Key learning objectives/key takeaways:
- Understand bank modernization archetypes – edge and coexistence models
- Learn how to navigate common pitfalls of legacy transformation
- Get insights on where and how to start your own Digital Modernization
Key Simon (00:07):
My name is Key Simon or per the introduction, Gus Simon. I'm a partner out of our Charlotte offices from Deloitte and I lead our digital banking practice or a leader in our digital banking practice and also in our next generation core modernization practice. And I also lead what we call our sort of solution business for financial services called converge prosperity. So I'm have the pleasure to introduce Jay Pool here with me today. Jay Poole is from Truist, he's SVP Consumer Banking Technology products and leading from the consumer side. And he's playing a key leadership role in their core modernization initiative that they have on the go. We are going to spend sort of the next 25 minutes talking to you some of the core modernization transformation models or approaches. We're going to touch a little bit around what are some of these next generation core transformation technologies mean from a customer experience perspective, also from new products and capabilities that it introduces or that it enables.
(01:22)
And also really enabling different sort of efficiency ratios. But the very deliberately focusing the conversation around what are the different sort of transformation archetypes that we see in the market. If we look at the different conversations we have with our customers on the one end of the spectrum, banks are saying to us what we want to do is we really just want to create a layer of abstraction on top of our sort of legacy platform and we want to focus on digital onboarding experiences and digital servicing experiences. And on the other end of the spectrum we have banks that are sort of more aggressive that are saying we are actually going to experiment with a whole new brand. We are going to build up a complete new digital entity or a digital bank and we are going to build that digital bank on a new technology stack, these next generation technologies.
(02:10)
And then once we get critical mass on that, we'll figure out what do we do with it? Do we bring it back into the new bank or do we start migrating customers onto that new on the edge play? And then where we see a lot of traction in the market right now is obviously what we, in the middle, where we see this coexistence world where a lot of the banks are saying what we are going to do is we're going to take some of these next generation core banking technologies and we are going to launch a product on it to start testing, to start experimenting and start sort of integrating into our existing environment. And then over a period of time, how do we transition our customers and the rest of the technology platform over to that and for a broader transformation. And I guess Jay, you've on Truist aside, you've had experiences almost in one, almost in all three of those. We are going to deep dive a little bit into that in a minute, but maybe just before we start, in speaking with different banks out there and different customers, it's clear to me that different people have different definitions around what is core modernization. So maybe just your perspective and your view in terms of how true is sees, what is in scope for core modernization and what does it mean for the bank?
Jay Poole (03:21):
Sure. So when I think about core modernization, it's really sort of the heart of the bank if you will. I mean many of you in the reamer are bankers or support bankers provide services to bankers. So what we do is we gather deposits and then we lend, so you think about core banking, it's either deposits or lending and we're starting in the deposit space. Obviously if you've been following the market since March, deposits are pretty important in a very competitive environment right now that we're all living with. So what core banking is to Truist is it's the deposit system, the system of record. We do separate today like many of our peers, big large institutions, we have deposit core systems and then we have lending core systems both on the consumer side and the commercial side. But what we're focused on today is that deposit transformation, which at Truist it represents 400 billion plus in deposits both on the consumer side and the commercial side. For us it's 40 year old Technology, mainframe Technology, which is part of the rationale behind starting the journey and moving forward. But I think about it as the heart of the organization. It's core to what we do, it's integrated into everything that we do. Our core deposit system integrates with 180 other applications. So you've got a lot of information flowing in and out and ultimately it's the system of record for deposits.
Key Simon (04:55):
And if I look at the next generation core landscape, so many of those providers are very deliberately saying we are a headless core, we are not in payments. So it's not about payments transformation, it's not about card processing transformation, it's not about KYC, AML, it's not about pricing and billing. Typically, if I look at the next generation core banking landscape, those set all external to just being the system of record. And would you sort of define that the same in the Truist landscape?
Jay Poole (05:27):
Absolutely. I mean the core system is really about managing debits and credits and the flow of funds into and out of client's accounts. And the nice thing about the modern architecture is all of those other things that you just mentioned, HEAs are modular and you can pick and choose which partners you want to play with or how you want to solve those problems.
Key Simon (05:47):
So I mean so important that you are very clear around what are you actually getting from that provider. Because also if you look at the landscape of those next generation core providers, different providers have different strengths in the business systems architecture after banks. So to your point, integration becomes so important around that. The other thing that we often faced with is just why now banks always ask us why should we do it now? Why fix something that's not broken in a number of banks, large and mid-sized sort of regional and even the smaller regional banks, the platforms are running, it's working in some cases it's paid for. So the cost of ownership is fairly low. So what I guess two sort of perspectives may be why from a Truist perspective, why is it important for Truist now and then just your view sort of industry wide, why is it important to.
Jay Poole (06:43):
Yeah, so again, if you think about the industry and what we're all dealing with right now, deposits are in our retail and small business bank, which is the way we reference our consumer bank deposits are the number one thing, attracting and retaining deposits. And fortunately we've been successful in doing that even through the disruption over the last several months. So deposits are important. So now is a great time to invest and we'll talk in a minute about how we approach it to minimize disruption and maybe rationalize the cost of the journey. But the other driving force behind why now is risk. I mentioned our platform is 40 years old, it's a mainframe COBOL based platform and those resources are going to become increasingly difficult to find. And the partner that sold us the application that we're on today, no longer is in this business. So we do have a support relationship with them, but it we're largely on our own.
(07:45)
So there's a risk there in terms of the core system that the bank uses that can be mitigated by modern cores. But some of the more client facing things is speed to market. Truist just introduced a new checking product suite called Truist One, which is a really innovative product because it's really one product that provides different benefits to clients based on their relationship with the organization, whether that be breadth or depth of relationship with the organization. And it took us 12 months to launch that from inception to delivery to clients. So the ability, the world is just moving so much faster than that. HIAs as we've talked about, particularly as things become more digital on the front end, it's just going to be important to be able to launch products and evolve the way we're doing business and the experiences we're providing to our clients.
Key Simon (08:42):
And it's interesting that you starting on the consumer deposit because I think that makes a lot of sense. Just if you look at the maturity of these next generation core platforms, again, if you look at the landscape out there, they all typically start with building out their product maturity around, let's start with simple savings transaction type products. Then they go to simple lending products and then they start looking sort of at the SMB segment. And very few of them have actually really stepped up to at the commercial or the corporate segment in terms of providing products. So is that sort of your roadmap as well or your journey that you're looking if you sort of look ahead into the future?
Jay Poole (09:22):
It is. So we've actually been testing a modern core in our subsidiary called Light Stream, which originally was a digital lending platform that SunTrust acquired about 10 years ago and still is in the market today. It's unsecured lending. And about nine months ago we piloted a deposit product on a modern core. We have a little over 2000 clients, 2000 loan clients that are actually have deposit accounts. So we've been testing and learning about the platform, understanding the capabilities, and now we're starting to transition into how do we bring that technology and the power of that modern core and what we've learned into the core bank. And the way we're thinking about that is starting with simple. So we're going to start with a simple savings product that'll be the first product that we launch under the Truist brand and then eventually migrate to transaction deposits over time. Makes sense. So we're starting simple, those 180 integrations that I mentioned, you only need about 30 of those for a simple savings product to get to market and introduce capabilities to clients and then we'll get add more complexity over time.
Key Simon (10:37):
And if you think about the benefit to the customer, I mean obviously you're doing this for efficiency ratios or efficiency in the bank. If you look at some of the key drivers for change on these new modernization, the core modernization efficiency is one new product innovation is one. What are some of the feature that the customer capabilities that you look to introduce or what are some of that customer innovation that you look, I mean these cores have got really innovative data models. Some of them come with real time processing, which comes with its own sort of bag of challenges. But what are some of those capabilities and features that you're looking to introduce to customers?
Jay Poole (11:15):
Yeah, I think the theme that we're thinking about is we talked about agility and speed to market, the ability to get new products to market, but I think it's also about the real time aspect. There's a lot to explore there, which really changes the way banking functions. I mean today everything clears, at the end of the day you've got memo posting, but this concept of real time, particularly in a digital world is a great opportunity. So I think that's something. And then the other key theme that we're thinking about is personalization. So the amount of data that you have in these core systems and the ability to visualize that for the client, whether it be savings pockets, goals, those types of constructs, just the ability to personalize the experience based on the individual client needs and where they are and where they're going.
Key Simon (12:11):
Yeah, I mean I guess one thing that I really like about this new cause, I mean most of them are fully event driven platform, to your point, real time platform. So now you know can literally track every single event that happens on the platform. So we did a piece of research a while back and the customers, we ask the customers, how do you build a digital relationship with your customers going forward? And one of the key themes that came out is the customers are saying so much about me, but yet you tell me so little. And just that opportunity to have more predictive insights, predictive analytics and where those insights and feeds to the customer is more real time while I'm engaged with a customer, we can actually now push that. So that's for me a really great example of how these platforms can deliver on that.
(13:01)
Yeah, I mean your journey, you mentioned you had LightStream, the opportunity to experiment a little bit with a next generation core in LightStream with a specific product. However, what you're now sort of planning and doing and where you're sort of kicked off is very different. I mean this is more in the heart of the business, it was in the public, the announcement where you're bringing LightStream closer to the main business. Talk a little bit about that. I mean, are you using some of that platform capability that you've, the lessons that you've learned in LightStream and as you're bringing it in, and also just in terms of what sort of initiated the journey for you guys? Why is it so important now?
Jay Poole (13:44):
Yeah, I think so the first sort of bit I would give you is that yes, what we've done at LightStream will become the core for Truist. So we'll build upon what we did at LightStream and what we learned there. But this is not going to be a big bang journey. I mean, we just went through, spent three years integrating two institutions to form Truist and there were a lot of big bang system conversions. That's not the approach we're planning to take here. So we are going to operate in a dual core environment for the foreseeable future. I don't know whether that's three years, five years, 10 years, but it's going to take some time and that will allow us to mature and learn along the way. It'll allow our partners to mature and learn along the way because all learning in this, so we're going to start small and based on the availability of capital, we're all operating in a very expense constrained, constrained environment right now.
(14:45)
We'll move as fast as we can with the resources that we have available to us and learn along the journey. But yes, LightStream will be the foundation for what we do going forward. And it's not dissimilar, the approach we're taking is not dissimilar from what we did on the digital side during the merger. And this may or may not resonate with some of the folks in the audience, but we actually launched Truist digital assets on online banking and mobile prior to core system conversions taking place. And we actually patented this approach to mergers and we called it the digital straddles. So basically the front end was consistent regardless of which institution, which heritage institution you were from or you were a client of. But the backend connectivity to the core systems was completely seamless. So it was a really interesting approach and that's really the approach that we're moving forward with in this deposit transformation.
Key Simon (15:48):
And I mean Jay, you've as a bank have done a lot of innovation and build out of your digital channel layer mean, would you say, how does that support, what sort of new features and capabilities does it allow you to introduce to that and why not just stick to that as a strategy? That's the saying, we can just expand that and sort of double down on that as a strategy.
Jay Poole (16:09):
So digital is important obviously. And we did as part of the merger, we completely rebuilt our digital assets so that they're now cloud-based owned by Truist, not partner driven. So we control that experience, which we believe is very important because that's a layer that can allow you to differentiate for the client and you can differentiate yourself from peers. But I mentioned we just launched a new Truist checking suite called Truist one, and it took us 12 months to do it. And that wasn't driven by limitations on the digital side, it was driven by limitations on the core banking side. So I just, as the world becomes more and more digital and things move faster and the market moves faster, which we've seen recently, I mean billions of dollars moving between institutions all through digital transactions, as the market continues to move and evolve, we have to be more nimble and agile. And the only way to do that is to address the core.
Key Simon (17:15):
So I mean you've now taken the approach of you're going to have this world of coexistence for a while where you're going to have both these core platforms running. Have you got priorities in terms of how to start tackling some of those other components in your business systems architecture or is that, leave that alone for now and it's really just focusing on the core. So is payments going to come into the scope at some point? Is fraud going to come into the scope or card or is that going to be more opportunistic as you build out other products?
Jay Poole (17:47):
Yeah, I think those things will be, and there's a lot happening in the payment space. So in addition to the core banking work that we're talking about, we are doing, making some significant investments in the payment space because just the criticality of payments, but our focus in the short term is on that core and then we we'll tackle some of those surrounding areas over time. And I think the thing that we're really spending some time right now thinking about is, so the digital piece we've done before and we know how to connect to multiple cores and make that seamless to the client and handle that transition. I think the more complex piece is the servicing side, whether it's client service or operations, you're going to have two different systems. So how do you think about making that servicing experience for internal teammates who are interacting with clients more seamless? I think that's a challenge that we're focusing time and attention on.
Key Simon (18:46):
I think that's a consistent theme that we are seeing certainly in our other clients, is just, it's fine to say that you introduce new capability, but how do you make sure that you don't give your customer a broken experience? And then that servicing layer becomes so important and interesting if you look at these next generation Core Technologies, so few of them have actually solved for that layer. So I don't know, love your view, but I mean really you are now reliant to look at other vendors out there, either existing servicing layer that you probably have in the bank or you need to look at net new servicing layer, but then you're sort of faced with this dilemma, do I port all my existing products onto that new servicing layer and service in the new way, or do I just introduce my new product from the next gen core onto my existing servicing layer? And what is your thinking at Truist around that?
Jay Poole (19:31):
Yeah, I think we're exploring a couple different options. One is exposing the new core information. Two, our existing servicing layer two is there are providers out there that provide servicing layers on top of the headless deposit core. And three is building something net new with a partner or internally. We've actually, we're in the process of doing a very large commercial and consumer card conversion right now. Prior to the merger, each institution had a different processor that they were working with and we're now migrating from those two processors into one which happens to be new. So we're not adopting either one of the heritage heritage organizations card processing platforms. So we're moving to a net new and we actually built a homegrown servicing layer in the cloud in order to basically make it transparent from a teammate experience. So regardless at today, currently we have cards, commercial card transactions that are going through all three processors. So we built this servicing layer is not dissimilar from what we did on the digital side that basically makes that transparent to the teammate who's servicing the clients. And then obviously from a digital experience standpoint, it's completely transparent based on where the client's card resides, that's where the information gets processed and served up. So I think there are a lot of different options. Why is the short answer and we're still evaluating the right one for Truist, but there's a number of different options.
Key Simon (21:15):
And as you mentioned that you're going to be in this world of coexistence, I can't help but think about the business case. So that's an increase in cost for a while there. And certainly when I speak to some of the other customers out there, what they're saying is what are the main driver in the business case? Is it cost avoidance, is it innovation? Is it new business that we sign? Is it a risk or a compliance thing? But it feels like that the cost avoidance or efficiency becomes really difficult in that coexistence worlds got to demise at the end of the journey. So what does that look like for Truist and just, I not share the detail of your business case, but just sort of what are the key anchors or pillars of how you think about the business case justifying to the business?
Jay Poole (22:01):
Yeah, I think it's really all the things that you mentioned. Yeah, right. There's a risk element of this in terms of the age of the existing technology. There's certainly a revenue opportunity we believe through creating differentiated experiences for the client and more personalized experiences for the client. And then I think over time, certainly things get more efficient. We have 50 applications that our deposit operations teammates use to service deposit clients. And over time that application suite is just going to start to shrink with the new modern capabilities, which is just going to drive efficiencies in terms of the way we service and the way we operate our business. And that's front facing client teammates. You know, think about we have hundreds of legacy checking and savings products today on the platform that clients use. We don't sell them anymore, but we still service them. And every contact center teammate and every branch teammate has to understand the nuances of those products. Well hopefully as we go through this journey, we can move from hundreds of products in an incredibly complex servicing model to something like, I don't know what the number is, 10, 15 products that are core, which drives a lot of operational and servicing efficiencies.
Key Simon (23:25):
Yeah, and I mean as we talked early on was the benefit of some of these new cores. It really allows you to be very innovative at the product level. Again, a very popular feature now in the banking world is you know, have an account and you have sort of pockets in the account and that can be lead to so many different use cases, whether those are savings goals, savings goals that you set out or expense pockets. But the reality is, in the older platforms, you would have to build different operational data stores to take care of that capability. And now you can just do that sort of in the modern core because it structurally, it allows for that data structure wise, it allows for that.
Jay Poole (24:02):
And data's so important for two things. One is creating that personalized experience and customizing the experience for the client and being proactive. The more we know about the client and the more data that's available to us real time, we can serve up insights that help clients and provide value. But also from a regulatory and compliance standpoint, I mean the regulatory bar continues to rise and rise and rise, particularly as you go from a super regional to the sixth largest bank in the country. That demand for information, the ability to adapt to changes in the regulatory environment is really critical. And moving to a modern core enables us to be much more efficient and effective from a regulatory compliance standpoint.
Key Simon (24:51):
Jay, you've touched on one of the challenges or the complex problem to solve for in this coexistence and that's sort of the servicing layer, but the other is probably at the more technical level is the integration layer. Like most banks have probably multiple integration platforms and you mentioned 180 different systems out there that you've got to integrate with. But how are you thinking about that? Are you creating a new sort of interoperability layer that service both old and new, or are you relying on your existing servicing layer for servicing those integrations? If you can just share a little bit about that and are you integrating just a new platform into that or are you thinking a little bit net new around that? Yeah,
Jay Poole (25:32):
I think the way we're thinking about it right now, there will certainly be some integration capabilities that are reused particularly early on, but I think the way we're thinking about it is putting an orchestration layer, if you will, in front of the core banking platform so that as we make changes on the core, we can make those transparent to applications that are sending or receiving data. And this is an approach that we took with the card transformation that I just mentioned, where as we're boarding clients to the new platform, the new card platform we can make, we change the way that we source and serve up data to applications without them even knowing it. So our platform system, our teller system, our contact center servicing platform, they don't have to make changes. Those multiple channels don't have to make changes. We can make those changes and make it transparent to the front end. So I think that's a similar approach to what we're thinking about from a core standpoint.
Key Simon (26:38):
Okay. And what about your CIF sort of custom information file? I mean I can imagine that's definitely sitting in and that's always a bit of a hot topic in a bank, so how are you thinking about that?
Jay Poole (26:49):
Yeah, so client master is obviously very important and core to the organization. The modern cores have some client master capabilities. So we're trying to figure out how do we marry those two together and get some of the benefit of the modern core while maintaining the integrity of our client master. So we haven't cracked that one yet, hes, but it's certainly something that's top of mind that we're thinking about.
Key Simon (27:20):
I know we are getting in the time here, but what do you say is some of the largest challenges that Truist, that's facing Truist on this journey or that you have experienced already that you're sort of thinking that keeps you up at night?
Jay Poole (27:33):
Yeah, I think one of the biggest challenges as we start this journey and really we've been on this road for five or six years now is getting everybody aligned and focused on a common goal. The great thing about mergers and acquisitions, which we were involved in over the last three years is everybody knows what their job is every single day when they walk through the doors. Our role is to put these organizations together, get the systems converted and get passed and get on to the next chapter. But with a deposit core transformation, it impacts so many different areas of the bank. Getting that concept in the business case and the why socialized across the organization with so many different stakeholders is really important early on. And fortunately we're sort of past that phase and now everybody's committed to the journey. It's the timing and sequencing look like. But early on I think that's a big challenge.
Key Simon (28:39):
Jay, if I think about it, this is an opportunity not to just replace what you have in the new platform and talk about the challenge, challenging people's thinking and challenging some of the orthodoxies in terms of we really want to think different, we really want to use this new platform's capabilities to design a new, more agile, more flexible product platform that we can rapidly introduce new features. And then if I just think about the ability to real time process, what that means, the efficiency it can drive in the back office and metal office, but also the experiences it can drive from a customer perspective. So great opportunity around that. So if you're sort of looking ahead, what excites you about the journey that you're on and the initiative that you're kicking off?
Jay Poole (29:24):
Just be being at the forefront of change, doing things that haven't been done before. I've done a lot of transformation work in my 20 year career at Truist and it's exciting to be part of something new in the future of banking, especially something that's so core to the organization and what we do.
Key Simon (29:45):
Awesome. I know we are right up time. Jay, thank you very much for joining us. Really appreciate it making the time and yeah, good luck and all the best on the journey. Thank you.
Jay Poole (29:53):
Thank you.
Key Simon (29:54):
Thank you so much. Thank you everybody.