Financial Restructuring in Banking

The banking industry is undergoing a profound restructuring, driven by digitalization and the rise of AI. Santander has completed its cloud migration in Spain, becoming the first major Western bank to be 100% in the cloud, which reduces the time to launch new products from weeks to hours. At the same time, BBVA has received approval to acquire Banco Sabadell, creating a European banking leader and demonstrating that consolidation is a key strategy to compete with the agility of fintechs.

This demonstrates the need for traditional banks to compete with the agility and customer-centric approach of digital-native fintechs. Santander's cloud migration is an investment in operational agility, allowing the bank to launch new features in hours instead of weeks, putting it on par with a tech startup. This shows that technological infrastructure has become the primary competitive advantage in the financial sector. Traditional banks with legacy systems and slow processes risk becoming obsolete, unable to respond to the accelerated pace of innovation and consumer demands for faster, more personalized service.

At the same time, BBVA's offer for Banco Sabadell and the consolidation of its three technology firms into a new company, BBVA Technology, show that scale is a strategic imperative. The acquisition of Sabadell is a strategy to achieve the critical mass needed to invest in AI and compete in new market segments, such as cybersecurity with its "Cyber Guardian" product. This demonstrates that consolidation is no longer done solely for cost reduction, but as a means to finance technological innovation and achieve the scale needed to compete globally. The acquisition process also highlights a change in the growth model, shifting from organic expansion to an acquisition strategy that accelerates entry into new markets and the adoption of advanced technologies.

Santander's cloud migration has reduced the time to launch new features from "weeks to hours." Additionally, the Gravity platform, once fully implemented, will handle more than a billion technical operations annually. For its part, the acquisition of Banco Sabadell by BBVA is valued at €17.4 billion and is projected to increase earnings per share for Sabadell shareholders by 25% from the first year. This shows that consolidation and digitalization can generate substantial financial value. The risk for traditional banks that don't invest in modernizing their infrastructure is the loss of competitiveness and relevance against these restructured giants.

Recommendations

• Accelerate Product Development with Cloud Agility: Financial products should be developed that leverage cloud agility to offer personalized, fast-to-market solutions, especially in niche areas like health and wellness.

• Communicate Digital Transformation as a Brand Value: Design marketing campaigns that highlight the bank's agility, security, and social commitment. Use digital transformation as a key differentiator to attract a younger and more conscious customer base.

• Prioritize Investment in Open Infrastructure and Innovation Ecosystems: Allocate capital for migrating to cloud-based architectures and adopting APIs to facilitate collaboration with partners. Actively participate in innovation ecosystems to identify and collaborate with FinTech startups that complement your strategy.