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Q&A: BBVA Compass CIO Sergio Fidalgo on the Bank's Upcoming Core Systems Overhaul

The bank's migration to Accenture's Alnova platform will provide it with a single customer information file and real-time transaction posting across all channels.

Madrid-based banking giant BBVA is about to embark on a major overhaul of its core banking systems across the offices of its U.S. bank, BBVA Compass. This morning we spoke with Sergio Fidalgo, CIO of BBVA Compass and Juan Pedro Moreno, managing director of Accenture Core Banking Services, about the project.

BS&T: What are your main reasons for doing this upgrade now?

Fidalgo: BBVA acquired Compass Bank in late 2007, and we spent the whole of 2008 integrating the operations of Compass's U.S. bank affiliates [which included Texas Regional Bancshares, State National Bancshares and Laredo National Bancshares]. When we did that integration, we decided it was time to do two really big things. One was to change the business model over to the BBVA business model, which is more centered on building long-term relationships with the customer than on the product side innovation that has been the traditional way of developing business in the U.S. We decided it was necessary to implement a new core banking system to support that change in the business model. The system that we were looking for had to be able to meet our requirements in terms of customer simplicity, to be able to run core operations for deposit, checking, savings accounts and consumer and small business loans with an integrated system with one single customer information file, that is the first foundation of a customer centric strategy.

BS&T: In your view, is the U.S. banking industry a little out of date compared to other countries BBVA operates in when it comes to core banking technology?

Fidalgo: In some cases I would say yes, investments in core banking in the U.S. have not been as relevant as in some parts of the world. In our case, in all the countries in which we do banking business we have this real time capability, which means we're able to process transactions at the moment customers make them, so they don't have to wait until the next day to see their updated balances in their accounts, they can see them on the internet, ATMs, whatever channel they use.

Moreno: I wouldn't say U.S. banks are out of date or outdated, but we're seeing clear signs of U.S. banks getting closer to trends we're seeing in the European banking sector, approaching some of the standards that are defining core banking systems in Europe. Those standards include a more aggressive time to market to taking out customer silos and achieving client centricity.

BS&T: How will you go from customer data silos to one single integrated customer data repository? Will you need to buy a new database and migrate existing data to it?

Fidalgo: That is part of the Alnova architecture. One of the central components of the system is the customer information file. Applications that report to the different businesses -- checking accounts, savings accounts, loans -- won't have custom information, they will go to the centralized database, which is part of the architecture Alnova provides. That allows you to be more efficient and avoid mistakes that can occur when you have different data spread throughout your applications.

BS&T: The other big aspect of this project is the ability to provide real-time transactions across all channels. That's been somewhat of a holy grail for many U.S. banks. How are you achieving this, are you replacing technology on all channels, including branch, online, mobile and ATM, with the Alnova system?

Fidalgo: Our branch channel automation will be replaced by Alnova. The rest of channels -- ATMs, mobile, iPad, iPhone, telephone banking -- we're going to be adopting in order to be able to take advantage of having that information available in all those channels.

Moreno: Real-time processing is very important from a compliance point of view, it enhances the ability to track transactions from operations throughout the channels of the bank.

BS&T: How long do you expect the migration to take and when will it start and finish?

Fidalgo: On the deposit side, we'll start migrating deposit accounts at the beginning of 2012, then we'll roll out systems on our standard approach throughout the footprint in the first half of 2012. By the end of 2012 we'll be going live with the loans piece.

BS&T: Core banking migrations can be disruptive. Are you doing anything to keep the migration smooth for employees and customers?

Fidalgo: The key in migration is to be as transparent to customers as we can. We're taking advantage of the conversion experience we have and we're working with Accenture on designing training manuals and sessions for employees. We know this is a big change for employees.

BS&T: Can you share how much this will cost and how you will get a return on investment?

Fidalgo: I can't disclose the amount of the investment, but one advantage we want to get from it is to be able to reach the market much faster with a complete spectrum of products.

BS&T: BBVA is conducting core system upgrades around the world. What are some of the advantages of getting your banks in different countries around the globe on the same platform?

Fidalgo: It can provide a consolidated view of some of our activities. It will help the holding company view global operations. And with a common architecture, we can develop and use software in one country and then roll it out in other countries, with slight adaptations.

BS&T: It seems BBVA has been innovative in several technologies, such as its ATM and mobile banking designs. How do you achieve and encourage innovation in your organization, especially as a lot of banks are trying to cope with the tough economy and regulatory change?

Fidalgo: We have three pillars in our vision, in the basic foundation of our strategy. The first one is principles, the second is people and the third is innovation. So one of the three big leitmotifs of our company is innovation itself. We're focusing on innovation. We truly believe if we don't innovate and keep a constant investment in technology, our banks will be out of the picture sooner or later. We were one of the first banks to have a native iPad app and we're exporting that application to the rest of the countries. With the internet and mobile presence of Gen X and Gen Y, everything will be based on technology. So besides having the operating model embedded in technology, from a customer reach point of view, we believe that technology is the most important factor for banks to succeed in the coming years.

BS&T: Can you share any future plans for your technology infrastructure in the U.S. or around the world?

Fidalgo: This is only one piece of the technology transformation we're going through in the U.S. and in the world. I cannot disclose other innovations we're piloting in concept mode. But BBVA in the U.S. operation will continue to invest in technology to be ahead of the curve, because we believe that to be a factor for success in coming years for the banking industry, so there will be more news like this to come.

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