‘Design is a competitive advantage’: How three banks are integrating design into customer experience

Despite all the hype around transformative technologies or the fact that consumers aren’t actually using any “fintech,” the dinosaurs of the financial world are changing from the inside out, putting the customer experience before their business — and design thinking is at the forefront of that.

It’s optimistic, but also just a new way (for banks) of doing business. They’ve realized they no longer dictate how they do business and what they produce; their customers do. In a digital world filled with choice, banks’ customers need choice, empathy and ease of use designed into every interaction they have with the bank — and they need to deliver on that quickly, before their competitors, which now include retailers and other non-banks.

Design thinking is moving bank operations away from “managing” and more toward innovating. For example, banks co-create products with customers in order to integrate their feedback more quickly and more frequently, instead of some far off time when a product s due for an upgrade. They’re deliberately hiring teams with diverse backgrounds to reflect the diverse customers they serve and build solutions with empathy, instead building teams of people with similar backgrounds and strengths. When they build new products, they’re collaborating with other parts of the organization and even with other financial services providers, instead of working independently in silos that don’t communicate with each other, which drags the delivery process at every stage.

“There is no greater trojan horse to change an organization than design thinking,” said Stephen Gates, head of Citi Design. “Especially with something where there are lawyers, regulators… Part of what we had to do was change thinking, not behavior. If it’s new behavior on old thinking, we didn’t really change anything.”

Here are three banks going all in on their design people — finding experts, training non-experts, cultivating internal communities — to make their organizations and customer interactions stronger.

BBVA
Spanish banking giant BBVA is training 1,000 staff ‘ambassadors’ to spread good design practice throughout the organization, Rob Brown, head of marketing, design and responsible business at BBVA, said Thursday at Experience Fighters.

Brown, who BBVA poached from Barclays last year, said the most innovative and exciting products on the market are those created at places that incorporate design in every part of the organization, not just the creative department.

“These companies understand that design is a competitive advantage and that all employees, regardless of their role, should begin to see themselves as a designer that contributes to improving the customer experience,” he said.

BBVA currently has 150 designers in 11 countries, but as part of the design ambassador pilot it will train “up to” 1,000 more from various parts of the organization, by promoting design thinking courses and providing training for the “non-designers” to apply design thinking to their day-to-day work.

“My goal is that our more than 900 projects around the world be undertaken using Design Thinking, and that our professionals have fun doing so,” he said.

USAA
In February USAA unveiled its 120-person design studio in Austin to focus on improving digital experiences among customers and employees.

The bank, historically a leader in financial services innovation — it was one of the first banks to get into mobile check deposit and online banking, for example — sees people and internal culture as the essence of how it design translates to their customers. So it chose Austin, a tech hotbed, for its design community, versus its home base in sleepy San Antonio.

Their goal, like all banks today, is to make financial planning, applying for a mortgage or choosing insurance coverage as easy calling an Uber or one-click buying off Amazon. But the reality of user experience design is often, businesses don’t experience the brand the way customers do and as a result, the work falls short.

“You have to do detailed visibility testing but also understand emotions that bring someone to an experience,” Meriah Garrett, the bank’s chief design officer, told Tearsheet at the time. “If it’s an in-and-out transaction, like trying to make sure you get your bill pay right, it’s all about speed and clarity.”

Appropriateness is the key design principle, she said. “It comes down to how you apply things appropriately… That drives me to why we have to have really good people.”

Citi
In October 2015, Citi launched its FinTech unit to act as a startup inside a bank dedicated to mobile-first solutions for its consumer banking customers. A month before that, Citi’s Gates joined the bank as part of the then 40-person Citi FinTech unit, to lead its in-house design studios as well as external agencies. His team has designed the user experiences for Citi.com’s various updates, the Citi mobile app and worked on the branding and advertising for Citi FinTech, the Citi Innovation Labs and the Citi Global Consumer Bank.

A deal signed that with the design consultant Ideo, in which it would train Citi employees on design thinking, has been a tremendous force in Citi’s innovation strategy, Gates said in January at the Design+Finance conference. The two have been working together to create a version of design thinking with agile methods for innovation that’s unique to Citi. Gates said he hopes his team would take the lead on spreading innovation across Citi.

“[Design thinking] gives everyone permission to come into that process, to participate. So instead of me going to legal and saying ‘will you approve this, yes or no?’ Come be part of the process. And then I can tap into the base thing: people will psychologically support what they’re part of. That was a massive transformation… ‘Creative’ isn’t a department anymore.”

Since then, the demand for the design teams’ work has grown to be the fastest growing team in the consumer bank, he says. He began the transformation by evaluating existing in-house creative talent and then re-establishing standards, culture and structures for the team. He has since hired new leadership and talent and coaches existing talent across different studios.

BBVA’s Scarlett Sieber on embracing innovative directions in banking

While some banks and fintech professionals are still just talking about embracing new directions with their businesses, Scarlett Sieber and BBVA are doing just that today. Scarlett is the senior vice president of global business development and she’s created a live case study of reengineering an incumbent bank to become the center of a technology ecosystem. In Scarlett’s case, she’s helping BBVA to harness the innovation of external partners as well as bring in-house the core technology and design skills to take the bank into the future.

Scarlett presented at the Tradestreaming Money conference in NYC in November of 2016. The audio you’re about to hear was part of her talk about building financial ecosystems with leading banks at the center.

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Below are highlights, edited for clarity, from the episode.

Creating BBVA’s digital team

Our team has really diverse backgrounds. We definitely have technologists. We have a lot of people like me who have an entrepreneurial background both within financial services and from outside the industry. We have our experts in banking (you can’t be successful without having those people). We also have people from the PayPals of the industry. So, we have a very diverse global team.

 

BBVA's Scarlett Sieber on financial innovation

 

Building the bank of the future through internal incubation

We’re attacking the fintech ecosystem in a variety of ways. First, we do internal incubation, which is launching our own startups. We’re doing that simultaneously in Spain and in the U.S. We have about seven companies going to market in the next six months. These companies start as projects focused on problems BBVA is trying to solve and we kept them very much separate from the rest of the bank so they can go test things, learn quickly, and fail. We take those learnings back to BBVA if they don’t make it.

Using strategic partnership to drive innovation

We were the first bank to partner with Dwolla. For all the JP Morgans in the industry partnering with OnDeck, we were the first. We built a reputation in the industry of  looking for ways to attract new customers as well as ways to diversify our product offerings to our existing customer base.

Banks are rolling out personalized customer experiences

For banks, offering a true digital experience to their customers is more than just having a website. Data silos must be broken, backends overhauled, and specialized software implemented.

Considering the high cost, it isn’t surprising that big regional or national banks have the lead in this arena. 17 percent of big regional or national banks reported implementing contextual, personalized insights and solutions to consumers, compared to only six percent of community banks and 2 percent of credit unions, according to Digital Banking Report’s  The Power of Personalization in Banking. More than 50 percent of each category reported having a basic level of digital prowess with plans to increase future investments in digital.

These efforts are paying off. Since 2012, customer satisfaction with big banks have grown steadily, ultimately surpassing satisfaction levels with midsize banks for the first time this year, according to the J.D. Power 2016 U.S. Retail Banking Satisfaction Study.

Many banks still find it challenging to move forward with digitization projects, partly due to lack of funds and unfamiliarity with the technology.

“The banks are locked in on an ‘old model’ mindset,” said Pau Velando, general manager of Strands, a company that offers digital money management software to financial institutions. “They think more in terms of banking and less in terms of providing value added services to their customers.”

Strands’ solution enables banks to provide customers with personalized experiences. The company uses statistical and machine learning algorithms to predict customer behavior and recommend better complementary products and services when it matter most to a customer.

For example, by analyzing past behavior, the Strands platform can predict whether a customer might overdraft, and proactively suggest an increase in his credit limit or to take out a short term loan. The platform also integrates with third parties which leverage customer data to market non-financial products, like a car or consumer electronics, based on customer spending habits and financial health.

For banks that work with small businesses, the software can recommend actions with account payables or receivables to help better manage company resources.

There are several push-backs from banks on digitization investments. One is balancing an investment in new systems with the budget allocated to maintaining current legacy systems. “Banks spend huge amount of money maintaining legacy systems,” Velando says.

Another common objection banks have is how hard it is to predict a return on investment in such projects.

There are some estimates of ROI on digitization of banking services. McKinsey identified several areas of digitization that drive more profitability than others. These areas include product back office automation, digitization of document management, automation of credit decisions, and big data analytics applied to sales campaigns.

“The profit margins of banks with high levels of digital enablement in these areas were, on average, twice as high as the profit margins of other European banks,” said the McKinsey report.

In order to convert stubborn board members, Strands works with banking customers to craft a technological roadmap with a clear budget. Implementation, Velando says, can take anywhere between 6 months for younger and more agile banks to two or three years for larger banks with a variety of separately-built legacy systems.

Strands has worked with various financial institutions on digitization projects, including Deutsche Bank, where it built the financial firm’s FinanzPlaner. BBVA’s Mi Dia a Dia was also developed by the firm. In 2008, BBVA and Strands cooperated to launch the first European Personal Finance Manager, Tú Cuentas. The firm also counts Barclays, ING, and BNL as clients.

As banks ramp up their digital efforts, fully personalized banking is gradually unfolding.

 

[podcast] BBVA’s Scarlett Sieber on the building of a consumer banking ecosystem

BBVA's Scarlett Sieber on the building of a consumer banking ecosystem
BBVA's Scarlett Sieber
BBVA’s Scarlett Sieber

Spain-based BBVA is one of the most creative and aggressive global banks when it comes to investing in new financial technology. In part, that’s because they have Scarlett Sieber on the team. Her formal title is SVP of Global Business Development in the New Digital Business Unit but the reality is, in that role, she’s part business developer, ecosystem designer, and marketer.

Scarlett joins us this week on the podcast. We talk a lot about how the role of banks is changing and what thought leaders are doing to stay ahead of the curve and how BBVA’s Open API initiative strives to be the AWS of banking.

We discuss the role of financial ecosystems in determining the future of consumer banking. For BBVA, she’s helped build direct channels in the US into fintech startups, venture capitalists, mentoring and sponsoring at top accelerators, universities, and technology consortia — all in an effort to work together, innovate together, and collaborate together to leverage the talents of all the players in the space.

Below are lightly edited and condensed highlights from the conversation.

The value of the financial ecosystem

The ecosystem is imperative for our strategy. Some organizations are competing by throwing money at innovation centers and interact with startups. Startups are just one piece of the larger puzzle. You have to think about other players in the space. Venture capitalists have a lot of deal flow and have unique perspectives. Accelerators see a ton of startups come through and we spend a lot of time playing a mentorship role at accelerators. Now you’re seeing fintech groups at a lot of the major universities. We also spend a lot of time with our competitors as part of BBVA’s involvement in the R3 blockchain consortium. We look to work together with all the players who are directly and indirectly in the space to provide value and find ways to work together.

Investing in fintech innovation versus partnering

We took the initiative to spin off our venture capital fund and it’s expanded to $250 million now, as well. BBVA Ventures is now called Propel. The idea there is, as a true VC, your true goal is to earn a return on your investments. Other times, it makes more sense to partner with BBVA Compass, like with our relationships with p2p payments, Dwolla and roboadvisor, FutureAdvisor.

When it comes to buying fintech companies, we don’t have an acquisition budget. We buy things that we think are necessary, strategic and relevant to what our initiatives are. Our acquisitions come from heads of departments. One of my favorite acquisitions is a San Francisco-based design shop, Spring Studio. As technology changes and consumers want a beautiful user experience, it made sense for us to buy a company that does it really well and has a great reputation.

We’re also creating startups within BBVA, so there’s a lot of opportunity for partnerships, there, too.

The last piece is our open platform, banking as a service. Shamir Karkal, CFO and cofounder of Simple, has left to become our head of our global, open API platform. In this case, we’re not directly investing in, acquiring or partnering with outside companies but we’re exposing our banking plumbing to the fintech community at large.

 

Photo credit: claudiolobos via Visualhunt / CC BY

5 trends we’re watching this week

5 trends in finance this week

[alert type=yellow ]Every week at Tradestreaming, we’re tracking and analyzing the top trends impacting the finance industry. The following is a list of important things going on we think are worth paying attention to. For more in depth trendfollowing, subscribe to Tradestreaming’s newsletters .[/alert]

  1. LendingClub models misfire as loan write-offs top forecasts (Bloomberg): A chart on one of the slides shows that write-off rates for a portion of five-year LendingClub loans were roughly 7 percent to 8 percent, compared with a forecast range of around 4 percent to 6 percent
  2. Zenefits CEO ousted, compliance saga takes a turn: what’s next for the company? (Insurance Thought Leadership): The CEO is out at Zenefits (one of the hottest fintech/insurtech/any tech startups) after it was found that 83% of the insurance policies the company sold were done by unlicensed employees. Oops.
  3. BBVA shuts in-house venture arm, pours $250m into new fintech VC Propel Venture Partners (TechCrunch): The bank is shutting down its in-house venture arm, BBVA Ventures; and it is taking BBVA Ventures’ portfolio, the $100 million fund it had allocated to the group, and another $150 million, and putting all of it into a new VC called Propel Venture Partners.
  4. How financial media firms are monetizing as readership changes (Tradestreaming)
    Being an old-school financial media company is tough in this market but a handful of firms have transitioned into a winning model. Here’s how…
  5. How credit unions can win the millennial market (The Financial Brand): No, this isn’t just another study about millennials. This is about a report – produced jointly by the Center for Financial Services Innovation (CFSI) and Cornerstone Advisors – entitled Competing on Financial Health: How Credit Unions Can Win the Gen Y Market.

The Startups: Who’s shaking things up (Week ending February 14, 2016)

fintech startups shaking things up

[alert type=yellow ]Every week, Tradestreaming highlights startups in the news, making things happen. The following is just part of this week’s news roundup. You can get these updates delivered direct to your inbox by signing up for the Tradestreaming newsletters.[/alert]

Startups raising/Investors investing

BBVA shuts in-house venture arm, pours $250m into new fintech VC Propel Venture Partners (TechCrunch)
The bank is shutting down its in-house venture arm, BBVA Ventures; and it is taking BBVA Ventures’ portfolio, the $100 million fund it had allocated to the group, and another $150 million, and putting all of it into a new VC called Propel Venture Partners.

More reading: What’s behind the BBVA restructuring (American Banker)

East Coast credit fund puts $250m to work on real estate crowdfunding’s Patch of Land platform (Finovate)
The investment comes in the form of an agreement to buy loans in a “forward flow arrangement,” and represents the credit fund’s first move into the P2P marketplace lending space.

WorldRemit gets $45m at a $500m valuation go grow its mobile money transfer business (TechCrunch)
A year after raising $100 million, London-based startup WorldRemit has picked up more funding. To compete against the likes of Western Union in the world of money transfers — and tap a remittance market that the World Bank estimates will be worth $610 billion in 2016 — the company has added another $45 million to its coffers.

Riskified nabs $25 million to fight ecommerce fraud (VentureBeat)
The Tel Aviv-based company promises its clients, which include Burberry and Viagogo, “instant, guaranteed approvals and peace of mind.” The Phoenix Insurance Company, NTT DOCOMO Ventures, and existing investors Genesis Partners and Entrée Capital also participated in the round. To date, Riskified has raised at least $31 million

Cloud data provider, Xignite closes $20m round (BusinessWire)
Xignite, the leading provider of market data cloud solutions for financial institutions and financial technology companies, today announced that it has raised $20.5 million in a Series C funding round led by Tokyo-based QUICK Corporation, part of the Nikkei Group and Japan’s largest financial information provider.

Robin And Saul Klein’s Localglobe backs online mortgage advisor Trussle (TechCrunch)
London-based Trussle, which raised £1.1 million, challenges the traditional mortgage broker with a tech-driven solution that advises customers on the best deal available, and helps manage the mortgage process if they choose to proceed.

As population becomes more diverse, funding options grow (Locavesting)
Diverse forms of capital are searching to invest in diverse types of entrepreneurs. Here are some various types of funders that invest in entrepreneurs from various backgrounds…

The Startups: Who’s shaking things up

LendingClub models misfire as loan write-offs top forecasts (Bloomberg)
A chart on one of the slides shows that write-off rates for a portion of five-year LendingClub loans were roughly 7 percent to 8 percent, compared with a forecast range of around 4 percent to 6 percent.

Fintech firms want to open accounts at the Bank of England
(Telegraph)
Payments and technology firms want the right to open bank accounts at the Bank of England, a right traditionally only given to banks and one which gives them access to the payments system

Berkshire Hathaway and Munich Re backstop Lemonade, startup P2P insurer (Intelligent Insurer)
“Consumer trust in the insurance system is at the heart of the insurance business, and is essential to the success of any new venture. With this collection of leading reinsurers, Lemonade’s customers will know this innovative venture is backed by some of the best and most established in the industry.”

Zenefits CEO ousted, compliance saga takes a turn: what’s next for the company? (Insurance Thought Leadership)
The CEO is out at Zenefits (one of the hottest fintech/insurtech/any tech startups) after it was found that 83% of the policies the company sold were done by unlicensed employees. Oops.

Britain’s ex-regulation chief thinks fintech P2P lending losses are going to be huge (BusinessInsider)
But according to Adair Turner, the former Chairman of the Financial Services Authority, which was abolished in 2013 to make way for the Financial Conduct Authority, consumers are taking huge risks when lending and borrowing via P2P services and the future fallout could be terrible.

5 trends we’re watching this week

5 trends in finance this week

[alert type=yellow ]Every week at Tradestreaming, we’re tracking and analyzing the top trends impacting the finance industry. The following is a list of important things going on we think are worth paying attention to. For more in depth trendfollowing, subscribe to Tradestreaming’s newsletter .[/alert]

1. Vanguard’s virtual RIA adds $10 billion in net new assets over last six months (RIABiz)

2. Invesco buys roboadvisor for advisors, Jemstep
(ThinkAdvisor)

3. BBVA Compass to intro robo offering via partnership with BlackRock’s FutureAdvisor
(Finovate)

4. Tech leaders and fintech: Why Amazon and Google are bound to enter finance
(Disruptive Finance)

5. An ex-Uber marketing pro weighs in on the Uberization of money debate (Tradestreaming)

5 trends we’re watching this week

5 trends in finance this week

[alert type=yellow ]Every week at Tradestreaming, we’re tracking and analyzing the top trends impacting the finance industry. The following is a list of important things going on we think are worth paying attention to. For more in depth trendfollowing, subscribe to Tradestreaming’s weekly newsletter (published every Sunday).[/alert]

1. [podcast] Stephane Dubois of Xignite on providing stock market data to (almost) all of fintech (Tradestreaming)
You can build your own apps or sell tools to others building apps. Xignite powers today’s top investment platforms with stock market data. Founder and CEO, Stephane Dubois joins Tradestreaming to discuss his 10+ years building stock market data products powering most of today’s top fintech platforms.

2. BBVA investment in Atom is a small step in a much larger plan (BANKNXT)
BBVA has invested $68 million in Atom Bank (here’s the story from Bloomberg). Daniel Gusev believes this is part of a much larger digital strategy for the bank.

3. Diebold To Acquire Wincor Nixdorf (PYMNTS)
Diebold will soon be the largest ATM maker in the world — if regulatory authorities approve its latest move to buy out rival Wincor Nixdorf.

4. The Disruption Of Millennial Investing (TechCrunch)
The media proliferates stories analyzing millennials’ work ethic, buying patterns and values. But what about investing? What’s changing with the way millennials invest?

5. First crowdfunding results: 70 go bust, one makes money (Telegraph)
Some celebrities, including Andy Murray, are investing in crowdfunding, but the risks are high. This article, based on one of the first studies out of the nascent equity crowdfunding field, shows just how risky early stage investing really is on these platforms.