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legacy

Barclays

barclays

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MPW London 2019: A Conversation About the Banking Industry's Digital Future

Finance

Leumi Group CEO Rakefet Russak-Aminoach and Barclays Private Bank of Overseas Services CEO Karen Frank discuss digital-only banking, personal data and more.

Well, thanks both of you for being here. So Karen is CEO of Barclays Private Bank and Overseas Service is and rock if it is president and CEO of Lumi Group, which is currently the largest bank. Just just recently got that title the largest bank in Israel. And right before we came on stage, Rocket said that she that Mimi is the oldest bank in Israel and then your CEO also of the quote unquote newest. So can you tell us Can you tell us what that means? So yes, Little me is the largest mechanism and also the oldest banking Israel. Actually, Lumi is almost 120 years old, much older than the state of Israel. Nomi was established actually with public here in London 1902 and next to me we have pepper Pepper is our mobile only bank for the millennials and it is the youngest maintain Israel. So we have the oldest and the youngest And you think for millennials Is that how you market it specifically? Because that's really a pretty specific demographic, right? So yes, we marked it for millennials, but actually it's only 2/3 off the customer war millennials and one thought unknown. And I always say that a moment I knew his gold was when my husband, who happens to be my biggest critic, uses Onley pepper in abundance all his other bank account. So I knew were there. And he has a millennial or oh e not. All right, great. Well, I wanted to start with, um I mean, Pepper is a good example of what we're talking about here with digital banking revolution. But, um, I wanted Thio throw some stacks out there. This is from an Accenture study that trust in financial service is firms is not 40%. That's actually highest across industries that famous the retail sector on, I would say, pretty impressive for a decade after the recession. 40%. Ah, utility companies just for comparison, 20% social media from 17%. So there's this. There's this and hearing from a level of trust in the industry which which I think is important to keep in mind. And then there's also some interesting statistics about the use of a bank branch fell from 52% to 32% of people that visited once a month. So two years ago and the percentage using a boat. A mobile banking app regularly is pretty flat at 34%. So we see a drop off in people going into physical brick and mortar bank and then not huge growth. This is for the UK, not huge growth in Mobile, and I think that that's just sort of interesting dynamic to keep in mind. Obviously it different market to market, but it kind of gets gets to the heart of the question of your Weighing. Customers need for convenience against the demand of them. Maybe so wanting that personal touch. And I'm just curious, sort of, how you think about that when you think about bringing technology into the bank in space, how you make sure you're not trading convenience for the person for the personal human touch. Karen, can you talk about? I look in it. It's a wonderful thing, and I have a feeling that we're going to share a lot of including being a very old bank work with around 3 to 28 years or something. But how you bring that legacy to to the New Age because it's not just for millennials. It's about changes in the way we do things exactly what you're pointing. Thio. So I so love stories of pepper because we're all having tea basically do that dynamic. How do you take something that is cold and heavy and established and do something that's nimble and quick and really has this way? Went from this process where we started with product centric. How do we digital, you know, digitized products to make it more convenient. And then we went to client service, and now we're talking about clients experience. It's not stopping with what, exactly the statistics that you're pointing, Thio say. Not just how do we make life more convenient, but with financial service isn't all kinds of things now weaving theirselves into fabric of what we d'oh imagine going to bed at night, going saying, Hey, Google or Hey, Alexa, pay Khalil school bill right? And having that just done it, it's just done having that woven in and the way that we're doing that is exactly I think a bit is described your having to manage that footprint across the new thing, um, and being very nimble and innovative and thinking more widely as well. It's holding the old stuff the old stuff has to pay for it for two reasons, really, in my mind and it is a legacy. One of it is, you know, there's a lot of regulation. It's hard to be nimble when you are. You have such a long history. I'm sure you have the same one, you know, at Barclays, because we've been around for so long. Andi spend billions on technology every year. I would love to spend. We will all look to spend those billions on innovation and new things. And how do we bring new experiences to clients? The reality is a large part of that has to be supporting old infrastructure, making sure that software and data keeping data for regulatory reasons and others that we had for 20 years, 30 years, making sure that that old software still work. So if we ever get called by a regulator, we can pull it back up, and that is a massive challenge. The other one is really important. It's really important for financial institutions, not just as we think about planes experience, but remembering our place in the ecosystem, our place in society. So we generally speaking when we think through branches and we have the same observations with you. Then the people who physically need a branch is decreasing, right. We're finding ways to bring that interaction of many people. Yet there are certain things that we watch out for. We have very close relationships with all of not just our regulators, local communities, local governments, et cetera. And that is, we want to be sure that there is a branch open for people in local communities. We want to make sure that there's an A t m available two people. And there was almost a bit of a game in the UK who could pull up first, not the last man standing. And I'm a bit proud of in terms of the institutional way that we've thought about it, to say, Look, we have to make sure that we do fulfill the entirety of the of the need both for clients who really, really think about being able to walk down the street and have their banking meat served as well as people like your husband, my husband, my biggest credit health. I'm not a millennial, but you know, I'm sure another exact people who jump online and say 15 minutes. I'm done. I had my credit card. It can use it anywhere, Any place, any account finished. And so you take in sort of a with pepper. Your goal was to disrupt from within. You. Can you just explain why you took that approach and what you did? How you got the culture of your institution to embrace that as well. Actually, the cultural was the main challenge. Yeah, and we do it. If you said way have journeys, one is to adapt gloomy incumbent on me to the new world like everybody does. And besides that, we decided to start from scratch with Pepper the way we did it. We actually built it as a startup incubator within Lumi. But it's a sort of People are much younger. They're separated in a different place. Mm. It was It was challenging to convince the people that we're not cutting the tree. We're sitting on rather reinforcing the tree. He took some time, but I think they don't know. And one of the things that is interesting that pepper, when you look at the breakdown off the customers of Pepper Loomis customers is only 32% of the customers and no means marketer and return 25%. What? What does it mean? That actually we are disrupting ourselves, But we are destructing the whole market, right? Right, So we're not just taking clients from you, me and the whole market. Just because I completely agree with your rock. If it absolutely the culture, it's literally the culture. That's the hardest to change. And for those of you who don't finance you think about some costs and you say, How do you leave that behind is an organization and say it's not about reusing and leveraging digitizing old product. It's literally about disruption. I feel is, though, that building that that cultural changes the hardest part. I think the second real challenge that we have, and it's wonderful that you've done it. We've have pockets, we build innovation and our biggest client leave him alone. They don't require them to use anything else, because in most circumstances the second big challenge we have is how do we think about people who don't feel that they need to build everything in health right When we send billions on technology, it's hard for us to convince the institution actually working in partnership, as we've seen recently with many financial institutions, whether it's Facebook or Apple or Google or uber or any of them. How do we work better in partnership using the ecosystem that's out there and get away from this idea that the end and with hundreds or thousands of software engineers has to be serviced in completely in health? And that's also a massive cultural shift change, particularly when it comes to things like, you know, security for our customers and making sure that that is the holy Grail of everything that we would we would put out or get gonna go take questions in just a bit. So start thinking. But rock, if I wanted to ask, um in terms of we always talk about disrupt our an incumbent vs, uh, legacy And is that right? I'm sorry and comment versus a disrupter. And is that right? I mean, I guess you got to that point of it sort of the line blurring or the part partnerships being established between those two groups is that I mean, is that the right way to think about it? I mean, should we actually actually won? People always mix the challenger banks with digital applications of the incumbent. Many times they asked me, Why did you need Pepper? You have gloomy dot com what we call umi digital, which is the great up, actually the best in Israel. So what do you need? Pepper? And there is a huge difference between the two because Lumi dot com is a digital skin over a non digital buddy. Because Lou Meet is almost as we said, 120 years old, and it has lots of I T systems, all convoluted together, and on top of it, we build a digital skin. Okay, so it's like more like window dressing than the real thing. Now, when we build pepper, pepper is the new bank from scratch, and it was built on a new I t. A new technological system. So everything is much more up to date and banking Israel time, which we don't have in regular banks, time to market for new products and connect to new fintech. He's very, very short, and it's much more personalized. When you talked about the branches and you said, Well, don't don't miss the match. We think that it's more personal life and the people in the branch because the the end of the day when people come to break the branches this don't remember each and every one of them. What you having this f which is very personalized. You have a basis. So it gives you the right hip and the right offer. It is very, very specific to you. She's very, very You just brought us such a wonderful point because you're right, Chloe, you bring up branches and we traditionally think about branches is being the thing that anchors us in the physical. The reality is it's almost the data that's worse, you know, literally decades upon decades of data. And it can towns itself in several of manifestations. One of it is, where's the data stored? All of the physical data that actually stored. I'm talking about the electronic use of that. And then all of the software that's built on top of that And then, you know, we talk a lot about golden source data. Exactly it. Time to market golden source data. How do I go among? I don't know, 15 2040 different systems buildup and actually figure out what data don't need from a client 100. I was gonna try t o tryto grab that data and then launched a new product. Okay, The very basic thing. How do we go to the web? Be nimble, be acid. Light is an institution. How do we do that? It is just such a mind bogglingly difficult thing. Both German expense from a golden day. How do we pull it all together on then when you just think about the again? I go back to always thinking about people, and this is a new age where people owned their own data. Okay, whether it's regulatory lee and mandated or whether it's people, people own their own data. You can't simply say we're going to create this golden source of data and move things because it's more convenient for us to bring you better service to go back through millions and millions of clients and say we would like to take these 16 manifestations of your data held across potentially hundreds of platforms and co located in a single weight in the cloud that we conserve you better. That is very fortunate to achieve. And so when we talk about branches, that's the tip of the iceberg and That's why I think you know your spot on if we want to be. And we see this, you know so much more. Barkley, find BMB barking mobile out of mobile app in the world. Also skin never for the exact same, probably with PSB to skin skin. And that's the difference. Is the whole thing with the body, right? Are there any questions from the audience early? I feel like we have one over there. Great. Can you just remember to introduce yourself? Hi 100 Wallace from DeLay. Piper, where we are trying to innovate and lawyers are not typically very good at that. Um you talk about and you've been talking about We heard yesterday talk about innovation and a I and how people think it's critical, but they're not actually moving and implementing. And it sounds like that's absolutely what you're doing. And I think one of the challenges we have is people assume that innovation means they're gonna lose their job. How do you bring if you're introducing new things all the time and you've got the legacy on the established personnel but not used to this sort of innovation? How do you bring them along with you. Is that a question of retraining? Is a question of selling the message to them. Or how do you bring those people along? That might be not used to that innovation that you're introducing all the time. Do you want to take that? Yeah. I could make it. I will just tell you that. Actually, Lou me, it's even. It's much harder because we have what we call a 10 year employment. It means that whenever we start Mm. People come at the age of 24. 26 we employ them. Kill the 67. So we need a look to do a lot. The deal with this and yes, everything. You said that the main thing is to try to to win their minds and hearts, that they will be convinced that you are taking the organization to the right place. And then they will go after you some time off them. They need to see the success. They will not come before, but many of them, if you convince them. If you talk about it. If you lecture which war because what we did get to the question about culture again. Do you have anything to add. Just look eighties and it is a conundrum. I mean, we love innovation. We love uses a I we looked launch new new products, and I think that's one of the things, particularly in the UK, are home market that we pride ourselves on what we're happy with. And again, we're changing the mindset about saying, How do we use ah wider ecosystem to help us deliver that more quickly? But it's often the best ideas that come from in health so well, we use automation. Somebody's implementing the automation, and if we can use the people were, you know, we can retrain and upscale people to handle both sides of that. It's something that we're always very cognizant of. Bond. We just We feel that we have a wonderful talent pool. Investment in our colleagues is huge for us, but it does mean that we all have to move along with the industry and moved to serve our clients better on every single day. And that will require some heavy lifting and some rethinking about our rural workforce and how we work with people. Wait, we're actually out of, but you can find maybe Karen and rock if it afterwards if you have any questions, but we unfortunately have to move on to our next panel. But thank you so much to both of you for being here. Really? Appreciate. Thank you. Here.

Barclays

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