International Finance
Interview Magazine Technology

The dramatic era of digitisation is here

Some of the world’s largest banks are investing a lot in sophisticated technologies to create more personalised user experience

The global financial industry is rapidly changing. Digitisation is the most sought-after approach in the industry now. It is also a critical prerequisite for financial institutions to appeal to new-age customers. Seriously, though, embracing digitisation can enable financial institutions to enhance customer service, reduce human error and build customer loyalty. In recent times, some of the largest financial institutions in the world have invested a lot in digital — and as a result of changes in the digital era, the financial sector is under constant pressure to offer more personalised customer experience.

BBVA, one of the largest financial institutions in the world, is on a path to create an excellent customer experience with new products and services or more efficient versions of existing ones through its open banking platform BBVA API_Market and API offering. For the bank, developing an open banking strategy means focusing on the end customer experience. This change in philosophy also acts as a lever for transformation, since customers, who in previous decades visited the bank, now expect the financial institution to be the one that approaches them — offering everything they need and when they need it. With open banking, both individuals and companies will have better options to decide which financial products are best for them and they will be able to find products that better suit their needs.

Amid the protracted coronavirus pandemic, BBVA has anticipated events in all the markets in which it operates to protect the health of all its employees and customers, and ensure business continuity and customer service. In fact, the pandemic has accelerated the pace of digital transformation in the global financial industry, but the challenge lies in the interest of financial institutions to reinvent their overall banking experience.

Interestingly, BBVA is collaborating with Google to deepen its digital experience for new generation customers in the industry. It is clear that tech firms are seeking to foray into financial services to keep up with customers and exponentially grow their businesses with accumulation of vast data. Consequently, building customer confidence is at the forefront of this move. While the bank is not targeting a specific type of customer with this collaboration, it will help to expand customer reach beyond the physical footprint which is anticipated to naturally appeal to digital natives. The partnership with Google to offer digital accounts is expected to offer a competitive advantage in the long-term.

That said, the bank has also partnered with Fujitsu to use its Digital Annealer for its quantum ready journey. In this context, Carlos Kuchkovsky, Global Head of Research and Patents at BBVA, in an interview with International Finance, spells out the bank’s digital journey on the back of its recent partnership with Fujitsu and what it means for its investments portfolios.

Can you elaborate on BBVA’s partnership with Fujitsu and its implications for customers’ investments portfolios?
Our partnership with Fujitsu is one of the research lines and Proofs of Concept (PoCs) that we have carried out as part of BBVA’s Quantum Ready Journey. We know that we need to be pragmatic — and in some cases agnostic — about quantum or quantum-inspired hardware and capabilities to put our efforts in solving complex problems that could augment the value we are giving to our customers. With this approach, the partnership with Fujitsu helps us to test and understand how to create new quantum-inspired algorithms and find out the amazing capabilities of Fujitsu Digital Annealer, while putting more focus into our customers’ present and future needs.

The real constraints in portfolio management of hundreds of assets make optimisation a tough task — and especially when we add an asset to the portfolio, the number of possibilities multiplies by two. Quantum computing and quantum-inspired hardware like Fujitsu Digital Annealer has the capacity to solve problems that classical computers cannot, or resolve those problems with more accuracy and in less time. We have tested the hypotheses and want to move to the next level, with a focus on reducing risk while augmenting return of investments to our customers. Working with Fujitsu Digital Annealer allows us to work and prepare new capabilities and models with systems that are developed to use in a productive environment.

How is the use of Fujitsu’s quantum-inspired Digital Annealer anticipated to deliver a competitive advantage for BBVA?
The project is still in an exploratory phase, but the results so far point to a set of advantages that this type of technology has compared to tools currently used to resolve certain complex problems such as investment portfolio optimisation. Specifically, the technology could help us deal with complex financial problems that currently require intensive computational calculations that can take up to several days to complete and will have to consider a significant number of dimensions or variables to make the best decision.

For example, in the case of investment portfolio optimisation that we addressed using Fujitsu’s quantum-inspired technology, our initial research indicates that the use of these types of tools could represent huge progress in terms of speed compared to traditional techniques when there are more than 100 variables. Given the pace at which quantum hardware is developing, it is anticipated that these benefits could soon be produced when applied to even fewer variables.

What are the challenges faced by BBVA prior to the proof of concept developed with Fujitsu in the use of quantum technologies?
We are living in ecosystems where complexity is growing. This points to more data, more interactions, more variables and more global challenges. A lot of problems are identified around optimisation of resources: time, money, risk against return, allocation, planning, scheduling, fraud and much more. Having the capability to solve high dimensional complex problems will give us new tools to face our highly ambitious key strategic priorities and create huge efficiencies. I am especially excited about the potential to apply these optimisation capabilities to the sustainable transition challenges.

What are BBVA’s digital banking plans for the next three years?
BBVA has a clear strategy for the next three years. Our mission in the research department is to try to support the main goals and challenges of the organisation, creating new capabilities and knowledge with science and deep tech. Meanwhile, we are also trying to anticipate the disruptive market and social trends. Quantum technologies have the potential to give us new computing capabilities and resolve intractable problems by consuming less time and energy. Also, and as I mentioned earlier, we believe quantum technologies deliver a great potential to address new challenges around sustainability. We are particularly interested in exploring how this technology can be applied to improve energy efficiency and help our clients and customers advance towards a more sustainable society, both challenges that align with our strategic priorities as an organisation.

The evolution of digital interaction and the concept of Web 3.0 is one of our key areas in research, exploring the evolution and combination of digital identity, digital and programmable assets, change of data access and control and management. In a complex world, it is mandatory to have distributed and privacy reserving capabilities to extract information and make predictions using data to ensure that we give our customers better advice. Distributed and private AI is an area that we have been working hard on in the last 3 years and we hope to see tangible results soon. Another example of our work is trying to solve main challenges in the use of AI to recommend the best products and services to our customers. We are working toward ensuring that we make it happen without bias. This is the reason we have been working to generate explainable and interpretable capabilities for machine learning models.

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