish and available in Spain, it would be for us very easy to integrate a thing like Amazon Echo or similar devices to our core systems.

In Europe, we have a new regulation, the Payment Service Directive 2 coming up. Early 2018 will be the date where banks will be obliged to open APIs for third parties. And that is the same way where, first of all, we already have it, we have to adapt it to these standard interfaces but we know how to do it, how to adapt it; but the more important thing is for us it’s much more than a regulation, it’s an opportunity, not only to open our API to other banks, to FinTech to integrate to it, but we can start thinking about using our services to the back-ends of other banks and give services to clients even when they have the account in other banks, for example, with the advantage of being already able to work with our APIs.

And we use data from our more than 250,000 POS devices we have with clients in Spain, and analyze that data, and give services to our clients to store. So, a client of Banco Sabadell with a POS device gets a webpage where he can check, what is the medium-sized ticket of people buying in my shop? What is the medium-sized ticket of all my competitors around. Of course, anonymized, but always focused on the business he’s running, extremely useful information, nobody else can get that data; fully respecting data privacy and security but extremely valuable for the retail stores.