13. Innovation and Technology

In 2013, the Innovation and Technology (I&T) area has structured its activity around four main lines of action:

Infrastructure and systems
Omni-channel banking
Transformation of the Central Services, offices and ways of working
New Operational Model
Operations Control and Information Security
Innovation and Support Center for innovators and entrepreneurs

Infrastructure and systems

BBVA has been developing and advancing its technological platforms over the last several years. The emergence of new players in the financial sector, the need to define new business models that require technological support and the need to provide the best service possible to our customers have shaped the main guidelines for the evolution and design of our systems.

Our experience in 2013 has confirmed that our new platform is prepared to support the Bank's growth. As the most telling example, it is worth noting the integration of Unnim last May after 11 months of planning and development work. In its last week, the new platform made it possible to integrate 509 branches serving 1.1 million new customers into our network, with no significant service incidents.

In 2013, the Corporate Investment Banking ("CIB") technology in the BBVA Group launched most of the technological projects forming part of CIB's internal transformation plan, whose final objective is to both protect and expand the current business. The projects completed in 2013 include the launch of the first unilateral electronic FX trading platform in the BBVA Group. This platform allows our customers to directly connect to an online trading platform with a low-latency connection and a price offering, which allows us to compete with the major global players in the international currency market. It has also hit landmarks in the improvement of global risk management and in the adaptation to major regulatory changes, while simultaneously launching the Back Office Global internal transformation plan for the Global Markets unit and continuing to boost the global multi-channel strategy of the current Global Electronic Banking Platform for Businesses.

Omni-Channel Banking

In 2013, different initiatives have been developed to support the Group's Omni-Channel Banking strategy designed to create an experience in which the customer can interact with BBVA through any channel, at any time and from anywhere. The initiatives developed include defining the strategy for reaching the channels based on the device (native, web-responsive or hybrid apps, etc.) in order to offer the same customer experience across all the channels. Various initiatives for generating digital content have also been developed. These include the incorporation of contracting functionalities in 30% of the digital channel innovation roadmap, as well as the creation of initiatives that cross over all digital channels, including gamification.

Transformation of Central Services and Branches

The main focus of the work of the Central Services Transformation Plan is to improve the efficiency and productivity of the Operations and Technology factories, as well as of the various support functions. With this objective in mind, work in 2013 took place on two planes. On the one hand, progress was made in the "Cross-Cutting Plans" project which has streamlined the central services in more than 1,000 resources in 2013 (more than 2,500 since the plan's start in 2010). On the other, the "Níquel" project was launched. The aim of this plan is to establish a new level of aspiration in both the organizational configuration and in the efficiency of all central functions, in order to reduce costs by 30%. The pilot phase of the Níquel project was successfully completed in 2013, and the project will be extended to the entire Group in 2014.

In 2013, the transformation plan for the network processes has driven the design and launch of a plan of top-down processes in all countries whose objective is for branches to become spaces for advice and sales, by minimizing paperwork and administrative tasks and freeing up time for commercial activity. To that end, a new issue of the Network Activity Map (MAR) has been released, and a global evolution objective for 2015 involving a 20% increase of Commercial Management Time has been established. To attain this objective, a working plan has been set for 2015 in every geographical area, with a focus on centralization, simplification or automation of the processes that consume a greater workload and present the greatest room for improvement (in total, 165 processes Group-wide will be addressed).

In terms of Transformation of ways of working, several projects have been developed, with special emphasis in 2 areas: improving the technological experience of the spaces called "BBVA Cities" (trading and meeting rooms; going paperless; the experience in common areas; the telepresence and collaboration systems, etc.), as well as the High Performance Desktop (HPD), an omni-channel web desk (for PC, laptop and tablet) that provides the Group's employees from all geographical areas with a set of functionalities aimed at simplifying and optimizing their ways of working.

The Operations Transformation Plan is contributing to the Group's efficiency and productivity objectives through the application of the "3-Layer Model" in the various banks and with the launch of the "industrialization" project for operating centers.

In terms of the "3-Layer Model", it is important to highlight the transformation of operational processes carried out in 2013 in all business units and, especially, the impact made by OP-Plus: on the transformation of the network in S&P (Vanguard Project), as well as the consolidation of OP-Plus Peru and OP-Plus Colombia as the levers for bank transformation in those regions. An important step has also been taken in Mexico with the creation of a new OP-Plus branch, which will surely play a fundamental role in the 2014 transformation of BBVA Bancomer.
The operating center "industrialization" project is aimed at improving productivity in factories and Mass Transaction Processing Centers, both internal and external, through the use of Business Process Management ("BPM") and Optical Character Recognition ("OCR") technology that enables mass processing of specific activities in the scope of Operations. The pilot projects developed this year in OP-Plus confirmed the validity of the selected tools and demonstrated the significant potential of the initiative in terms of efficiency, quality and operational control.

Operations Control and Information Security

In the scope of Operations Control, the activity has focused on defining the functional perimeter, the holding and local structures and the governance model, in addition to assuming the Risk Assessment process for the SOX and non-SOX risk perimeter for the business processes under its responsibility. In parallel, advances have been made in the design of the future Control Model for all of the Group's Business processes, whose implementation will provide standardization to the model and effectiveness in management, as it emphasizes the most relevant aspects.

The BBVA Group has established computer security controls to prevent and mitigate computer attacks that may materially affect BBVA's earnings. In 2013, the BBVA Group has not undergone any security incidents which individually or in the aggregate can be considered material. The BBVA Group's fraud management in 2013 has focused on improving the processes and tools for better fraud prevention and reduced fraud figures.

The Business Continuity initiatives incorporate the reaction in the event of the unavailability of people, centers or providers. To this end, efforts have been made in order to fully implement and update 127 continuity plans in 26 countries. Some of them have been activated, either fully or partially, throughout the year, as in the cases of tropical storms in Mexico and street riots and blockades in Mexico and Venezuela.

Innovation and Support Center for innovators and entrepreneurs

The Group's innovation project has been reinforced and consolidated, driven by the efforts made in the technological platform over previous years, the creation of an open innovation model and the focus on an innovation agenda that facilitates work at two levels: one very specific and close level devoted to the development of an omni-channel experience and the implementation of new payment systems, and another level that is more focused on the known areas of disruption and potential major impact, such as the BIG DATA environment, native banking in digital environments and open platforms.

Some examples of innovation opportunities that have become a reality in 2013 are BBVA Wallet, a mobile application launched last December, available for both iOS and Android systems, that provides a new means of managing card transactions quickly and safely. Thus, Wallet allows payments to be made by cellphone, and by downloading the application, customers will be able to view all their cards, check transactions for each and save photos of receipts with each purchase transaction or pay by simply placing the cellphone close to the point-of-sale terminal.

Another example of innovation is Wizzo: the first digital native product in Spain, which creates a completely new category of financial services. Wizzo is a web and mobile application for iOS and Android that speeds up payments between individuals, and makes it possible to create spending allowances online with friends or to take money out of an ATM without a card. In addition, Wizzo users may request a physical card or a contactless sticker to make payments from a cellphone.

Work in 2013 has also focused on the opening of platforms and big data, in order to expose some of BBVA's capabilities, products, data and services so they can be used by developers and entrepreneurs to foster the design of new products and digital services, make the most of the value of the data and information available to BBVA and enrich the value proposition for the market.

In order for the advances made in the scope of innovation to reach all geographical areas, special attention has been paid to the presence of local resources devoted to facilitating the transfer and adoption of innovation projects in the different regions. The execution of innovation projects has also been boosted by Innovation managers, who have played an essential role in the coordination of efforts and real integration of the innovation opportunities into the Group's normal business.

In 2013, the Innovation Center intensified is open innovation activity. The more than 100 events and thousands of visitors are proof of its consolidation as a meeting point for the innovation and entrepreneurial community.

A space designed to turn the innovation center into a stage for real interaction with users, the Living Lab, has also been inaugurated. This environment replicates the spaces where people normally interact with BBVA and allows us to better observe and study their preferences and listen to their feedback in order to improve the products and services we will offer them in the future.

In 2013, we held the first hackaton Innova Challenge, a competition for the development of applications using transaction data that BBVA shared with the developer community. A total of 144 eligible projects from 19 countries were submitted, and nine applications were awarded with €90,000 in prizes. This activity has already demonstrated the enormous talent and huge amount of ideas that can arise out of open innovation, with applications currently under analysis to enrich our value proposition for the market.

In 2013, the aim to involve the innovation community has been particularly geared toward the bank's own employees. With that objective, the BBVA Betatesters program was launched for BBVA product testing prior to their appearance on the market. The platform already has 2,200 users in 11 different countries, like the United States, Argentina and Mexico. To date, 18 applications (including Wizzo and BBVA Wallet) have been tested. This has allowed the knowledge and know-how of all of us belonging to BBVA to be reflected in the products we offer others.

The academic and university world also provides a major source of talent through its students, together with a special interest in resolving real business challenges. In order to enrich our vision with regard to some of the current challenges facing our business, we have reached agreements with universities and business schools like Columbia University, ITESM in Mexico, ICADE, ESADE and IE. In partnership with them, we held five challenges in 2013 during which the students were presented with real practical cases related to BBVA. A total of 155 students with 21 proposals collaborated in the five challenges held last year. At the end of 2013, four more challenges were underway, with the collaboration of 420 students and 62 proposals.

In order to promote our ties with innovative entrepreneurship, as of March 2013, the fifth BBVA Open Talent event was launched, the most international to date. This year we had 916 eligible projects from 24 different countries. The participation in projects in Colombia, Argentina, Mexico and Peru is especially noteworthy. The "new banking" category has received high-quality projects, and the winners are already working with BBVA to make the most of the opportunities arising from their products/services.

Moreover, the Innovation Center has continued its support efforts with entrepreneurs and relationships with the innovation community with the global support for the 2013 Innovators Under 35 awards in Mexico, Colombia, Peru, Uruguay, Argentina, Chile and Spain, as well as with its support for the EmTech emerging technologies conference in partnership with the Massachusetts Institute of Technology (M.I.T.).

Furthermore, the BBVA Innovation Center has continued to expand its global footprint. In March of last year we opened the Innovation Center of Bogota (Colombia), and the Innovation Center in Houston (USA) opened its doors in June. The aim of both of these centers is to replicate the bank's open innovation model, with the objective of forging a relevant presence in the entrepreneurial and innovation community of both countries and consolidating the Group's global open innovation project.

The digital community surrounding BBVA's innovation project has also grown. Today, the 878,000 visits in 2013 reveal the interest in the project and major activity in terms of open innovation projects. The social audience (the sum of followers in all of the social networking channels of Innovation), totaling 53,611 followers at the end of 2013, is also a meaningful figure that enables us to maintain an active conversation with individuals interested in innovation and entrepreneurship.