Culture and Talent
How Capital One is rethinking its approach to products
- Capital One is building a culture of agile, collaborative product development throughout the company
- Though innovation labs are important testing grounds for new innovations, they can't develop in isolation from where the rest of the company is going
Digital banking is about more than AI or chatbots. It's about digitizing the entire organization behind the app. For the past year, Capital One has been rethinking how it can get out of the too-common approach of "innovating" by layering new technology on top of an old product -- it's realized it needs to entirely reconsider the customer's interaction with it. "If you're too limited in the way you think about a product, you'll only create the things you produced yesterday, but just slightly more automated," said Sanjiv Yajnik, president of financial services at Capital One. "The real power is shifting the way in which you think about the product. Customers today are demanding products and services that are seamlessly integrated into their lives." Too many companies employ a "bolt on" strategy, by building tech innovation on top of outmoded product designs, Yajnik said. For example, by adding AI and machine learning to product design that needs a refresh, companies miss opportunities to draw up a whole new experience for the customer. Capital One was early innovator on digital customer experience, with its Eno chatbot last year and being one of the first banks to roll out an Alexa skill. "The biggest challenge is that it's hard for a traditional company to rapidly transform at scale and make the jump," he said. Part of that transformation is getting rid of a concept called "batch processing" that restricts transactions to specific times of the day or locations, and moving to one where banking is an experience interwoven into customers' daily lives regardless of time or location. "Legacy core banking is based on a number of factors, one of which is batch processing, where you batch process all the transactions that took place during the day at night" -- in contrast to other customer experiences that take place on a 24-hour clock, said Aite senior analyst Kevin Morrison. "The jump is about moving to real time [banking] because millennials expect it." For example, Capital One's Second Look product, which offers real-time alerts based on the customer's transaction activity, evolved from a simpler fraud detection feature. After a rethinking of the design and the addition of machine-learning algorithms, it now offers detailed insights into customers' spending habits, informing them of changes or unusual occurrences -- like being charged twice for the same restaurant bill, or an unusually high jump in the price of a utility bill. “We thought ‘what if we took that system and used it to solve problems for customers, like getting overcharged?’” said Joseph Whitchurch, Capital One's head of customer experience and innovation for small business cards. But transforming product development is just one layer that needs to be backed up by internal process changes where each individual stretches their job descriptions to work in a more collaborative way, an unnatural act that requires top leadership to set an example, Yajnik said. Banks like Capital One, JPMorgan Chase and U.S. Bank are increasingly following an iterative, agile development path, said Celent senior analyst Bob Meara. This method allows banks to act more like startups, release minimum viable products, and adapt them quickly based on customer feedback. The old "waterfall" bank processes would involve defining all the requirements and taking a longer time to release a product that was as close to perfect as possible. While the pressure is on for big banks to innovate quickly or risk falling behind, being first to market isn't necessarily the best option for a bank, Yajnik said, adding that exposing customers to risk is one worry resulting from fast-evolving digital-oriented products. "People are so worried about trying to be the fastest and first to market, but I've realized that it's about understanding when the market is ready for a particular product or service and preparing for it well in advance."