- Why today’s vertically integrated model is not going to be enough to capture growth in the future.
- What future business models will look like and the different approaches banks can embrace with scale in mind.
- How the wise pivot for banks will be from one business model to multiple models managed together in a portfolio
Transcription:
00:00:13:17 - 00:00:36:27
Penny Crosman
Good morning, everyone, and welcome to this session. I'm Penny Crossman, tech editor at American Banker. I want to say thank you to Jeremy Belkin for that interesting kickoff speech this morning. He really set the stage nicely, I think, with his talk about how payments are eating the world and the rise of the super app and how cars are becoming wallets on wheels.
00:00:37:09 - 00:01:08:03
Penny Crosman
And, you know, he argues that payments are the sexiest part of financial services. Today, I don't know if everyone would agree with that, but really interesting points of view that he brought to the table. So thank you, Jeremy. And now we have a really great panel. We're going to talk about some of the shifts in the financial services landscape, kind of continuing on where Jeremy left off, talking about how business models are changing, how competition from fintechs and tech companies are changing.
00:01:08:15 - 00:01:31:01
Penny Crosman
And we have a fantastic panel this morning. We have Michael Abbott, who is senior managing director and global banking lead at Accenture. And he's written an interesting report that we're going to be touching on quite a bit during our discussion today. And that report is linked in the session description box. So be sure to check that out. It's definitely worth a read.
00:01:31:02 - 00:01:54:08
Penny Crosman
I read it and and found it very interesting. We have Nicky Katz, who is managing director and head of Digital Design and delivery at Bank of America. Welcome, Nicky. And we have Gareth Gaston, who is executive vice president and chief digital officer of digital platforms and capabilities at U.S. Bancorp. So thank you all so much for coming. Really nice to see all of you again.
00:01:55:06 - 00:02:16:01
Penny Crosman
So, Michael, you wrote this report talking about how banking is changing, how fintech competition is changing, and how financial services firms kind of need to adjust their their business models, their strategies, their ways of thinking. Tell us a little bit about the research and what you set out to do here.
00:02:17:14 - 00:02:37:13
Michael Abbott
Yeah, great question. The when we were here, as we we're looking around the globe, we're starting to see some interesting trends emerge in the banking industry. And in particular, what we were noticing was if you looked at the traditional vertically integrated banking model and if you thought of it like, you know, it's sort of like a church and well incredibly well put together, stained-glass, everything.
00:02:37:13 - 00:02:58:10
Michael Abbott
Absolutely. Perfect harmonization, but in a vertically integrated way. What we were seeing is we were seeing that stained glass being pulled apart, basically that horizontal, that vertically integrated model. We were seeing these horizontal slices or slivers of banks become available and from various fintechs. So, you know, good examples of those that can commercial would be the unseen as in the world.
00:02:58:10 - 00:03:21:23
Michael Abbott
You've got, you know, in the mortgage space, it might be the first time when labs and you've got Marquez to get all these fintechs that were starting to emerge that were providing capable abilities of the banks. And then what we saw, which was more interesting, was it wasn't so much that the banks themselves were taking advantage of it, but what we're seeing is we're seeing the fintechs out there take advantage of these horizontal slices.
00:03:22:07 - 00:03:42:04
Michael Abbott
And what they were doing was they were they were they weren't focused as much on digital. In fact, I would argue what we learning is that digital was a necessary but not sufficient condition to render said differently. We started to see that digital was table stakes in many scenarios. And that the real winners, the differentiation that was occurring was occurring on two fronts.
00:03:42:21 - 00:04:03:27
Michael Abbott
One was around product innovation. So it was the ability to unbundle and we bundle your capabilities into new products and services very rapidly. And we saw this in North America, you know, with the example of time over the pandemic where they took almost one in every four new customers wanting to chime with a very simple product innovation and value properties just get your paycheck.
00:04:03:29 - 00:04:32:02
Michael Abbott
Two days earlier, you saw that also happening around the globe. So that was one trend we were seeing is this unbundling and rebranding at speed to drive product innovation and digital first products. The second thing we were seeing was that, you know, banks traditionally, especially large banks have played what I would describe as a 10% game, meaning they have terrific brands at great balance sheet great relationships, deep brass networks within Geo, Geo geotagging of locations.
00:04:32:21 - 00:04:54:29
Michael Abbott
And they traditionally would play that 10% game, meaning I'm going to play my brand into the marketplace and that's where I'm going to go. Then all of a sudden you started to see banks taking this unbundling concept and taking it one step further, was saying, Look, if, if others can unbundle and provide many services, why can't I unbundle my own bank and embedded into other places?
00:04:54:29 - 00:05:27:29
Michael Abbott
So you saw things like what's happening with Spotify, with Shopify, you know, in partnership with Stripe, providing Treasury services from other banks. So you're very far removed from the end customers but embedding those services in and we are seeing that across the across the globe. And what we realized and what the report points to is that if you look at the GDP growth of banks over the last decade and growth of their gross revenue, compare the GDP, you'll find that banks generally have fallen behind the growth rate of GDP relative to the revenue lines.
00:05:28:11 - 00:05:49:07
Michael Abbott
And what we realized was the way they can get that back is to play two different games. One is to get back to product innovation, which frankly, banks were always great at and start looking at how you can drive more revenue through digital and products. But more importantly, how do you embed banking into other? How do you measure banking services into other people's products and services going forward?
00:05:49:07 - 00:06:06:22
Michael Abbott
And if they do that? Our belief is that they can probably get close to doubling their growth rate which may sound modest, but, you know, if you can go from three. 4% growth rate to six 7% growth rate, we think there's a tremendous amount of upside for the banks. You know, especially from a market capitalization point of view.
00:06:06:29 - 00:06:23:28
Michael Abbott
So that's why we set this. We said we believe that the industry we believe there's this kind of best way to describe as a post digital age coming and the banks that take advantage of this and kind of take apart those stained glass windows and build a kaleidoscope of products and meet them. That's going to be a that's going to be a great strategy going forward.
00:06:24:01 - 00:06:26:24
Michael Abbott
So that's why we don't put it out there. Get the conversation started.
00:06:27:13 - 00:06:50:03
Penny Crosman
All right. Interesting. So you so you mentioned that the time has done really well with simply with its early stage access tool. What are some of the what are some other examples of fintechs that have brought product innovation that has drawn consumer interest? The banks are also starting to emulate. Emulate.
00:06:50:17 - 00:07:08:23
Michael Abbott
Yeah, I'll give you some I mean, some are some have been out there for a while. I remember one like if you look at Square, I think everyone Square was innocently enough. And you look back a decade ago, Square was kind of panned by the analyst because many of the banks said, how could I ever serve a small customer, an individual acquiring customer?
00:07:08:23 - 00:07:30:13
Michael Abbott
Why would I ever do that? By acquiring business requires scale. I have to have tens of millions of dollars to justify my terminals and my salesforce, etc.. And they realized that if you could find instead of asking the question why, I can't say they're saying why I can't serve it, ask the question, how could I serve? And all of a sudden you're serving an individual, acquiring you're serving individuals on a quarterly basis.
00:07:30:13 - 00:07:47:28
Michael Abbott
And then what happened is they grew Right. So the employee of one became two or three for 50. And now banks look back and say, Wow, I wish I really had that. That's a great example of, you know, kind of unbundling and rewiring a product in a different way. Yes, Stripe is another good example of that. That's trading out there right now.
00:07:47:28 - 00:08:06:13
Michael Abbott
Right in the in the e-commerce space. They're simply bundling into APIs and services. There's no reason why banks can't open up apps and services for e-commerce, why that didn't happen from a bank and had to happen to a fintech. So I think you're seeing examples of this over and over again. Another good one, which is not in the United States as much, but quite interesting.
00:08:06:13 - 00:08:29:27
Michael Abbott
Overseas we see this is a company called MN. 26 and 26 decided to say, look, we're going to target an immigrant population in Europe and want to provide transit, the ability to transfer money very easily and open an account in just a few minutes. So I think what you're seeing is you're seeing these examples over and over again in different spaces where product innovation is leading to it, leading to large revenue lines over time.
00:08:30:08 - 00:08:35:03
Michael Abbott
And the key for me is looking at areas you would say I normally wouldn't serve that area.
00:08:36:21 - 00:09:07:28
Penny Crosman
Interesting. So so Garrett implied in what Michael had said in the report that he did. He he's basically saying that banks can't really compete on their digital offerings, that they're all pretty good and they're all they all have some of the same features and capabilities across the board. Now, at US Bank, you have been working on personalization and small business app and, you know, various features to to to make your apps more appealing.
00:09:08:03 - 00:09:12:03
Penny Crosman
Can banks compete on their digital offerings?
00:09:12:27 - 00:09:36:07
Gareth Gaston
I think what Michael's talking about is we're on a continuum here where, you know, the first category that we talked about is being the best digital version of yourself. And, you know, let's be honest. First of all, it's an enormous amount of effort to become the best digital version of yourself. And, you know, and secondly, this is a very large and fragmented industry where everyone is still on that journey.
00:09:36:08 - 00:09:59:08
Gareth Gaston
So I think I agree with the point completely that at some point in time, just being the best digital version of yourself is not sufficient to continue to compete. However, I think there's an awful lot of banks and financial institutions who are still not yet the the best version of themselves. So there's a lot of work still to be done and very hard to rent your way to being the best digital version of yourself as well.
00:10:00:02 - 00:10:28:23
Gareth Gaston
So you know, certainly, you know, as you said, we've played an enormous amount of effort and work into, you know, being named as the best mobile banking app in the US and things like that. So that's been an enormous journey. I definitely would then agree that there's more that need to be done. So that's why, for example, in the B2B to space, we have businesses like Allen on the card side and our live on the merchant side, which to Michael's point have evolved dramatically over the last few years.
00:10:29:08 - 00:11:03:06
Gareth Gaston
To really think about and still so much more to do, positioning ourselves for a more unbundled version of that. And then from the packaging perspective, a lot of what you talked about there in terms of recognize being, you know, square and stripe and things like that, that's exactly why we've acquired, for example, companies like Tyler who are, you know, to all intents and purposes, a mini version of Square and, you know, look to integrate that into our offering and not just from a pure payments and weight labeling perspective, but also to give us the capabilities to do some of those things and then are open to acquisition as well to help us compete in the payment
00:11:03:06 - 00:11:32:24
Gareth Gaston
space. But I also think, as Michael said, it's not just about making acquisitions. It is about smart partnerships, which is why we partnered, for example, with the blends of the world, the means he with the world. So it is about the partnerships and and how you create that. And then I would flip it the other way, which is you know, the reason why we've embraced sort of connected banking so much is because there is an emerging ecosystem out there where you can you can either view that as something you will consume or you can view that as something you're going to be part of.
00:11:32:24 - 00:11:43:18
Gareth Gaston
And we very much see that as something we'll be part of. And that's why we've got dozens of APIs that we're either have or are creating, and that will be available for third parties to use.
00:11:45:00 - 00:12:08:22
Penny Crosman
Great thank you. And how about you, Nicky? Do you think that banks can differentiate themselves by their digital offerings? For instance, you guys have Eric, which is still somewhat unique. What do you have? 15 million users of Erika today. It's probably higher than that. Yeah, but what do you think of that idea? That you really can't compete on your digital off your digital channels.
00:12:08:22 - 00:12:35:01
Nikki Katz
You really have to compete by offering innovative products or, and or doing some kind of banking as a service. Yeah. I mean, so to answer your, your tactical question, we're, Erika's at over 23 million and I think it's such a great example because I think, I think that there's still just so much room for growth in the space. I mean we have at this point over 41 million active digital users.
00:12:35:08 - 00:12:58:03
Nikki Katz
And being an established digital player, you think that that rate of growth would slow. But what we're seeing instead is that those users, those clients are actually engaging more with our digital platforms. We had 2.6 billion logins last quarter alone and that's a 17% increase year over year. So as we continue to invest in our digital capabilities, we're actually seeing clients respond.
00:12:58:12 - 00:13:21:20
Nikki Katz
And I think the reason I like what you what Mike said earlier, which is, you know, there is a certain element of having a robust digital platform is just table stakes at this point. But I think on top of that, there is opportunity for differentiation. And I would actually sum it up as that opportunity is about relationships. It's how do you use digital capabilities to actually deepen relationships with clients?
00:13:21:20 - 00:13:47:07
Nikki Katz
And I don't mean that just in their you know, make sure the clients get more products with you, but rather it's also about just better understanding clients. What do we know about what matters to them, how they tick and then how do we give them the tools and empower them to be successful in hitting their goals? And Erica is a great example of one way that we've been able to do that is Erica started off as an A.I. virtual assistant, but it's so much more than that at this point.
00:13:47:07 - 00:14:13:22
Nikki Katz
Erica is really a central gateway for us, for search for help. Definitely for guided servicing. And Erica's handled over half a billion interactions at this point, and it continues to grow at a rapid clip where, in fact, seeing acceleration in Erica's growth. And another great example of how we're trying to use digital to actually get more intimacy essentially with our clients and what their needs are is life plan.
00:14:14:03 - 00:14:37:22
Nikki Katz
So we launched a life plan, and it's actually been almost a rapidly adopted digital feature that we've we've had we have over 5 million clients who have created a life plan with us. And what I love about it is that the results are there. So for the four for those clients who have created a life plan, which is really about them telling us, here are my life priorities, here are my near and long term goals aligned to those priorities.
00:14:38:00 - 00:14:59:15
Nikki Katz
And then us working with the client digitally to really help them achieve those goals and provide guidance and information to to get them there. And for those clients, we've actually seen clients with life plans increase their assets with us by over 36 billion since we launched. And that was just roughly a year ago. So I think there is still an opportunity for differentiation.
00:14:59:15 - 00:15:23:12
Nikki Katz
Again, bottom line, it's about how can digital act and service of building relationships with clients. Yeah, a good point. Well, that's a good segue way because I think Michael you wanted to ask the other panelists about, about relationship building and, and kind of not to speak for you you know.
00:15:23:17 - 00:15:42:14
Michael Abbott
Exactly. And I think what Mickey was talking about, I think if you talk around with is a great example of a life plan, is a great example of a product, but it is a digital first product and feature functionality that is beyond just what I would describe as sort of solving the customer response needs meaning check my balance, pay my bills, we can all do that.
00:15:42:19 - 00:16:00:18
Michael Abbott
That's why I think digital now is moving into a much more of a product, much more of a positive. And I'd love to get to I'd love to get naked and get your thoughts on this, which is if I look at digital experiences and I would think we I think we would all agree there's a table stakes element of this.
00:16:01:00 - 00:16:32:24
Michael Abbott
A lot of it is functionally correct. The best way I can describe it is functionally correct, but emotionally devoid, meaning people can go through the wire frames, they can pay their bills, etc., etc.. And I think you mentioned some examples. I'd love to get your thoughts. How do you put humanity back in the digital age? I mean, I go back to the days when I worked at Fleabag way back when, and I'd walk into a branch and they would kind of instantly know your problem and figure it out and you kind of had a conversation and just curious around your perspective, how you how we get back to that.
00:16:33:01 - 00:16:36:19
Michael Abbott
Is it possible? Yeah, go ahead. Sorry.
00:16:36:26 - 00:17:05:15
Gareth Gaston
Yeah, Yeah. So so I think that what we were talking about earlier, so first of all, I couldn't agree more that the world has definitely moved on beyond the transactional only experience and digital. And when we were launching our so-called our new mobile app, but it was 2019 when we launched and when we were contemplating that app, one of the main things that we thought about was we can't simply just launch a transactional app.
00:17:05:16 - 00:17:30:01
Gareth Gaston
People are expecting a much more personalized experience based on, you know, not only the direct customer research that we were doing, but just intuitively everybody, everybody, every app that you interact with is much more personal and much more So I think, you know, first of all, having a by using the information that we have about a customer and I think customers I know customers expect us to use that information to be helpful to them.
00:17:30:10 - 00:17:54:08
Gareth Gaston
So we partnered with person networks as an example and created lots and lots of smart insights. So whether it's that things related to spends things related to like subscriptions, for example, is like here's here's a snapshot of subscriptions and here's how, you know, payment alerts like you paid this twice. Are you sure this is real? You know? So that to me is, you know, really emulating the experience you would have got if it walks into a branch.
00:17:54:20 - 00:18:13:20
Gareth Gaston
And I actually think it's probably, you know, potentially even better than that, because the machine, of course, isn't limited to thinking about one thing. It looks at all of your data and then it gives you, you know, up to seven, eight, nine insights on a set of cards and one goal. And you know, it'd be really hard for any human beings to do that systematically for every customer that ever walked into our branch.
00:18:13:21 - 00:18:31:16
Gareth Gaston
Now, of course, we can do that for customers of what kinds of brands, because we've taken that great stuff we did for our mobile app and put it in front of the bankers as well. So they are able to to react and take that as well. But I think that is a tremendous way of providing a much more human advice oriented relationship because you're actually getting helpful tips and suggestions.
00:18:31:27 - 00:18:52:08
Gareth Gaston
And, you know, not only that, we seen a couple of billion of those served since we launched but we've also you know, we also know from customers that they greatly appreciate the advice and interaction. It does get that more personalized experience And then I think things like, you know, we also have launched a voice assistant. There's not many of us who have, but we have a voice assistant as well.
00:18:52:25 - 00:19:11:05
Gareth Gaston
And I think that really helps bring humanity into it. As well, because you're able to talk to your app. And actually, I think the thing that is great about being vertically integrated from a financial services and banking perspective is the richness of the conversation. And the amount of interaction is actually much greater than I would say with Alexa or Google.
00:19:11:05 - 00:19:26:27
Gareth Gaston
Right. Because you can have a I'd like to pay my bill. Which bill would you like to pay? My credit card bill. Would you like to pay the minimum balance or would you like to pay the maximum rate so you can actually have a more relevant conversation because the use cases are shorter, so you can be much more different and then certainly I would say of three.
00:19:27:24 - 00:19:49:06
Gareth Gaston
The third thing of three is we have so we talk about and primarily when you talk about digital, people tend to think you're talking about DIY or do it yourself. But I think part of bringing humanity back into digital is there's nothing wrong with a human being, part of a digital interaction as well. So we have this thing we call digital together, and so it happens in a number of fronts actually.
00:19:49:06 - 00:20:11:02
Gareth Gaston
So we have either Kobra is right. So we've got a a way that you can a branch agent, a branch banker or a contact center agent can collaborate with a customer when they're on the phone or in the branch. Or actually we design most of our branch stores these days so that what the what the branch manager has in front of them is pretty similar to what the the customer would have on their own device.
00:20:11:02 - 00:20:22:08
Gareth Gaston
So that form of kind of do it together. So So to us, I think personalized insights, voice, voice interactions and do it together experiences are, are some of the ways that you can bring humanity back into banking.
00:20:22:19 - 00:20:36:08
Michael Abbott
And engage That's perfect. I think we're in the first inning of this to a person. I think like as long as Nick, I'd love to get your thoughts on this. And I have a question for both of you. It's quite simple afterwards. So I'd love to get your thoughts on how do you put humanity back into banking.
00:20:37:06 - 00:21:00:17
Nikki Katz
Yeah, for Bank of America, we've had a high tech, high touch model, and that's all about how do you marry our digital capabilities and enabling our clients to self-service via digital or get answers via digital, but still keep that high touch of talking to a specialist staff. You know, we have 4300 financial centers and we want to make sure that really digital is enriching that experience.
00:21:00:26 - 00:21:21:28
Nikki Katz
So it's almost like there's two modes, one mode. I like your analogy of the neighborhood banker. It's how do you take your friendly neighborhood banker that knows you, knows who you are, really value that relationship and take that scale and put that neighborhood banker on a mobile phone in your pocket so that a client can bank and have those conversations anywhere, anytime.
00:21:22:04 - 00:21:55:14
Nikki Katz
So that's almost like 11 direction. But the other is, you know, clients want the simplicity of digital, but there's moments where when there's complex matters, sensitive matter, sensitive matters that they need to discuss they still want the human interaction. And so to your point, putting the humanity back is about digital can serve to actually enrich those conversations. And for us, there's a couple of great examples, which is even though I talked about how our digital engagement is continuing to grow at a pretty impressive rates, but at the same time, we've also seen over 800,000 appointments.
00:21:55:14 - 00:22:18:07
Nikki Katz
And last quarter, four financial center conversations were set through our digital platforms. So in those moments for digital just wasn't exactly what the client wanted. They were able to very quickly transition the conversation to the human channel essentially. And another example I love I talked earlier about our life plan product, and you called it a product rightfully, Mike, because it is.
00:22:18:27 - 00:22:42:13
Nikki Katz
But life plan is even helping conversations with our human channels. So we've seen financial center associates are talking to clients about their life plan have actually that's actually led to over a million follow up appointments to continue to talk about life priorities. Those are the complex, high touch conversations that we want to make sure our digital capabilities are actually enhancing.
00:22:42:22 - 00:22:50:29
Nikki Katz
So that's I think the perfect marriage for me of digital and physical channels is about how do the two play synergistically together.
00:22:51:14 - 00:23:03:20
Michael Abbott
To have this effectiveness? One last question, Penny. I got one. I just it's a simple one because it's like it's one that's been bugging me forever, which is will we ever be able to just text with our banker yeah. Just talk to their banker.
00:23:04:02 - 00:23:28:16
Gareth Gaston
Yeah. So it's like, yeah, actually, we actually have texting live already with our mortgage divisions. So you can you can text with your mortgage advisor as, you know, as a fully integrated part of the process. And we 100% agree with you. And I think that because again, it's back to Nikki's neighborhood banker type thing. Right. You want to we want customers to be able to communicate with us and the way that they want to communicate with us.
00:23:28:16 - 00:23:37:23
Gareth Gaston
So I absolutely believe that to texting will be a core part of an interaction. And I view that as just as digital as anything else. So yeah.
00:23:39:22 - 00:23:41:08
Michael Abbott
Perfect. I'm looking forward.
00:23:41:18 - 00:24:02:27
Penny Crosman
I'm CommBank has had that for a while. They have their their go to banker where you actually have a directory of like people with their photos and like whether or not they like cats and their interests and all that sort of thing and you actually choose somebody. So it's like we call the Tinder for Bank or something fanatical.
00:24:04:16 - 00:24:08:27
Michael Abbott
But if there's one quote that comes out of this Tinder for bankers, I remember that one for sure.
00:24:09:11 - 00:24:52:15
Penny Crosman
Yeah. I got a call like, could you please change the headline, change a story? I think we change the headline. We didn't change the story. But anyway, you pick one person and then that's your person who theoretically you can call or text at any time and they'll remember you. And in your, your, your children's names and their whether or not they're in college and you have that relationship that Nikki was talking about, like to go to the local branch and, you know, the tellers and the personal bankers, etc. So yeah, we're seeing a little bit of I don't think it's too common yet, but I think a little bit So, Michael, another thing you talked about
00:24:52:15 - 00:25:00:19
Penny Crosman
in your report, there's also been a topic lately, Jeremy brought it up earlier, is the super, the rise of the super app?
00:25:00:25 - 00:25:01:03
Michael Abbott
Yes.
00:25:02:20 - 00:25:19:23
Penny Crosman
And you described it as an excuse me, all one platforms offering a range of financial and non-financial products. What do you see as some examples of super apps and and do you really think people in the US want to use that kind of app?
00:25:22:27 - 00:25:38:18
Michael Abbott
As I kind of that's it's various and was saying earlier that if I had if I had a dollar for everybody that wants to build a super app, I'd be I'd be beyond incredibly rich because everyone who wants everyone wants to be a super app these days. Yeah. Look, I think first you have to ask what's the question definition of a super app.
00:25:38:26 - 00:25:54:08
Michael Abbott
You could arguably you could say that many of the banking apps we have today are in one way or another are already to some extent super apps are. We can do we can you know, if you look back to the basics we could do before we just checking bounced pay bills. I mean, now you can you can open new accounts, get mortgage type upload documents.
00:25:54:08 - 00:26:26:26
Michael Abbott
I mean, to some extent we've almost created in many ways for the advanced ones like I like Nikki and Gareth here today, you know, we've created super apps, a banking that can you can do almost everything inside of the app. We're getting pretty close to it in that way. But when when people talk about super apps, what they're what they're often referring to is referring to what's occurred in China over the weekend Alipay and in really bringing not just banking into it but commerce into it and what you have to look at and what we've learned is when you look around the world, what what they're really trying to get with a super app is how
00:26:26:26 - 00:26:47:21
Michael Abbott
can I combine together my shopping, my ecommerce behavior, my banking, my savings, and also my offers and loyalty. So how can I how can I bring all of that together into one app? And it is it's a huge opportunity, but it's also incredibly hard. And what we've learned is we've learned the question is where do you have the starting points?
00:26:47:21 - 00:27:04:19
Michael Abbott
And everyone clicks that we've been Alipay. But, you know, in full disclosure, they've they've been challenged to move outside of China. And when you look at where they came from, they actually didn't come at it from a banking perspective. And they didn't come at it from a payments perspective either. It came at it from an accept payments perspective.
00:27:05:06 - 00:27:28:16
Michael Abbott
So when you looked at China, China UnionPay did not have the coverage that Visa, MasterCard, MasterCard had. So when we paid Alipay came out, they were about accepting payments just like PayPal did in the early 2000, where individuals accept payments online. And by starting with that positioning, all of a sudden you have a commerce business that you're starting from a commerce business where payments are coming in.
00:27:28:16 - 00:27:50:06
Michael Abbott
And so by the very nature, you end up with a banking business around it. So to get to these super apps as people define them, I think we have to look at is where where's the starting point? Where is the starting point and how are you going? How do you get from A to B? And if you start at a particular point, do you do you actually own the right of way to go in a different direction or do you have to start with something radically different?
00:27:50:06 - 00:28:07:11
Michael Abbott
Like, I know, Gareth, you were talking about acquiring of one. If you think about acquiring of one and letting individuals take payments if you can get a hold of that and then all of a sudden merchants want to use that payment type for it, you know, that's a great way to start a super app. I think this super app thing is is quite interesting.
00:28:07:11 - 00:28:29:19
Michael Abbott
The other thing I would say that we've learned about super apps, that's kind of one first, what are they and how do you get to them? The second is, is everyone wants to be a super right. So when you look at when you look at it, you know what Goldman Sachs did in launching the Apple card? The card itself is kind of just a general card the real innovation with that is there's no mobile banking app at all.
00:28:30:01 - 00:28:50:06
Michael Abbott
It's all integrated into the mobile wallet. So you're starting to see a future here where you know, the largest players also want to absorb what's in the banking world into their experiences. So what you have going on here in the super app world is everyone wants to be a super app and it's a Cold War underneath to figure out who's going to ultimately be the one to become that super app.
00:28:50:15 - 00:28:55:22
Michael Abbott
So it you know, I think we can place our bets on which way to go, but you know, time will tell.
00:28:57:00 - 00:29:21:14
Penny Crosman
Nicky, what do you think of the concept of the super app and is it something you might work toward? Yeah, I think I think, you know, Mike talked about where it originated, and I think that that's actually a great way to talk about it, is where we're coming from is we have a rich offering for our clients of Bank of America, whether it's across banking, lending, investment, retirement, we've really got a full breadth of offerings.
00:29:21:23 - 00:29:41:07
Nikki Katz
And so for us, our approach has been that we've been on this journey for the last I mean, almost two years, and it's a multiyear journey of at least really bringing those capabilities together and to call it a super app don't call it a super, but really into one mobile app. And the thinking behind that is, is to I would say on two fronts.
00:29:41:07 - 00:30:17:09
Nikki Katz
One is allowing our clients regardless of what their relationship mix is that they have with us and what their product mix is allowing our clients to monitor and manage every aspect of the relationship with us all and with the convenience of that single app. And the second piece, as you know, Michael, you mentioned earlier around you know, we're square started from and I think we believe and we've seen with our clients that growth you start in one place and whether it's on the individual front, the growth from retail customer through the wealth continuum or on the business front, we want to just be there with our clients throughout the journey and offer them the right tools
00:30:17:09 - 00:30:56:23
Nikki Katz
at the right moment and create that personalized experience. So over the last year, and a half couple of years, we've added dozens of features that were previously in our Merrill Edge app or our Merrill Lynch app or benefits online. We are all of those into our single Bank of America app to make that really fully featured. And one of the things, one of the things I love is not only I talked already about the growth in our digital activity in our digital active client base, but in addition to that, one of the data points I love is that as we've been doing that, we've actually seen a 74% increase in the number of our multi relationship
00:30:56:23 - 00:31:31:09
Nikki Katz
clients who are accessing investment features. So as we're combining it, we're seeing deeper engagement with all types of digital experiences, but also across the entire continuum of relationships that client has. So I think in that way our focus again, we're coming from a different starting place. We're coming from a place of we already have a very rich platform of offerings, so we're coming from a place of how do we bring all of those together in order to make it easy, fast, convenient for our clients to, to leverage those capabilities and access them Sure.
00:31:31:15 - 00:31:34:00
Penny Crosman
How about you, Gareth, would you say? Yeah. Super app.
00:31:35:07 - 00:31:51:04
Gareth Gaston
Yeah. Thought my first thought when I thought about that question was Our app is pretty super. So that was that was number one. I think the second thing is just to build on that point about so in the context of a bank of a bank, if you like. Right? So we did have many apps and still have a few.
00:31:51:11 - 00:32:07:25
Gareth Gaston
And over time we have been consolidating all of our apps together, which actually if you go back a few years, like when we were launching our app was actually a pretty challenging thing to do because you think about as Michael was saying, you've got hundreds of things you can now do in banking apps. How do you define a navigation system that can do that?
00:32:07:26 - 00:32:32:12
Gareth Gaston
Now, first of all, that the navigation systems have evolved in a way that does make it intuitive. But secondly, that's why when we were making the case for our virtual assistant, that's one of the things that really cut through the clutter. And one of the reasons why a virtual assistant is so important, because you no longer have to click the hamburger menu and scroll down and try and guess which one of the categorized options will eventually take you to stopping a payment or something like that.
00:32:32:20 - 00:32:52:18
Gareth Gaston
You can just say, you know, here you are spying. Can you stop this payment? You know, and then I will take you there. So so that's and we've consolidated apps like, for example, our prepaid business is now using some of the prepaid products are integrated. Some of the prepaid products are have separate apps, but they're on the same platform and so the same look and feel and slogans and things like that.
00:32:53:11 - 00:33:13:20
Gareth Gaston
And we'll continue to continue to do that. I think the question is, is that truly something for absolutely every type of human being that would interact with the bank? Because I think consumer and small business. Yes, I think corporate banking probably you know, because we I think we've you know, the industry has barely scratched the surface of digital corporate banking.
00:33:13:20 - 00:33:30:16
Gareth Gaston
So I think there's something to think about there and whether that all ends up in an NSA map. And then on this, the real definition of a super app, you know, to me, I think the thing that's funny about the super thing is like it's almost like, you know, a separate super apps. The answer, what was the question?
00:33:30:16 - 00:33:54:19
Gareth Gaston
And, you know, it's really a business strategy question, right? I mean, if you were to ask your your banking strategy people, do you think that we should be in every single business that's possible out there, then of course they're going to say no. So your app really should reflect the business strategy that you have. And I think, you know, that I have the same notion of there's a customer journey and there's places in that customer journey that banks can add value to customers.
00:33:54:26 - 00:34:09:24
Gareth Gaston
And I think what's really important is to be really good in those places. And so think about, for example, places where it may be part of our own experience. So if somebody is walking into a branch, for example, can they identify like you do when you go to the airport? Can you identify yourself with your mobile app, for example?
00:34:09:24 - 00:34:25:07
Gareth Gaston
So that's one of the things that we've done that we'll continue to innovate on. Or you might be on the phone when you do that, or it might be a payment or it might be after a payment, you know, so things like, for example, you know, we've got an extended period is a bit by product. That's something you can do after.
00:34:25:08 - 00:34:53:21
Gareth Gaston
So there's there's a whole bunch of things on the journey that I think you can you can innovate with. And I think this notion as well, that's part of the part of the the research, which is about bringing in other products and services that might not necessarily be yours to help augment that experience as well. And that's a way of creating an amazing and connected digital experience without having to go and build all of that and and create that business itself behind everything.
00:34:53:27 - 00:34:58:23
Gareth Gaston
But, you know, a complete super app like we've seen around the world and not on our radar.
00:34:59:27 - 00:35:32:17
Penny Crosman
But good point. And that ties back to what Michael was saying about banking as a service being a model of the future. And I just want to say to the audience, we are going to be accepting audience questions. So feel free to type a question in if you want to ask Nicky, Gareth and or Michael something. So another another sort of facet of this paper that that Michael at Accenture wrote you said, Michael, that banks can choose between three approaches to survival.
00:35:32:17 - 00:35:55:15
Penny Crosman
They can stay their current course, as we talked about before, becoming the best possible digital version of themselves. They can be fast followers or they can dramatically adjust their approach and focus more on back against a service or being some kind of a packager. What would you say are the pros and cons of each of these paths?
00:35:56:02 - 00:36:09:27
Michael Abbott
Yeah, kind of. I think what banks are going to have to do is you have to learn how to walk and chew gum. I mean, if you look at if you look at the three, I mean, I think the default answer is do become the best digital version of yourself. And I believe I believe that's happening right now.
00:36:09:27 - 00:36:29:12
Michael Abbott
And I believe I personally believe U.S. banks have done a really good job on this. I think they've done a really good job. And you've heard it from both Nicky and Gareth today, what they've done with, you know, different approaches. But I think both very, very well played jobs and well done well done in terms of in terms of being the best digital version of themselves.
00:36:29:22 - 00:36:46:26
Michael Abbott
And as Gareth mentioned also earlier, there's still a ways to go that, right. So it's not like this is game over. I mean, it's still not super simple to do a mortgage in some of the more complex things in others that still need to be integrated. You have the commercial side of banking, which is still, I believe, just getting started on the digital front.
00:36:46:26 - 00:37:12:25
Michael Abbott
I think the pandemic has forced us to think of what might have happened in 20, 25 on the commercial side and bring that forward. So there's still a lot of work to do to be the best digital version of yourself and just drive that through. I do though believe in. So I think that's going to happen no matter what I do think the fast follower is the pros of that is that you don't have to be the absolute best innovator out of the gate.
00:37:13:11 - 00:37:38:01
Michael Abbott
But you do need to have the ability to move your products in at speed and be willing to launch those new products and test them out there. Right. So the key to that is making sure you have somebody it's following the trends and you find trends that it's not. I think we sit here and say it's digital, but the reality is banks are multiple lines of business is their credit cards or debit cards are deposits, they're mortgages, they're autos, they're commercial lending.
00:37:38:13 - 00:37:55:20
Michael Abbott
I do think the fast follower is something that you want to, at the very least, be learning how to innovate products at speed. I would say our digital teams and the digital teams across U.S. banks are exceptional at speed and delivery and being able to use DevOps and see ICD and put out new features and functionality on the front end.
00:37:56:05 - 00:38:13:29
Michael Abbott
That functionality, that thinking needs to get embedded back into the core in the product side of the bank so they can move products at speed. And I'll give you one very tactical example of what could happen on that front if interest rates rise. And mind you, I know many people's careers have been blown by, you know, saying interest rates are going to rise.
00:38:14:10 - 00:38:35:02
Michael Abbott
But if interest rates rise a decent amount, there will be a war for deposits and this will be the first war for deposits in the digital age. We've ever had. And I firmly believe the ones who will win, that will be the banks. They can innovate on the product side and develop digital product deposit capabilities. Kind of like what we used to do in the 1990s with credit cards.
00:38:35:12 - 00:38:56:01
Michael Abbott
It's going to be that speed of innovation and you're going to need to be a fast follower just to survive in that environment. To put out the new product. The competition next year is doing the grab your deposits. So that's the pros and cons of the fast power and I think that's possible. The packager one in embedding in kind of what I would say, playing 100% gain versus 10%.
00:38:56:17 - 00:39:16:17
Michael Abbott
This is a really hard one because what makes a lot of banks great is their brand is their brand and their brand ethos and everything they believe about that brand. But when you go into being a packager or you're trying to open up your capabilities to be an API for somebody else, you're now becoming a fintech in your brand.
00:39:16:17 - 00:39:44:14
Michael Abbott
You have to understand that your brand does not matter at that point in time. What matters is your functionality, your APIs, the simplicity of doing business with you, the ability to underwrite. So all the things that make you super strong are not necessarily the same ethos. That play into being an embedded banker, which is why to date, we've always seen in the embedded bankers that you take the example of the private label players have almost always been separate from banks because it takes a different mindset.
00:39:44:14 - 00:40:04:26
Michael Abbott
So I think the pros and cons of the last one there's the pros is there's a ton of opportunity to do it. The cons are, you know, it's not necessarily brand centric, it's a different type of business model. It goes out there and you're going to have to have a different type of culture and leadership approach to make that happen at scale so I think any one of these are going to work.
00:40:04:26 - 00:40:11:19
Michael Abbott
I think banks are going to learn how to walk and chew gum at the same time. We'll do many of these different parts, but I don't it will be one solution in the end.
00:40:13:12 - 00:40:21:16
Penny Crosman
Gareth, what do you think of those two, those three approaches, and where do you think U.S. Bank is along those three lines?
00:40:21:27 - 00:40:43:28
Gareth Gaston
Yeah, sure. So I think that framing in Michael's report is really great. And I think like all well thought through framing things it helps provide sort of a great way to evaluate where the industry is at and where you're at. And I agree with all three, you know, so I think you know, being the best digital version of yourself, we talked a lot about that today.
00:40:43:28 - 00:41:04:06
Gareth Gaston
So I think we're we're doing really well in the consumer front. We've got lots in the pipeline on the on the small business front. And we are, I think, like everybody else, early days on the corporate banking front, for example. So and so I think, you know, and I think some of our with our you know, we talked about the awards we received for our app and things like that.
00:41:04:06 - 00:41:21:13
Gareth Gaston
So I think but I think it's a moving continuum, though. I don't think that there's a point in time where you say that's I don't know with having the best digital version of ourselves, even for the things that are more mature, like consumer consumers. Expectations, of course, are always continuing to rise set by other industries and other app interactions.
00:41:21:13 - 00:41:47:26
Gareth Gaston
So that is an always on always innovating type thing. And to Michael's point, I think one of the things that I place a lot of stock in is start really focusing on the home and then the vote will follow. So that's that's kind of an evolution and mindset that I've had. I used to be a very bought oriented, and then the hope is there to help you figure out the ones I know stay focused on the how you focus on agile, focus on design, focus on engineering and, and how that comes together.
00:41:47:26 - 00:42:20:00
Gareth Gaston
Under an Agile framework in order to enable pace and innovation and empowerment from, from the start that B2B side of things. So it's a B2B to eggs, for example. So, you know, as you say, we've got, you know, great businesses and a line and 11 and they definitely have evolved. And I think what we're seeing and I think what is important is you know where historically we might have taken two approaches to that where we say well this is our branded business and this is our partner business, this skill set actually.
00:42:20:00 - 00:42:42:03
Gareth Gaston
And so I think it's one of the things I would probably sort of push back on a little bit was what Michael said. I'm not sure there are different mindsets anymore. I think they historically were. But I think frankly to play to when it doesn't really matter whether it's your brand or your customers brand above it, because in the past you may have got away with having or you may have you may have done something for your customer that would have been different.
00:42:42:09 - 00:43:11:17
Gareth Gaston
But the reality is at the end of the day, on the other side of these experiences are the same types of consumers and the same types of customers. So you have to be awesome everywhere. And so there's no need anymore. I think, to take those two different paths where you do something for partners and something for yourself. And I think the key, both the pace and innovation, is actually to figure out how to do both of those at the same time with the same technology and not the same teams, but certainly all part of the same portfolio and and driving mix.
00:43:11:17 - 00:43:31:10
Gareth Gaston
So, you know, from a hyperspace, I think we've got businesses in place. We've learned some great things. And the packaging side is super interesting because I think the point that you brought up there about, you know, what's your what's your what role does your brand play? So we have really embraced, you know, pick your name open connected banking as a service, wherever you want to, wherever you want to call.
00:43:31:10 - 00:43:55:25
Gareth Gaston
And they all of course means something slightly differently. So we've embraced that. We've been on that journey for three years now. We've we've had great successes and things like data sharing and, you know, being part of a culture and all that kind of stuff still very much in its infancy for the industry. And I think there's a question there because we're perfectly capable of doing some of those embedded banking things.
00:43:56:00 - 00:44:15:27
Gareth Gaston
It's about whether or not you want to do business with or without your brand. Right. That's that's the big question. But there's certainly you know, there's nothing there's nothing short and the capability to do that, it's it's to your point, continuing to think about. Now, I would say there's no shortage of brand opportunities currently right. So we're finding many opportunities where and I think that's been said in this call.
00:44:16:03 - 00:44:49:07
Gareth Gaston
Payment products are the the shiny object of this world right now. So there's many opportunities for payment products to up but also, you know, that's why we've made some acquisitions as well. So things like talent in the small business, merchant services space or bento and the small business payment space, you know, finding what they're basically have told us is that the world a lot of small business customers as a software leads world where small business customers really want a bunch of software services to help them run their business.
00:44:49:19 - 00:45:14:28
Gareth Gaston
Banking can be part of that banks providing services can also be part of that. So this growing suite of things that would not historically have been considered to be banking products, we now have and are lining up and we consider doing much more else to provide the holistic solution for the customer. So in short, I would say I love the three framings and I think the answer is at least these three things are going to be important in some degree or another.
00:45:15:20 - 00:45:35:12
Gareth Gaston
And I think embedded in all of them is the big question for yourself, which is how good, how good you want to be at digital, how much do you want to partner in the B2B space and, and what's your view of your brand and how do you package? And then underneath all of that is the raw ability and capability to execute all of that stuff.
00:45:35:12 - 00:45:52:12
Gareth Gaston
So I will say one final thought in closing in on all of that You know, I definitely think that everything you said, Michael, about the banks in this country being really good at what they've done so far, I think if we went back and read some reports from maybe seven to ten years ago when there was lots of fintech attackers.
00:45:52:12 - 00:46:16:09
Gareth Gaston
Right. I think everyone had their doubts that can the banks do this? Can you know, are the fintechs going to come and take over? And I think that's been demonstrated not to be true. And I think, you know, like every other industry, we're seeing great challenges from fintechs. Ah, who have some amazing solutions but as you say, what we're also seeing as banks ability to execute and drive innovation and change is absolutely there as well.
00:46:16:09 - 00:46:25:26
Gareth Gaston
So I think, you know, I would still I would still invest in there. And the banking stock as a place to get a great return from from the innovation has to come.
00:46:26:26 - 00:46:42:17
Penny Crosman
Okay. Well, unfortunately, we are out of time. So on that optimistic note, we will close out. I want to thank Nicky Katz, Gareth Gaston and Michael Abbott for joining us. And I want to thank all of you for tuning in this morning. Hope you enjoyed it. Enjoy the rest of your day.