A friend in need

Elena Lázaro Azpichueta, Partnerships Manager for InnoCells – Banco Sabadell’s corporate venture arm and innovation hub – discusses how traditional banks can be supportive partners to fintech collaborators

It hadn’t come on its own. Standing alongside it was: Biometric Vox, a Mercia-based startup in which the bank invested in 2018 to explore algorithmic-powered remote identification and signature by voice.

The infant project they’d come with, that they couldn’t wait to get into the ideas crêche, was a tool that addresses three key themes for Banco Sabadell: accessibility of banking services, especially for the most vulnerable customers; the rise of ‘conversational banking’; and the rapid acceleration of digital services as a result of a massive, pandemic-induced migration to online everything in the previous 12 months – Sabadell’s list of active digital clients has grown markedly – to 70 per cent by summer 2020 with more than one million by then using the Sabadell Wallet.

“Our first strategy for keeping up with digitisation is to accelerate alliances with third parties,” says Elena Lázaro Azpichueta, partnerships manager for InnoCells, the bank’s corporate venture arm and digital innovation hub, which has struck up more than 20 such partnerships with startups – not all of them Spanish – since 2015. “It’s not efficient to do everything by yourself; it’s better to focus on what differentiates you and partner for the rest,” says Lázaro Azpichueta. “That’s why banks are building open and collaborative innovation. At Banco Sabadell, we are creating a standardised model so that we can collaborate with third parties on an even larger scale.”

In mid-March, the bank launched its Partnership Portal, an open-API platform for developers, initially aimed at those looking to launch payment-related services under the revised Payment Services Directive (PSD2). But the Portal also seeks to create a point of contact with partners that help to accelerate the digitisation of Banco Sabadell with ‘faster and simplified contracting processes, remote channels, capabilities for self-service, and greater personalisation’, says Lázaro Azpichueta. Essentially, the delivery of banking solutions is where the innovation is urgently needed.

Swedish fintech Minna Technologies is one of those third parties that’s helping to provide it. This year it worked with InnoCells to develop – in very short order – a subscription management service, making Banco Sabadell the first bank in Spain to offer such a tool within its app.

The service provides a complete picture of all subscriptions and bills paid by direct debit and/or debit card by the bank’s customers, including to utility companies, entertainment services and insurance. It also alerts them when a subscription changes and gives them the option to cancel in a click, providing price comparisons with other offers, if needed. The first iteration took 12 weeks to develop and a follow-up, to allow customers control over all of their subscriptions and bills with Banco Sabadell accounts. The next goal is to further develop the service to give customers an

Clearly-defined partnerships can generate huge success for banks and fintechs

overall view, regardless of which bank they set up the payments with.

“Fintech companies not only provide us with learnings, but also sometimes generate solutions faster than we can ourselves,” says Lázaro Azpichueta, “although the bank itself aims to combine customer-centric methodologies and more agile ways of working, to reduce the time needed for analysis, development and delivery of those solutions. Since last March, we have obtained significant evidence of the results of using these two methodologies, in terms of faster time to market and better predictability.”

But combining in-house and external capability is the most productive course, for both parties, she says.

“What we are seeing is a lot of fintechs pivoting towards a B2B model, or B2B2C, but most of the time, they are not going directly to the customer. They have realised that a hybrid model is better, and that the banks could be perfect partners to collaborate with. That’s why I think we are only at the beginning of the collaboration between banks and third parties. Collaboration will be as exponential as the technology it’s based on.”

So, how are these partnerships realised within Banco Sabadell, given the big banks’ past technical and cultural resistance to shared outcomes?

“The partnerships team that I head up acts as the nexus between the bank’s reality and the third-party’s reality,” explains Lázaro Azpichueta. “Internally, we create a standardised process that enables collaboration. The departments around that unified process all have their business-as-usual, so it’s important to be really agile, and to be clear what we are going to ask them to do. The second thing is to have a clear vision of the bank’s focus areas and look to the third-party opportunities that can really impact those areas. You gain buy-in from management by giving them real metrics that show how it’s creating value for the bank.

“From the startup’s perspective, we help them to align their service, product or technology to the needs of the bank. They could have the best solution in the market, but each bank is different. So, when they come to explain what they could give us, sometimes it’s not really aligned to what our business areas are expecting. We also help them to navigate the complicated

The Biometric Vox solution is fairly mature in the development cycle – versions of it have been tested with Banco Sabadell employees, based on the fintech’s commercialised CheckVox vocal biometrics software. The bank has already adopted its advanced remote electronic signing engine, FirVox. The Biometric Vox team is now also looking at ways to combine blockchain, internet of things (IoT) and biometrics for new applications.

Banco Sabadell has traditionally focussed on small business, and many of its innovation partnerships have been aimed at improving services to those customers. In January, it invested €2.5million in Nomo, a startup that began life in its incubation hub, providing business management tools for SMEs and freelancers. Already spun out from the bank, it gained huge traction last year, almost tripling its user numbers, month-on-month during 2020, to 100,000.

onboarding requirements and procurement processes of a large, regulated bank. For those startups, or fintechs, we are really the main point of contact with the bank. We’re the friend they can call when they need to.”

The UK has already made significant changes to allow banks and third parties to collaborate more easily, creating an enabling environment in which they can explore potential regulatory issues together. Spain’s new sandbox will foster a similar spirit of collaboration.

“People say that traditional banks don’t want to take bigger risks,” Lázaro Azpichueta says, “but it’s not true. We want to, but the regulations sometimes don’t allow it. That’s why we wanted to participate in the first edition of the Spanish Regulatory Sandbox.”

The sandbox will allow the testing of innovative technology-based projects in the financial field, with real users, which, due to the novelty of their business model, are unable to find a place in the current regulatory framework.

In collaborating with such innovators, banks can not only provide services for particular demographics, but also learn more about their customer base through data collected from these external services, and discover new ways to meet their client’s needs.

“We need to boost the capabilities of the bank’s technological architecture and infrastructure,” says Lázaro Azpichueta. “All the traditional banks have the same issue of legacy, but I think the difficulty is not so much about having the ability to renew that technology; it has more to do with the fact that sometimes we are not clear about what we want to achieve. For us, it’s to improve productivity, and efficiency, and to improve the connection with third parties.”

As customers become more aware of the potential of technology to help them manage their finances, the rate at which new applications and services are produced is increasing dramatically. The model Banco Sabadell is creating with its partners, shows that, by working together, banks and fintechs can deliver relevant solutions fast. But the roadmap for getting there needs to be clear, says Lázaro Azpichueta.

“The first important thing is to have a shared vision. It must be clear from the beginning, when you are signing the proof of concept, or the minimum viable product contract, what you need to accomplish, who has to do it, when and how, even if you do iterate it later.

“Secondly, it’s vital for a good bank/fintech partnership to establish the metrics and key performance indicators (KPIs) from the beginning. It’s important to clearly define how you are going to measure. For example, with the Minna partnership, the KPI was customer engagement. Other examples of positive KPIs might be efficiency or building new revenue streams. Having clear measurements helps to transmit the message to C-level executives at the bank.

“The third success factor is to work as a single team with clearly-established roles and responsibilities, and transparent and trustworthy communication.

“Finally, there has to be mutual respect: a recognition that the other company is giving something that it would be difficult for the bank to achieve by itself, and an understanding on the fintech’s part that the bank is prepared to share a lot of knowledge gathered over a long time.”