BBVA's perspective on Embedded Finance and BaaS

Monday 23 October 2023 10:14 CET | Editor: Mirela Ciobanu | Interview

BBVA’s Jose Luis Navarro Llorens dives deep into Embedded Finance and BaaS from a bank’s perspective, discussing trends, partnerships, monetisation, and regulation.

What are the major trends and developments that you see powering the growth of Embedded Finance (EF) and BaaS?

Embedded Finance and BaaS are both relatively new, they have been accepted by banks and third parties alike, and new use cases are popping up continuously. Although the demand is on the rise, the speed and spread are far from its peak. The biggest next developments won’t be technological but strategic ones: non-financial companies seeking ways to integrate financial services into their business offering, buyers and suppliers expecting the same speed and ease of digital payments in their business transactions as in retail purchases, more players entering the arena, banks deciding their role in the ecosystem and how much to invest in it. Also, the professionalisation of partnering among Embedded Finance parties and understanding who is who in those relationships. There are also some new players trying to cover niches as many intermediaries take advantage of the lack of standards, or platforms offering connectivity or implementation help to embed new services.


What is BBVA's role in the EF and BaaS Embedded Finance space, and where does it fit in the value chain? Which related products and services are included does BBVA’s Embedded Finance/BaaS offer?

BBVA’s role in the ecosystem is to provide the best banking services to our clients wherever they are, we are creating products to be embedded in the experience of third parties. For example, we have joined forces with a leading telco to launch an innovative home insurance product sold under its own brand in Spain, using BBVAs Open APIs, and it’s been one year of successful experience for both of us. Our products range from payments and account information to BNPL, mortgage, insurance, and treasury APIs for businesses.


How does BBVA approach partnerships with fintechs, BaaS platforms, and other companies to offer EF solutions?

We do not hesitate to partner directly with third parties but don’t avoid using intermediaries and ERPs, BMs, etc., when necessary. We have partnerships and innovations teams that are in close contact with fintechs and other companies, scouting their needs, and helping them match our products. This is also the main input on deciding what products to create next. About success, BBVA learnt to measure the Embedded Finance partnerships at different layers, and not only by direct monetisation, but it could also be customer gain, product gain, reputation gain, etc.


What are some of the key regulatory considerations that BBVA must take into account in the EF market, and how do you ensure compliance, security, and due diligence?

We shall make a distinction between services subject to a specific regulatory framework, such as payment initiation and account aggregations services in the EU, already regulated in PSD2 and those services that banks can freely decide to offer via third parties. In the case of regulated services, they must abide by the requirements established in the specific regulation.

In the case of services not subject to specific ‘Open Finance requirements’, BBVA is the provider of the service that is embeddable in third-party channels, as said before.

As a consequence, we are ultimately responsible for ensuring that the service and the way it is offered complies with the applicable regulation whether it is offered in our channels or via third parties.

For that reason, before placing our services in third-party channels, we carefully assess them and make sure that providing our services through such channels could meet not only the requirements imposed by local regulation, but our standards too.


What impact do you expect EF to have on BBVA over the next three years? How will BBVA monetise the reported USD 7 trillion market opportunity?

First of all, we expect to have our API Market opened throughout our footprint. We will be increasing the offering of services as well as continuing our quest for partners to embed BBVA’s APIs. We expect a faster speed on partnering and implementing APIs as third parties will get more knowledgeable about Embedded Finance. We also foresee the digitisation of our clients' behaviour as a non-turning back trend, which will bring into the discussion arena more new partnership opportunities.

Our focus currently is to become a key player in Open Banking and Embedded Finance and build from there about monetising directly or indirectly the opportunity. Being a bank, we favour the acquisition of customers and contracting our products in front of monetising a specific API.

Besides the USD 7 trillion market opportunity, there is also the belief that almost 30% of the current traditional banking income will be at risk because of the new banking trends and BBVA, as an incumbent bank, is preparing itself to be part of the banking of the future.

Fast forward three years, we see the need of evolving to Open Data because transaction data is only part of individual or business data. In that respect, we are very vocal in calling for a global regulation around data sharing, across industries, geographies, and regulatory regimes, to ensure that consumers can share their data more widely to create a real level playing field that supports the growth of the wider digital economy and brings benefits to our clients.


This interview was first published in The Paypers' Embedded Finance and Banking-as-a-Service Report 2023, which is the latest comprehensive market overview and analysis focusing on the key products and players within the Embedded Finance and BaaS ecosystem.


About Jose Luis

Jose Luis has a large experience in banking, from core banking retail to consumer finance, confirming and negotiable instruments. Steaming from his current role of Strategy head of Open Banking for BBVA he is an enthusiastic supporter of Open data and Embedded Finance and achieving a banking without borders.




About BBVA

BBVA is a customer-centric global financial services group founded in 1857. The Group has a strong leadership position in the Spanish market, is the largest financial institution in Mexico and it has leading franchises in South America. It is also the leading shareholder in Turkey’s Garanti BBVA and has an important investment, transactional and capital markets banking business in the US.

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Keywords: embedded finance, Open Banking, BNPL, ERP, API, banking
Categories: Banking & Fintech
Companies: BBVA
Countries: World
This article is part of category

Banking & Fintech


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