‘Connect your jeans with your suits’: How technology is changing bank leadership
- There's a new leadership role inside banks that's responsible not for digitizing finance, but for managing finance in an increasingly digital company
- Most of the time, that new role is falling to existing COOs or CIOs who are finding their responsibilities have morphed
Banks are starting to look less like finance companies that get technology and more like tech companies that happen to be in finance.
That shift has led to the need for a new type of leader that’s responsible not for digitizing finance, but for managing finance in an increasingly digital company. Most of the time, that new role is falling to existing COOs or CIOs who are finding their responsibilities have morphed.
“There’s a lot of governance that has to be in place to innovate efficiently. And you want it to be like governance but you have to have transparency on it,” said Roger Park, the innovation and strategy lead for EY’s financial services organization.
Traditionally, the chief operating officer covered day-to-day, in-the-weeds operational needs in an organization and reported to the CEO, who looks at high-level strategic priorities and market dynamics. Where technology is concerned, the chief technology officer concentrates on day-to-day operational things and reports up to the chief information officer, who works on broader back-end technologies and focuses on how to move the organization, according to Stephen Greer, a banking analyst at Celent.
“Those roles are getting more ambiguous especially as you have the CIOs looking at more innovation organization-wide,” he said. “Organizations are starting to think of the CIO more as chief innovation officer than the chief information officer. And CTO is almost chief ‘transformation’ officer as opposed to ‘technology.’”
COO-CTOs in the Big Four
When the first wave of technology disruption hit almost every company responded by hiring chief digital officers. When fintech emerged three years ago chief innovation officers began cropping up in banks. Citibank even opened a dedicated FinTech unit focused solely on mobile-first products for customers.
Now the top banks are bringing technology and operations roles closer together, or even combining them.
For example, this summer JPMorgan Chase lost Matt Zames, its chief operating officer who focused heavily on technology and cyber functions toward the end of his tenure. His team now reports to different Operating Committee members rather than to a COO, according to a JPM spokesman. Chief information officer Lori Beer, who sits on the Operating Committee, is now responsible for the firm’s technology systems and infrastructure across all of the firm’s businesses globally, the spokesman said.
Citibank has Don Callahan, whose title is head of operations and technology and who also leads the Digital Governance Office, which is responsible for driving digital transformation across Citi’s businesses. Bank of America has Cathy Bessant, who for the last seven years has served as chief operations and technology officer.
Before Bessant took over the global tech and operations team in 2010, each individual line of business had their own tech team and their ops team, a Bank of America spokesman explained. CEO Brian Moynihan decided to pull each of those teams into a single organization that would support each line of business so the tech and operations strategy would be deployed more consistently across the company.
“Innovation is across the whole bank,” he said. “She doesn’t just have an innovation lab or an innovation team… She’s pressing not just on her team but for us to be innovative everywhere across the bank.”
At Wells Fargo, that responsibility falls under the CTO, Scott Dillon, who joined in 2016 to take over part of Kevin Rhein’s responsibilities after he retired. Rhein was chief information officer and head of the bank’s tech and ops group. Upon leaving Wells, his responsibilities were doled out to Dillon (who serves as head of enterprise information technology as well as the CTO) as well as the chief data officer and the head of the tech and ops group. (Tim Sloan, who was chief operating officer for 11 months until October 2016, has taken over as the bank’s president to clean up its phony-accounts mess).
“If I were to look at projects we’re doing with banks you’re seeing more of the CIO becoming chief innovation officer — not in name, but in role — and CTO being charged with the transformational side of migrating some of the underlying technology to be involved in the day-to-day,” Greer said.
Jeans versus suits
The “innovation” the industry has observed in the past three to five years has largely reflected the internal culture inside the banks. Innovating banking is about more than creating a new way for customers to check balances, which means how the bank transforms its culture and operations internally has to be about more than hiring millennials, letting people wear jeans to work and encouraging them to think like a startup.
Product innovation is part of the greater technological transformation, but it only clears the first obstacle, Park said. The back-office function is critical.
Often, “you’ll get a lot of ideas and most of them won’t be viable for a number of reasons — but not because they’re bad ideas,” he said about banks’ innovation, digital and technology teams. “Maybe you can’t differentiate, maybe you don’t have access to a market. You need to eliminate those right away so you don’t waste your time on them.”
“The other thing you’ll see is you’ll get a lot of ideas and many of them will be the same idea. So how do you avoid paying for the same idea five times? It’s not enough to go tell everyone to innovate. You don’t want to be restrictive about it but you have to have visibility into what’s going on and that’s why this is a funnel.”
That’s why it’s important to define who manages what goes into the funnel, and that can fall on any person or combination of executive leadership depending on the institution.
A major theme in “fintech” this year has been the need to re-focus on deep back-end technologies. Venture capitalists agree too many investments are going to consumer product interfaces instead of actually fixing the financial system, but also say infrastructure technology may be too young for aggressive investment or execution.
“It’s usually because they don’t have their ‘suits’ involved,” Park said. “It’s easy to prove these technologies work in a lab. Other companies are already using them. To get maximum value out of innovation, you have to connect your innovative ‘jeans’ with your enterprise ‘suits’ so you can roll these new approaches out across your organization. That’s the critical next step.”