‘If change is constant, why wouldn’t you build an operating model built on change?’: Takeaways from Tearsheet’s 2021 Convergence Conference
- Both startups and traditional financial institutions are rolling out a broader set of products and services to their customers.
- Tearsheet's Convergence Conference 2021 explored the evolution toward financial super apps.
Modern fintech's roots are in unbundling the bank. Startups carved out part of the banking journey and did a really good job delivering a modern customer experience. As these firms have grown, they've added in more products and services -- to the point that many aspire to be financial Super Apps, a singular app that provides customers one point of contact to manage their financial lives. And we're just getting started.
On the other hand, traditional financial institutions are also expanding their product portfolios. They’re building their own products, as well as partnering with top fintech firms to more fully service their customers’ needs. In addition to web and mobile banking, an increasing number of FIs are getting into student lending and refinancing, investing, and commercial banking for small and medium sized businesses.
So, independent of their roots, financial services firms big and small are converging, heading in the same direction: becoming the home base for their customers’ financial lives.
It was against this backdrop that Tearsheet hosted its inaugural Convergence Conference on September 14, 2021. We hosted leading professionals from firms spearheading the convergence of modern financial services, like JPMorgan Chase, Amex, Anchorage and Petal.
Here’s what we learned:
Going digital is more than delivering digital products-- it’s really about organizational change.
Sometimes, it’s the little things that prepare an organization for much bigger change. It was around creating a lock/unlock button for a credit card that Chase’s product team had its Eureka moment.
To decompose that button, you had to understand all the different things that have to happen to make that button work, like how to answer a customer if she called in about it or how this button would interface with the Visa and Mastercard networks.
“Generally speaking, a lot of people are focused on the button, not necessarily all the stuff that has to happen to make the button come to life,” said Rohan Amin, chief product officer at Chase. “I think we took everybody on this journey of what it takes to bring this button to life. And I think that was eye opening for a lot of people.”
Of course, for an organization with a $4 billion technology budget and more than 12,000 engineers, it wasn’t just about the button.
The real outcome the Chase team was after was to shorten the product development lifecycle and be able to deliver more value to customers more frequently. The analysis around the button helped to accelerate that conversation. Chase embarked on a transformation project to organize its technology, product and design teams around structured areas of focus so that the organization wasn’t shifting resources around in a typical project with a waterfall-based structure. It also wanted to create more collaboration across their product design and technology teams, so that they could deliver faster and better with a customer experience focus. Lastly, the transformation project wouldn't stop here but extend all the way through the organization.
“You have to be comfortable with change because change is constant. And so why not have an operating model that actually is built around the fact that everything is changing around you?” said Amin.
Nigel Vaz isn’t skeptical that large financial institutions can make the leap to become truly digital. The CEO of Publicis Sapient works closely with some of the largest financial institutions in the world, like Goldman Sachs and Bank of America, on their digital journeys.
“Digital transformation is not simply about digitizing something -- digital business transformation is all about fundamentally transforming yourself to be relevant in an age that is increasingly digital,” he said.
There are lots of challenges for businesses that didn't grow up in that context, because it requires changing the way an organization thinks, organizes, operates, and behaves. Vaz told a story about a Publicis Sapient client that was early in its transformation process. The very large financial services firm was starting to make a shift in its thinking about its transformation journey, so that it didn't become a project about technology, but about really transforming organizational culture, technology and metrics. Instead of obsessing over the cycle time it requires to deliver a project, Vaz encourages firms to think about how to increase the speed of their organization, in terms of its ability to move.
Change is always going to be hard, because banks have built large structures and teams that made them successful in a specific context. So, financial services have an opportunity to align themselves to operating as an organization in sync with their customers. “While a lot of that is about technology, so much of that is about how the organization shifts the balance by looking at things and its business. They're like assets and liabilities. How do we actually ensure that our assets trump our liabilities?” Vaz said.
Adding in new products and features requires moving beyond core experiences.
When American Express launched personal savings a few years ago, it was very much a standalone experience only for the web. When it made the decision to integrate personal savings into the core American Express app, it was a prompt for the firm to think about non card experiences. “So, we really began thinking not just about the specific ‘personal savings’ feature, but thinking more broadly about what it means to go beyond core card experiences as we start to bundle in a broader suite of instruments for our customers,” said Stewart Kendall, vice president of global mobile, at American Express.
It was clear the firm needed to prioritize the function. For the card company, savings was the number one feature card members requested to see in the app. From there, it became a case of looking at the platform's existing capabilities and how Amex could make sure that it is building and reintegrating them in a way that is really seamless and highly performant. “We're really focused on making sure that the app performance is quick, and experiences that may have been standalone actually feel very, very integrated and slick as you navigate between one and the other,” he said.
Kendall pointed to money movement as a future target for the product team, citing some opportunities across the experience of moving money between instruments. “I think there are some really interesting opportunities across the experience, rather than just savings or just cards -- there are some really wonderful horizontal experiences to explore as well, which we are just starting to get into,” he said.
This is all happening as American Express’ audience is skewing younger. Similarly, Citizens Bank is also moving deeper into a different demographic with its digital national bank. Launched a couple of years ago, Citizens introduced a savings platform called Citizens Access. The firm is now adding checking and other lending integrations to its capability set. As it goes beyond its branch footprint markets, it’s looking to expand to a young professional audience that really just wants to interact in different ways.
The focus on the experience is also influencing the way Citizens approaches its branch network. Eric Schuppenhauer, executive vice president of consumer lending and national banking at Citizens, sees branches increasingly reflecting advice centers.
“I think we're making a pivot today, as we have more transactions occurring in the branch than we'd like to.There's a little bit of a mindset shift, even for customers to start moving to additional, easier and better ways of doing their transactions,” he said. ”But in the future, it's all going to be principally advice-based, where it's more a question of ‘how can I help you get started on that?’, even if you then complete it outside of the branch, whichever way you choose,” he said.
As some banks go big, others are finding value in niching down to better service specific communities.
Laurel Road for Doctors was launched earlier this year, offering physicians and dentists banking and lending products customized to their needs. Laurel Road was acquired in 2019 by KeyBank -- both organizations have had a focus on the medical profession but saw an opportunity to launch a full service offering for healthcare professionals.
Surveying doctors, the bank learned that they were open to help with products, but really wanted good advice for their situations. The bank developed a physician mortgage product and personal loan products for residents, becoming the first lender to introduce a resident student lending product. There's a high yield savings product and a cash back credit card, for which the highest value of cashback goes towards paying down a student loan. There is also Laurel Road Perks, which offers savings and discounts that help doctors with their everyday lives.
Generalist banks have always launched products to service niche communities but often, it’s not a deep solution. ”Many banks have XYZ for doctors. But if you peel back the onion, they're not really tailored for doctors. We wanted to have that laser focus,” said Alyssa Schaefer, Chief Experience Officer at Laurel Road.
Doctors are a good example of a niche with unique needs and a particular financial journey. Two-thirds of American doctors graduate medical school with $200,000 of debt. Schaefer is familiar with doctors’ financial experiences -- she’s married to a physician. He’s been an attending for several years now, moving through medical school to residency to fellowship.
“You have this huge amount of debt -- you're really kind of not concerned about it, but it's always lingering over you in the back of your mind. You're deferring it for many years through your residency, and you're wondering, okay, when do I start really chipping away at that? And how aggressive should I be paying it down rather than saving money? And all of these types of questions, so they have a really unique journey.”
Crossover products are a good foothold for new technology
Financial institutions are at different stages when it comes to crypto. Some are just beginning to think about it, while others are thinking about products and services that could transform their institutions. Whatever strategy and path they decide, banks and other FIs will need to partner with fintech firms to get there.
Anchorage Bank is the first nationally chartered digital asset bank. When it comes to getting started with crypto, Nathan McCauley, co-founder and CEO of Anchorage, points to crossover products. It all starts with the straightforward use case of buying and selling.
“If you look at the baseline set of services, banks and brokers just allow people to hold, buy and sell assets. So banks or an associated broker dealer can say, ‘Hey, we're going to hold your dollars, we're going to hold your investment assets’. And then they can start to say, ‘We're going to hold your Bitcoin, your Etheruem -- we're going to bring in another set of assets there.”
From there, firms can look at the building blocks that get built on top of that baseline set of services -- lending against crypto assets, for example. “This is a really interesting model where the new of crypto matches with the old of collateralized lending. That's a very nice kind of first pass to start looking at crypto,” he said.
According to McCauley, everybody wants to start small with something and then build up over time. Anchorage is in talks with many financial institutions in the U.S., helping to bridge the old and new worlds.
“Right now, we’re at the precipice of starting to look at really rapid transformation and seeing a bunch of these services starting to be offered and come to pass.”