The Next Phase of the Fintech Phenomenon

When was the last time you stepped foot in a bank? How about wrote a paper check? Weeks? Months? Can you even remember the last time?

As smartphones have accustomed us to conducting our everyday tasks online, the banking industry has been in a state of constant flux, with new business models emerging from startups and established players alike.  On this episode of Mastering Innovation on SiriusXM Channel 132, Business Radio Powered by The Wharton School, Dickson Chu, Global Head of Portfolio Management at BBVA, discusses the state of the industry. Chu, who has been working in fintech since well before it had that name, describes his company’s open innovation strategy and identifies where he thinks the most exciting fintech ecosystems are developing worldwide.

An excerpt of the interview is transcribed below. Listen to more episodes here.


Harbir Singh: So, innovation and banking are not often used in the same sentence, right? But today, it is. Tell us how it is happening and about the different market segments. I know our students here at Wharton do everything on their smartphones. Likewise, people who want to go to the branch, visit the teller, and visit the bank are a shrinking population. How do you see the evolution of this industry?

Dickson Chu of BBVA
Dickson Chu, Global Head of Portfolio Management, BBVA

Dickson Chu: To your opening comment about innovation and banking, I think the common perception that you articulated, that innovation and banking don’t really go together, is a fairly contemporary one. If you think about the really incredible things that Citibank, for example, did in the ’60s or ’70s, that was quite a bit of innovation with the invention of the ATM and things like that. And the banks do it through phases. I would say, for all sorts of reasons, later in the ’80s and into the ’90s, not much innovation has happened.

But I think that banks, and therefore fintech as a broader venture capital-funded phenomenon, are really leaning forward and pushing the envelope on the use of technology and new business models.

To your question about segments and current behaviors, my personal belief is that while there were interesting things that came up in the early ’90s with the internet, mobile technology really did change everything — in particular, the iPhone did. It’s enabled all sorts of different experiences on a very powerful computer device that’s always connected. And these are all things that we dreamed about and thought about and tried to do. I certainly did, earlier on in my career. Sometimes, what’s old is new again, so the ideas have been around a long time, but they really have been accelerated by the mobile phone.

Singh: It’s an industry that has really transformed, without a doubt. Let me ask you this: What are the fundamental challenges in terms of risk and security and people’s concerns about the hacking of accounts? It’s not happened as much with banks, but it’s definitely an issue with credit card numbers leaking and ancillary players getting hacked. And yet, of course, we know that these are a very small percentage of transactions, right?

Chu: They are. On aggregate, they’re a pretty small percentage of transactions. However, the perception has validity. There has been many, many hacks, and there are credit card numbers, emails, and IDs that are out there in the world. Some of it is, I think, a behavior offshoot of this “freemium” model that many of the tech companies have espoused: “I’m willing to give my information away, whether explicitly or otherwise, because I want that free account, and I want those free services.” So I think that’s accustomed people to a much more relaxed view of their personal data. I think that’s changing, with the big hacks in some of the recent news events.

It is a real issue. We, at our bank, and I know many other banks, take these things incredibly seriously. We invest considerable amounts of money to make sure that the data is secure.

“Banks are really leaning forward in terms of pushing the envelope on the use of technology and new business models.”— Dickson Chu

We also try to teach consumers to behave in a safe way. At the same time, the tension is whether you sacrifice convenience and other things in exchange. I think that there’s some innovation that’s coming into play to try to support some of that, but it is and will be a persistent challenge.

Singh: There is a lot of talk about open innovation today, and I think it’s a wonderful paradigm; I’m a big fan of it myself. For example, in pharmaceutical companies, many of them are putting out calls for research in a community of bench scientists, and they found that they can not only lower cost, but also get better ideas (while, of course, they simultaneously do internal research as well). Open innovation has really caught on in some of the industries with high R&D, and I think fintech certainly has a big opportunity as well. I understand you’re doing something related to that at BBVA.

Chu: Yes, it’s not exactly the same as you’re describing, even though we’ve been using the term “open innovation” for quite a while. In fact, we’re about 10 years into it. We run a series of events around the world every year where it’s an open call to participate. We do it in Latin America, the U.S., and in Europe. It culminates in a visible event, usually around November, where the finalists from each one of these regional events would be invited to Madrid, and they incubate in a Shark Tank-like thing, but without the pressure.

Singh: So, you make it a big event.

Chu: Yes, it gives exposure to young startups and gives us exposure to all the other wonderful things that are going on around the world. In any given year, we probably see a thousand or more new ideas and young companies that want to make themselves known to us. Of course, there’s some cash prizes and things like that, but nothing of real consequence because I think people want the exposure. For our purposes, it gives us a chance to really see what’s going on the world, and there may be some piece of innovation that we want to incorporate into what we’re doing in the larger bank.

About Our Guest

Dickson Chu is the Global Head of Portfolio Management at BBVA. Here he has overall responsibility for the governance, budget and strategic direction of BBVA’s growing portfolio of fintech businesses such as Simple in the US, Holvi in Finland, Atom Bank in the UK, Muno in Spain and OpenPay in Mexico.

Dickson received his Bachelor of Arts degree from St. Mary’s College of California. Currently he serves on the boards of Simple, Azlo, OpenPay, Denizen, Upturn, Ingo Money, Boomtown and Opportunity Fund (a non-profit providing loans to small and emerging businesses); and, previously served on the boards of Bluefin Payments and (a non-profit that provides a digital learning platform to public middle schools – He was a Strategic Advisor to LoopPay (acquired by Samsung), Leapset (acquired by Sysco Foods), Cortex MCP (acquired by Uphold), (acquired by Facebook), Anywhere Commerce and Sequent.