Ricardo Duhart
Director of Strategy and Solutions for Companies and Government
BBVA
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Specialization, Reliability, Quick-Response Are Keys for Success

By Alejandro Enríquez | Fri, 07/31/2020 - 12:00

Q: How successful has BBVA been in attracting new clients in the automotive segment with its digitalization strategies?

A: Financing should be an element of the overall purchasing process and our solutions have helped clients to apply for loans directly through a mobile device. The client receives the approval and then picks up the car. This platform is already available and it has made the purchasing process easier. Although growing steadily, this side of our business remains small, representing around 3-5 percent of our monthly activity.

Buying a car is an emotional experience, but all the paperwork around loans makes it a nightmare. If a bank takes three or four days to approve your credit, you might think twice about your purchase. In essence, we want to become almost invisible in the purchasing process by making it easier for both the end-customer and the dealership. We are also working on our response time, for which we are already the industry’s benchmark. Today, 75 percent of all credit applications are answered in less than 25 minutes, enabling dealerships to provide a test drive while we analyze the application. The customer will not only be in love with the car, they will be able to buy it immediately, which increases the probability of the sale.

Q: As digitalization permeates the credit sector, how does BBVA’s offer stand out from other players with similar products?

A: Digitalization is the essence of our business model. A first competitive advantage is our specialization in the automotive sector, since not all financial entities competing in this market are ready for digitalization. Second, we have a comprehensive offering as a financial entity and we work under a personalized scheme to offer our products to a dealership or an individual customer. We offer everything the value chain needs through a specialized business unit. A third element is our level of service, reliability and closeness to dealerships. All these advantages give us a quicker response time, a better market understanding and overall specialization, thus making us leaders in the market.

Q: As the largest bank in Mexico for consumer credit, what are BBVA's strategies to cope with declining financing numbers in Mexico, both for consumer and automotive credit?

A: Despite sales falling around 8 percent, we are growing at a 14 percent rate. This is due to different factors. One, our innovative products and the strategies we have implemented together with dealerships have made us the preferred brand for financing. We have also molded our strategy in the automotive sector for the long term.

Financial entities should also be more careful when approving loans and know who their potential client is. In the banking sector you manage risks. If you are not careful regarding the key indicators for a healthy portfolio and you start approving loans randomly, you end up paying for it. I have seen this through my 30 years in the banking sector. Car financing is a business of economics of scale and if you do not generate valuable elements, it is very difficult to guarantee million-dollar investments to sustain the service. Constant feedback allows you to improve your services and products as operations ramp up. Being cautious and providing a very good service has helped us to become leaders in the industry. There have been months when we have been country’s top loans provider. This is a major achievement because it is a situation that has not happened before.

Q: What strategies are you implementing to grow your market share and capture the non-banked population?

A: Financial inclusion is something we have talked about for quite a bit at the bank and we are the only bank that does not ask for income receipts from our clients, except when the loan exceeds a certain amount. In 95 percent of the cases, we do not need income receipts to grant a loan. Given our experience in financing cars since 1988, we have developed our capabilities enough to know when someone is eligible for credit. It is true that it can be difficult to be proactive in loan decisions with little information. Yet, we took a step forward in the industry when we launched this decision-making process in 2015. Our financial inclusion strategy only requires clients to provide their ID and a proof of address. There is still much more to be done, however.

Q: What market conditions are needed for automotive financing to start growing again?

A: If you look at it from the demand perspective, the market has not shrunk. The number of applications that BBVA gets on a monthly basis is growing. It is not that people do not want to buy a car but that their purchasing power has deteriorated. For three years, we have seen a small but consistent decline in clients’ credit profile due to inflation. If prices are rising while salaries remain the same, families do not have money available for a loan. Therefore, the decline in car financing is due to an increase in the number of rejections.

If things start to change in the next year, with salary increases, more people getting into formal jobs and debt relief, little by little the financial situation will improve and the negative trend will end. If there are no external factors that have an impact on families’ income, I would expect a decrease in interest rates and a subsequent gradual increase in car sales and financing.

Q: What are your growth expectations regarding automotive credit acquired through digital means?

A: Today, digital credits represent 5 percent of our total portfolio and the goal for 2020 is to reach a 10 percent share, although we are aware the year will be challenging due to market conditions. Regarding car sales, I believe growth will remain close to zero. The automotive industry has had over 30 months of declining sales, which means the financing market will not grow again until 2020.

Q: What further innovations could clients expect from BBVA in the near future?

A: We are rebuilding what we already have. We are improving customer experience to make it even easier to get a loan. At the end of the day, what we want to do is embed ourselves in the purchasing process since the important element here is buying the car. We are the means for client to fulfill their dream of having a new car. If we become more invisible in the process, we will know we are doing things right. Next year will bring some interesting opportunities for BBVA’s services.

Q: What is the extent of your relationship with online platforms like Mercado Libre and Kavak?

A: Collaborating with these websites is part of our digitalization strategy. We are working on a first product that could be replicated on all platforms. The idea is for clients to be able to choose their car, apply for the loan on the same website and receive an approval or rejection immediately to complete the purchasing process.

 

BBVA is the result of Spain's Banco Bilbao Vizcaya Argentaria (BBVA) becoming the main shareholder of Bancomer in 2000. BBVA is the largest private financial institution in Mexico and the main bank for automotive financing

Alejandro Enríquez Alejandro Enríquez Journalist and Industry Analyst

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