Toyota designing digital bank for drivers, not just dealers

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Vipin Gupta, the newly appointed chief information officer for Toyota Financial Services, has ambitious plans for the firm, including expanding the bank beyond the dealers it currently serves to include consumers.

During an interview with American Banker, Gupta, who until recently was CIO at Key Community Bank in Minnesota (part of KeyCorp), talked about the $120 billion-asset firm's effort to launch a digital banking service for customers.

"The bank has historically offered full banking services to our dealers," he said. "We haven't opened up our bank to give you the entire banking services, but that's where we're going with building this digital bank."

Such plans would be a significant departure for the Plano, Texas, firm, which offers retail auto financing and leasing through Toyota Motor Credit Corp. and Toyota Lease Trust. It offers extended service contracts through Toyota Motor Insurance Services.

Gupta also wants to use the digital bank to increase automation in their financial services development, and get the employees to think digital-first as well.

Following is a Q&A with Gupta, edited for length and clarity.

What's it like to switch from traditional banking to auto finance?

VIPIN GUPTA: We are at the intersection of two industries that are being disrupted. We are seeing the reshaping of the financial services industry and the automotive industry. It's double the fun and a significant opportunity for us.

Toyota is a mobility company, and we are a mobility financial services company. In addition to selling cars, we are also focused on new mobility services, which is all about enabling the freedom of movement from point A to point B.

In addition to auto lending, we also have leasing, insurance, protection plans and we also own an FDIC-insured bank, called Toyota Financial Services Savings Bank in Nevada. Through the bank, we provide financial services and financing to our dealers.

We're also going to use our TFS bank for a broader range of products and services. We're going to turn that bank into a digital bank and we're going through that transformation as well.

Today our bank is about a billion dollars in assets. It could become a platform for our other services to other Toyota affiliates. So it won't be just a bank, but a banking services platform for all of our Toyota affiliates.

Can I as a consumer use Toyota Financial Services Savings Bank for my financial life?

We don't have that for consumers yet. The bank has historically offered full banking services to our dealers. We haven't opened up our bank to give you the entire banking services, but that's where we're going with building this digital bank.

Is there a timeline for the completion of the digital bank?

We're still in the road-mapping stage. We don't have the timeline yet, but once we get started we'll be done quickly.

What parts of your business are you interested in automating right now?

We just recently launched a robotic process automation factory. We have about 50 digital factories. The RPA factory will be focused on taking in ideas for automating tasks and delivering them on a continuous basis. We created a new operating model for our information and digital transformation team, which is the IT team, and one of the missions that we have is to build our software the way we build cars.

So we have taken the entire organization and launched 50 of what we call ABC factories, which [stands for] agile business capability factories. These factories will combine agile practices and deliver the software in a continuous cycle.

We have a separate factory focused on service experience automation. The process automation cuts across multiple factories by subject area. There is a factory focused on our insurance product, focused on digital banking, focused on our mobile experience, focused on application programming interfaces, focused on our data supply chain.

What do these factories look like?

We have an individual who is accountable for the business capability and a second person who is available for the platform for this capability. We'll call them a business product owner and a technology product owner.

Once we have those two individuals, they will have full, joined and equal accountability to drive the output from this factory and prioritize the work. The team will work like an assembly line and each assembly line will be staffed with 10 to 12 individuals max. As we get more demand in that particular business capability, we can scale these assembly lines, just like we do for the cars.

Are software factory workers doing that full time?

They are fully committed to the factory. This is a dedicated team for that purpose. It aids our second mission to grow knowledge in our company through a team of experts. The factory members will continue to learn about that particular business capability and the platform and become an expert in that area.

The financial services business will be won by the companies with the best digital army. We want to create that expertise and intensity in our army.

In addition, we are complimenting this effort by launching a TFS digital academy that will be in a building outside of headquarters but nearby. We're going to use this academy not only to drive learning and teaching for technologists but also for the non-technologists, other areas of TFS. The ability to harness the power of software is not just the business of our IT department.

This is not about rewriting technology systems, this is about rewriting our business and our operating models.

What data do you look at now and what data are you hoping to look at in the future?

We use data and analytics around sales and product pricing, risk modeling and management, and collection and recovery of assets.

What we're working on now is connecting vehicle data, the data collected in the car, and trying to figure out how we connect it to financial events. Then using that data set and connecting it to customer behaviors and interactions and how do we personalize services and offers.

What APIs are you developing?

We are building an integrated digital ecosystem from the ground up in the cloud, since we have Toyota affiliates across the world, including fintech partners and suppliers. We will build our own API library that will be available internally and selectively externally.

How will the academy work?

The people that will come through it are not only Toyota employees but also Toyota consultants. This is a physical space with lots of digital curriculum around it and digital lessons we'll apply for macro as well as micro learning.

If a team member joins Toyota, they will go through a three-week digital boot camp where we will immerse them into the way Toyota operates broadly. Then we will immerse them into TFS and how that operates. Then we'll immerse them into how our information and digital systems work, these factories, the digital transformation and what we're doing there.

So for three days each week of those three weeks, that's what they're going to go through before they start working on their roles and responsibilities.

For our business team members for example, they'll have a curriculum focused around what happens behind the scenes in technology and how do we keep the lights on is the title of that curriculum. That is one area where not only our non-technologists but also our technologists don't fully understand.

What happens if there is an incident? What happens if there is an issue and what happens behind the scenes when everyone is sleeping and how we keep all of this technology infrastructure up and running 24/7? Then on successful completion of that, select individuals will be taken to our data center tour for them to see a real factory.

It doesn't stop there. Ongoing throughout the course of their career, we will be introducing various learning modules. People who are going to teach are people who are already here. If you have to teach information security, who better to teach than our own chief information security officer?

In a financial services organization, we don't manufacture cars. What we manufacture is data, decisions, and experiences.

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