Spanish Banks Leading Edge

The leading Spanish banks are embracing both technology and social responsibility.

Gortázar, CaixaBank: The Spanish banking industry is at the forefront of innovation and corporate responsibility.

Spanish banks are becoming known for their embrace of technology and their ability to innovate—and now, for their role in promoting corporate responsibility. Behind these new traits is a deep economic transformation that has taken place over the last decade.

“The Spanish banking industry is certainly at the forefront of innovation and corporate responsibility. This is why four Spanish banks, including CaixaBank, are among the 25 top banks on the global Dow Jones Sustainability Index 2019 [DJSI],” says Gonzalo Gortázar, CaixaBank’s CEO. “CaixaBank has been recognized by international institutions as a leading innovative bank not only in Spain, but also in comparison with its continental and global peers.”

Santander tops the DJSI as the world’s most sustainable bank, the result of a five-year push to build “loyalty among our 140 million customers, transforming our bank so it is a more responsible and sustainable company,” says Ana Botín, executive chair of Santander, in a bank press release.

In addition to Santander and CaixaBank, BBVA, Bankia and Bankinter also make the rankings. BBVA, for example, is mobilizing €100 billion ($111 billion) in financing for green ventures, sustainable infrastructure, social entrepreneurship and financial inclusion, with €22 billion already committed.

Spanish banks’ plunge into tech has been recent and rapid. “In 2012, we introduced the world’s first contactless ATMs; and in 2016, we created the first Spanish mobile-only bank,” says CaixaBank’s Gortázar. “This year, CaixaBank has become the world’s first bank to use facial recognition for cash withdrawals at ATMs without the need to use a PIN number.”

The quest for greater efficiency and a different way to conduct business has steered the change, close observers say. “In recent years, Spanish banks went through a drastic overhaul that led to a brutal reduction in the number of branches,” says Ya-Lan Liu, bank analyst at Ahorro Corporacion Financiera (ACF) in Madrid. “This was sometimes done at the cost of losing clients, since the Spanish banking model was based on branch proximity and retail relationships. Closing branches sometimes meant losing business.”

Banks had to look elsewhere to boost their efficiency. Technology became “a way to improve processes and create a single technological platform to process data, develop distribution channels and design new digital products and services to engage clients,” Liu says. “Spanish banks did a great job in a very short time. Now they have nothing less than other banking systems that started their digitization process much earlier, such as Northern European banks.”

BBVA, for example, has driven the push for open banking; its mobile app has been recognized for the third year in a row by Forrester Research as the best worldwide, as it “combines exceptional functionality with the best user experience,” achieving a near-perfect score. BBVA also offers Commerce 360, which allows small to midsize enterprises (SMEs) to access data on customers’ usage and habits. “This is something that really helps SME clients to have a tool based on big data,” says Carlos Peixoto, analyst at CaixaBank’s BPI Equity Research.

At the end of last year, BBVA launched the world’s first syndicated loan negotiated and completed using blockchain. In September, Santander launched a $20 million end-to-end blockchain bond: Santander is the issuer and one of its units purchased the bond at market prices, meeting a regulatory requirement and cutting the usual issuance fees.

“Banking resolution authorities require banks to meet the MREL/TLAC [minimum requirement for own funds and eligible liabilities/total loss-absorbing capacity] targets, so as to be able to absorb losses and restore their capital position,” says ACF’s Liu. “Part of the MREL requirement must be met with subordinated liabilities such as regulatory capital instruments or nonpreferred senior debt. As a result, these issuances are higher cost than with traditional senior debt, and are at odds with the drive to boost efficiency and reduce funding costs.”

Instead, Santander issued the bond directly onto the blockchain, and the bond will continue to exist there. “It got rid of all the intermediaries under the traditional way,” Liu notes. “With the blockchain technology, banks could significantly reduce the cost, complexity and opacity traditionally associated with issuing bonds.”