ImaginBank and its war against fintech

The article describes some of the initiatives that the largest Spanish bank is putting in place to stay relevant in the digital era.

La Caixa with 344€Bn in assets and >5000 branches is the largest bank in Spain. It provides and delivers banking and social services. The bank reinvests a large part of its profits in social initiatives, ranking as the 4th biggest non for profit contributor in the world.[i]

Traditional banks, and especially in Spain, are struggling to remain profitable for three reasons: (i) in spite of the low interest environment there is simply no demand of credit; (ii) new online only banks (Bankinter, EvoBank, etc.) with a much smaller cost base are starting to gain relevance; and (iii) the next generation of customers, the millennials, are not willing to pay for most of the services that banks provide since they are getting them for free from some of the new fintech startups.
The last two are direct consequences of the digital revolution that has enabled them. Traditional banks are being forced to make adjustments to their business and operating model to remain relevant. La Caixa has made two big bets in this regard:


Mobile First: The first step that La Caixa has committed to is taking a page from Mack Zuckerberg’s book[ii]. La Caixa decided that they would skip being a leader in the web and move directly to a mobile-first strategy, they created ImaginBank[iii].
The account and all the services are only accessible through a mobile phone (to reduce the cost base) with the exception of cash withdrawals, which will be able to capitalize on the broad traditional network. The app also offers several services that cannot be found on a traditional bank account, but offer great value to the customer at small cost to the entity, such as a Venmo-like service.

While the idea of going full into a digital/ mobile experience is good, they might be digging their own grave by not differentiating themselves from all the fintech noise. The main risk that I see with this bet is that tech is a winner-take-all market[iv]. The banks are playing an uphill battle because these technologies already have millions of users and many adjacent functionalities. On top of that this technologies usually offer cross-bank and cross-platform functionalities, which is arguably in opposition to the banks’ short term goals.
In conclusion, banks can offer as many of the functionalities that are already offered by smaller players as they want, but the question is whether the consumers who are already on those platforms will abandon them for yet another app from their bank which is not as good as any of the alternatives by themselves and limits their interactions.
To defend form this risk the banks could pull together to address cross-bank issues, as all the Spanish banks are doing against Venmo[v], or start acquiring[vi] the startups (for their user base rather than the technology) while the banks are bigger than them.

Data hubs: >80% of transactions in Spain involve a credit or debit card[vii]. Banks are the main distributors of credit cards in Spain and are in the middle of the >2.5 billion yearly transactions[viii]. During the years they have created a huge transactional database. Until a few years ago this information could not be leveraged. However, the increase in cheap computational power and development of machine learning techniques have enabled them to both increase their topline through cross/upselling of their own products or selling information to selected partners and to improve their return by developing better risk scoring systems or reducing their compliance costs[ix].

This has been a great idea and source of value for traditional banks for the past few years, but in 2014 Apple and Samsung launched their own payment platforms which now aggregate the information that only the banks used to have. In the short term neither Apple nor Samsung are issuing their own cards and act just as another layer between the consumer and the bank. However, if in the near future they start providing the credit[x] (themselves or via partnership), they could black the banks out completely.
The only possible way to defend from this seems to be the same as the way to defend from small fintechs detailed above: pull the resources together and not compete against each other. Several banks are launching their own eWallet platform[xi], but none of them by themselves has the potential scale[xii] that the iPhone and Samsung do.


All in all La Caixa is a best practice in adaptation to the digital revolution both by launching new initiatives and improving their old operations. However, to keep new players gaining momentum in the finance market, be it small startups or big tech, they will need to bring their current competition along to create a winner-take-all tech platform and keep making money in their currently untouched lines of revenues (e.g., mortgages). (800 words)

















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Student comments on ImaginBank and its war against fintech

  1. Interesting post Vicente! While I agree that La Caixa (and all traditional banks) must accelerate their efforts to adapt to the digital world and compete with FinTech startups, banks do have one major advantage over these players: their low-cost deposit funding, which will always give them a leg-up on their net-interest margins when they make loans. Ultimately, even if customers use services like Venmo or Paypal to transfer money, these funds are still coming from one bank’s deposits into another’s. Banks are then able to use these low-cost deposits (where they are paying ~0% interest to depositors), to turn around and make loans at higher rates. While yes there is the potential for credit card interchange fee revenue to be disrupted by services like ApplePay and SamsungPay, because the regulatory environment is so stringent, licensed banks should be able to use their ability to take deposits cheaply and make loans at higher rates sustainably into the future.

  2. Thanks for the article. It seem banking is finally seeing the need of digitalization that other industries faced years ago? However, I’m not sure that the right strategy is to create a “parallel” virtual bank in addition to the normal bank. Are regulatory limits behind this? Having two banks creates two far from perfect products and more hassle to the users.

    It’s understandable that banks like La Caixa wouldn’t want their virtual user to start using the more expensive brick-and-mortar options, but they can impose fees to do it. Moreover, the bank would benefit greatly if it offers the alternative of virtual products and customer service for the current user of the branches.

  3. Great post Vincente! I actually agree with what La Caixa is doing and would argue that there is no need for banks to directly compete with fintech startups. It does seem that just doing mobile banking is not enough to call itself revolutionary, but at the end of the day such banks do it to enhance their current user experience and not to compete with startups. In fact, when you look at the now over hyped fintech space, the majority of startups (particularly robo-advisory) are phenomenal technologies that cannot and would not exist without a support of a larger platform. Goldman Sachs is a great example of a bank that capitalizes on it and cheaply acquires such startups for its technology as an additive to their standard operations. I am not very familiar with La Caixa exactly strategy on that front, but I believe that their strategy is not to compete with fintech to attract millennials. After all millennials is not where the stock of money is and banks need to adjust to better serve current customers, while preparing for the flow of money from millennials over the next 30 years or so. For this reason, I also do not believe banks will ever disappear or be overtaken by wealth advisers. In fact, this reminds me of times when e-banking was first introduced and a lot of people worried that physical bank branches will disappear. Instead, as we learnt with time, the branches simply became much more efficient and could focus on where they can add the most value – human relationships.

  4. Thanks for the interesting article Vicente! On your “winner-take-all”” point I actually feel like brick-and-mortar banks expanding into mobile banking have a higher chance of success given that they are better capitalized with existing profitable business and will probably find it easier to weather the competitive battle between fin tech companies till a winner is declared. From a customer standpoint I would actually prefer to have one common app where I can access both my current banking activities as well as new value-add services such as Paypal, Venmo, etc. High regulatory barriers to entry for banking make a fin-tech approach for traditional, “brick-and-mortar” banks even more valuable.

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