We live in a world of exponential growth. The world’s population took 50,000 years to reach 500 million people and yet, over the last 200 years, it has increased by 7 billion. Global GDP took 1,900 years to exceed $20 billion and just 10 years to grow by another $30 billion. Technological development is, by broad consensus, responsible for this new paradigm of exponential growth. Digitalisation, the Internet of Things, artificial intelligence, 3D printing and new materials are each disruptive technologies with an enormous impact on our society. And there are many more.
Moreover, the speed at which these technologies penetrate is astonishingly fast compared with the past. The telephone took 75 years to reach 50 million users, television 13, the internet barely 4 years, and Angry Birds just 35 days. This is a consequence of society’s greater willingness to adopt new technologies, which requires companies to be increasingly agile in responding to market trends and developing new products tailored to needs. It is an unprecedented innovation process.
The banking sector is key to the innovation process of any economy. In particular, as regards digitalisation, it would be difficult to conceive of a digitalised society without a banking sector leading this change. The frequency and relevance of financial services give us, as individuals and customers, the power to demand agility, efficiency, practicality and security in routine transactions such as making payments and transfers, managing investment portfolios, choosing loans and insurance, and identifying and handling savings instruments. A society increasingly accustomed to digital operations, with growing use of mobile channels, is a natural driver for an ever more technology-enabled and digitalised financial sector.
What avenues does the banking sector have to stimulate other companies and the economy as a whole through its digitalisation process? The first point to make is that digitalisation encourages the disappearance of boundaries between economic sectors. In the digital world, customers invite companies with varied activities to be increasingly connected to one another—one tap on a mobile phone, within the same operating environment. Financial services, retail, multimedia, transport, leisure, telecommunications—everything is ever closer and more interconnected. Business ecosystems and open platforms are emerging as the model of the future capable of meeting this new approach. And banking services are at the heart of these ecosystems. Take, for example, the Alastria network, a project bringing together companies from diverse activities aimed at finding blockchain-based solutions to shared issues across different services—under strong leadership from the banking sector.
Another reflection of this blurring of boundaries is the growing expansion of companies that have traditionally offered a single product into the provision of multiple services. This poses a major challenge for the banking sector, as the appetite of companies such as Google, Amazon, Facebook or Apple to provide financial services is growing. Although this is not limited to the financial sphere. Google has entered, for example, the world of automation, and Apple the multimedia space.
A second avenue for economic stimulus arising from the digital revolution in finance is the significant spillover effect it entails. Finance has always been highly technology-driven, but today’s banking sector not only needs to incorporate new technologies; it must also evolve internal processes and adapt to innovative environments and business models very quickly. To achieve this, it needs to expand its capacity to interact externally. It needs, for example, to be in continuous contact with developers of new technologies, with companies that help it better understand what customers expect, with start-ups with creative agility and the ability to test and learn from mistakes, and with services that enable it to adapt internal processes so it can implement the required changes more effectively. In short, banks cannot rely exclusively on an in-house model to adapt to the future. On the contrary, in their innovation process they pull along an entire ecosystem of large and small companies, generating a virtuous economic and social cycle.
At the outset we referred to how technological innovation lies behind the exponential growth experienced in recent decades. That effect, however, would be impossible if there were not safeguards in place to ensure the security of this innovation process. In the recent Facebook–Cambridge Analytica case, we have seen how sensitive society is to the security risks of new technologies. The digital revolution is accompanied by operational risks and, in particular, cyber risks. As a result, digital transformation has driven another unparalleled revolution in recent years in the field of cybersecurity. And in this, banking—an industry underpinned by the trust customers place in credit institutions to, among other things, deposit their savings—is expert.
Cybersecurity is not a new activity in banking; on the contrary, ours is a leading industry in managing cyber risks. However, digitalisation multiplies online activity and the interconnections between customers and financial institutions, which is why banking has made investment in cybersecurity a flagship priority. Beyond this, a current priority is to raise awareness of the importance of this issue among customers, but also internally within banking structures. Cybersecurity has ceased to be an isolated department within the bank; it is now organisationally empowered to permeate business areas and thereby ensure its work. This horizontal approach—pioneering and necessary—also generates synergies within and beyond the sector, contributing overall to making digitalisation a secure process and, therefore, possible. This is, among many others, banking’s contribution to technological innovation.
José María Roldán, Chairman of the Spanish Banking Association
