Digital Banking Trends and Priorities for 2023

Jim Marous:

Hello and welcome to Banking Transformed, the top podcast in retail banking. I'm your host, Jim Marous, owner and CEO of the Digital Bank Report and co-publisher of The Financial Brand. Today we're coming to you from The Financial Brand Forum, the biggest event in retail banking held in Las Vegas. While many digital banking initiatives revolve around making banking easier, that only stresses the surface of what really digital banking can do. In fact, what the consumer wants is they want better banking, not necessarily faster banking. They want personalized solutions.

Combining market leading innovation with digital banking transformation, U.S. Bank has continued to work hard to build solutions that can quickly adjust to the consumer's evolving needs in realtime. But building a digital banking platform that combines speed and scale is not easy. My guest on the Banking Transformed Podcast is Dom Venturo, senior executive vice president, chief digital Officer at U.S. Bancorp. Dom discusses how U.S. Bank is building a better digital bank that's ready for the future, and he's also going to discuss some of the trends and predictions that we can look as we're looking to 2023 and beyond.

So Dom, it's not your first time on the podcast, and actually it's certainly not the first time we've talked together. We go back many, many years at events like this where we'll catch each other in a coffee hour or a cocktail hour or something like that. But when you look at what's gone on in digital banking and what's happened actually in the last two years, what is the biggest change that you've seen as you're building digital banking solutions in the marketplace today?

Dominic Venturo:

First of all, thanks for having me on. This is our first video interview though, so we've got that going for us. We go back more years than neither one of us are going to say out loud. Look, when you look at the transformation overall and the interactions that are now capable, and they're powered by an awful lot of technology, but this isn't about technology, this remote control in our pocket for our lives has really enabled and unlocked a lot of potential for a whole bunch of things, whether it's ride sharing or hotels, checking in, checking out, whether it's travel, your boarding pass on and on and on and on.

So the customer expectations of the art of the possible continue to change radically. The technology and the advancements that have happened by our company, by the companies that we work with that enable some of the underlying capabilities have continued to allow us to unlock new capabilities. So the biggest surprise that I've seen is the massive sort of embrace and adoption in the very dramatic change in behavior.

Even some of those customers that were what I would call stuck in physical channel only, or hadn't yet really adopted digital, when we came into COVID and everything sort of changed overnight, we of course still had frontline employees, we had branches, we had the ability to deliver customer service, but what we found was that customers started experimenting more, and as they experimented more, they found, "Oh look, I can do this. Oh, this is actually easy. Or I can set an appointment or I can get a call back or I can do these other things." that experience then leads to deeper engagement, more experience over time.

Over that cycle, you then start to see the overall relationship of what I'll call the jobs to be done part of banking, not the advice, not the insights, not the solving problems, but the completing a task, moving entirely into the digital realm, and it really sort just took off and kept going.

Jim Marous:

Well, it's interesting. We talked almost two years ago now and it seems like yesterday, but at that point, a lot of your initiatives were around making banking faster and easier, as transactional I guess. How has that changed? I know that a lot of initiatives have been underway to make engagement a higher priority than simply how many transactions you can have done. How do you build what is going to come next and how do you figure out what the consumer's going to want ahead of making those innovations?

Dominic Venturo:

I think a couple things. So first of all, you still have to make things faster. So you can't not do that. That's sort of the-

Jim Marous:

You can't put friction in the equation.

Dominic Venturo:

That is the beginning of the entry point at which you then begin to earn the right to do other things like add value. So first, you have to be able to do things quickly. It is not necessarily that somebody's like watching their watch, but what they don't want to encounter, you said the word is friction in the process. So you have to redesign these processes front to back, and then as you digitize them, that experience needs to be well designed, it needs to be intuitive, it needs to be easy to navigate, all of those things.

Once you do all of that well, then the jobs to be done are fast. That sounds awesome, right? But now what happens is I have time to spend to say, "Well, I want to understand better how I might save more. I want to actually take the time to set a goal, which we enable. I want to take the time to set up a regular recurring transfer to the savings for the goal that I just established. Or I want to explore things like an automated investor product and the like." So you really still want to think about this like a digital company would think where you say, "Okay, monthly active users is good, engage is good, recurring use is good. I want to be able to get the jobs to be done easily so then I can add value and help explore, learn and deepen that relationship."

So that's really the shift as you think about going down the long list of jobs to be done, which we've made massive progress on, and now being able to add value, add insights, add recommendations, add next best product actions, add the integrated marketing capabilities and enable that in a friendly way. If you want to opt out, you can. But if you are engaged and you're in there and you're learning, we find that then you tend to do more business with us.

Jim Marous:

So you manage digital banking, but you came out of the innovation side of U.S. Bank.

Dominic Venturo:

That's right.

Jim Marous:

You've never been a bank that's bigger than the top four. As a result, you're going to end up having less money to spend to get a differentiation, getting your bank to be ahead of others in the way they do things. How do you focus on what is going to make a difference in the marketplace and how are you going to differentiate U.S. Bank from either bigger or smaller financial institutions?

Dominic Venturo:

Well, there's two elements to this. So one is, I mean, certainly there are bigger companies that have bigger budgets. That's always the case unless you're the very biggest, right? So that's always the case. I think when I was in the innovation group though, we actually used to love this phrase which was innovation loves constraints. One of the things that we observed with other industries, so to be clear, I'm not talking about competitors, I'm talking about other industries, is that if you actually have a really well-funded innovation shop or well funded R&D, you tend to waste a lot of money.

You may create a whole lot of things, but they don't get a lot of traction, they don't scale up and the like. So this is part of the dilemma in the innovation space, which is you actually want to starve it a little bit so that you are competing for those resources with the very best next thing that might succeed. So that's sort of one thing that I would take away.

The other is that within digital at the bank, we don't drive the product agenda for the company, right? We enable our business lines and all of our product partners to be able to unlock capabilities through the digital capabilities that we have. Now, of course, we recommend, we suggest things that we might do together and then prioritize those. But you really need to have the financial product side, you need to have the business line experts, you need to have all those other experts collaborating together in order to most importantly solve the customer problem.

Because if you're not starting with the customer in any of these conversations, you are creating a feature, you're creating a widget, you're creating a thing that may or may not get any traction, but if it actually solves a customer problem and you can do that in an elegant way, you can scale that up pretty dramatically.

Jim Marous:

So what do you prioritize? I mean, you're running the digital banking side of U.S. Bank. You've done a lot of things in the back office to make it so that the top of glass works better. But how do you prioritize where the next initiative is going to come from or what's going to get funded, what's not going to get funded? I would assume the consumer drives that, but there's got to be more to it because the office also have to be able to deliver against it?

Dominic Venturo:

Yeah. So I mean, first I guess maybe step back and just sort of think about the bank as a whole, where we have consumer bank, we have small business, we have large corporate, we have trust in custody, we have wealth management, right? So all of these businesses have different needs and priorities. So we, again, in digital don't prioritize for them. The businesses help us prioritize what's most important to them, to their customers, to their strategies and the unlock and then the ability to deliver.

Now, this is the other important thing, and this won't be news to your audience, which is when you deliver in an agile methodology or you think about the product model, you think about agile ways of delivery, you don't want to be too prescriptive in the what are you going to do next and prioritize that all the way down to a well defined thing. What you want to be able to do is say, "These are the objectives in the customer problem we're trying to solve."

The team is now empowered to go solve those in the best way possible, and they might actually solve it in a completely different way than you might have thought, and then be able to bring that to market, measure it and continue to iterate it, or kill it if it didn't succeed and then move on to the next thing.

Jim Marous:

How do you determine when you're going to engage outside providers, third party solution providers, fintech firms, anybody else in the outside world as opposed to building it? Especially given all the changes that happen, what are your decision criterion in many cases?

Dominic Venturo:

Yeah, I mean, at the very beginning, the first thing is is this the thing that we have the domain expertise to build, part one? Then does it exist in the world as a purchasable or contractable thing that you can contract for from a vendor? Because why would you build it from scratch if somebody already has domain expertise, deep knowledge and the like? Now saying that though, then you have to think about, "Okay, but am I building something that is strategically competitive? Is it uniquely differentiated? Does it have our own product flavor that I don't want others sort of getting by virtue of a relationship where you may then see that vendor sell that to others as a service?"

So that's another sort of layer of the decision making. But there are a lot of great technology partners, vendors, fintechs and the like out there who have mastered very strong what I will call verticalized solutions for things, whether it's the mortgage industry, whether it's identity management, whether it's back office fraud verifications, that any large bank like ours could go do that. But very often those things change so dynamically that you'd much rather partner with folks-

Jim Marous:

Specialists, yeah.

Dominic Venturo:

Who are investing in the R&D to bring those things to life and they've modernized along with us. So they now have the ability to take the software widget or the API and to be able to plug that in so that now you can create sort of a portfolio of solution providers. This is especially true in some of the digital capabilities where building any one of those just wouldn't make sense, but you want to be able to make that experience seamless. So leveraging those capabilities through the APIs and their developer portals and being able to connect them up allows us to do that in a real seamless way where we retain the interface, but all the back end pieces are done with our partners.

Jim Marous:

So essentially we were having a discussion earlier on the fact that sometimes we partner with an outside firm only to kind of mess up the process and we buy one thing and then we say, "Well, we liked everything you had, but we need you to do it this way for us." How do you avoid or how do you make a decision as to what you have to put lowdown for versus what we maybe should have a different way of looking at this than we have in the past?

Dominic Venturo:

I mean, I think a lot of things, they really always come down to the same part, which is having a collaborative discussion around what you're trying to accomplish. So why would I put the lowdown on something that they've done and say, "You need to do it my way," if they're the domain expert that I hired to do it? So that's sort of part one. Now there are things like information security or other things that come into play that become non-negotiable. But when you're really just talking about why are they doing the things the way they do it, the other part of it is when I was in innovation, we had this concept, and it's not something we invented, but it's pretty familiar in the space called the lead user.

So a lead user is the customer that uses your product in ways you never anticipated and they sort of hack, if you will, the products and solutions. One of the things that we have found is that if you have a really good partnership, you become a future product development engine for your partners because you lead use, you hack things and make them better and then they can use that to help inform their solution and make it better over time. But it's less about sort of prescribing do this or else. It's more about doing that in a collaborative way.

Jim Marous:

So in the digital banking realm at U.S. Bank, what really excites you about what's looking down the future, that thing you're shooting for that you go, "I can see this happening"?

Dominic Venturo:

I think the biggest base is when you look at the harnessed power of data in a cohesive way, and you think about financial management as all about the ability to understand massively complex models and then to be able to do something about it. So you think about simulations, you think about all of these things that bankers are used to doing, well, the average consumer, small business, even corporate customer isn't used to doing those kinds of things. If you said, "Oh, you need to build a Monte Carlo model around risk management and do these things," they might say, "Great, but I don't have any of those skills."

So we're able to increasingly be able to create those kinds of experiences. But to be able to do it in a super user friendly way because of the power of AI and machine learning, because of the power of big data sets, because of the speed of computing of the tools that we're using, because of the power of the device in your pocket that can do things that it never used to be able to do. All of that is enabling us then to be able to do things at light speed or machine speed that we could have only dreamed about 10 years ago.

I can't tell you how many things I remember seeing on the whiteboard that we would sort of put at the bottom of the list because we would go, "You know what, edge computing isn't fast enough, the network doesn't have enough speed, there's too much latency, we're not able to be able to bring up the data. So great idea, but it'll never work in the real world." Guess what? It's now working in the real world and that's the most exciting because-

Jim Marous:

It's coming at us really quickly.

Dominic Venturo:

Insights add value and help people just get back to living their lives. It's back to sort where we started.

Jim Marous:

Well, it's interesting because we've talked to a lot of big firms on this podcast and a lot of them say kind of like [inaudible 00:15:04] service. We've talked about AI a lot, but except for risk and fraud, we don't really use it very effectively. But now we're starting to. It's starting to become efficient, it's starting to be effective. The leaders are starting to say, "This is this holy grail. This is where we want to go." So let's take a little short break here and recognize the sponsors of the podcast.

Welcome back to the Banking Transformed. So today I'm joined by Dom Venturo, senior executive vice president and chief digital officer at U.S. Bankcorp. We've been discussing how U.S. Bank continually evolves their digital banking set of services and what is needed in the marketplace today. So Dom, moving away a little bit from U.S. Bank, but in the industry in general, as we look, we're getting close to 2023, what major trends do you see in banking that are going to really change the way we look at digital banking, we look at innovation and maybe we looking at financial services overall?

Dominic Venturo:

Well, ooh, that's a broad question. You know how much I love making predictions. But when you look at just the near term, sort into next year, we're really continuing to see this ramp up of overall digital adoption. But increasingly at the industry level, we're seeing more of these value-added tools being put together. Think of it as like a suite in services and capabilities that might actually be a collection of solutions from partners and banks in one place.

So whether it's the equivalent to a small business app store that includes things like time management, payroll management, cash management and budgeting, making it easy to have not only all those things available from an awareness perspective, but then that they work together and they just sort of seamlessly work, right? You've heard the term things just work. That's when you've got good human and technology design. So we're seeing an awful lot of that happening at the industry level and obviously work that we've been doing as well.

I think the other part is the ability for the information to be able to turn from insights to action more rapidly. So what I mean by that is we were talking a little bit earlier around the power of all of this data and the capabilities. Part of what you want to be able to do is in a non-intrusive way to be able to let a customer know that they should take action and or that you have a recommendation for them. Some would call that digital marketing, but I think what's happening is even in the cases of service interactions, of how you might save on fees or how you might save more for your goals, or the other types of things.

Those become genuinely very helpful. In the industry, both what I would call traditional banks and credit unions, and then also in the adjacent side, which would be the fintechs and the neobanks and the like, we've seen an awful lot of innovation in this space and some of it is done really well and some of it just hasn't gotten traction. The things that have done well tend to be the ones that solve a customer problem, back to the thing I mentioned earlier, and they tend to be things that are sort of snackable content. In other words, I can quickly understand what you're telling me. I can quickly decide whether or not I want to do what you're suggesting and then I can move on and get back to things.

So the whole idea of being able to do that then helps customers become better decision makers over time. But you need to be able to think about how are you serving up the actual content that you're engaging with beyond the what's the technical capability. I think the industry's doing better at that. We were throwing a lot of technology at customers, and in some cases the cognitive load, if you will, the term we use around experience, gets too high and then people, they opt out.

Jim Marous:

Well, it's interesting because you're talking about the fact that really we're maybe even moving away from product to content and overall life changing solutions.

Dominic Venturo:

A hundred percent.

Jim Marous:

Which, by the way, will sell product. But we've always been so focused on the measurement of product sales as opposed to engagement, which could be a completely different element. I look at what Acorns does and they don't sell me another product, but they continually give me content on how to leverage their services better. So I feel like I'm a partner. I realize who's going to benefit from this, but if I'm benefiting as much or more than they are, it's a good relationship.

Dominic Venturo:

I mean, that is the definition of a good relationship. I think that's exactly the point, and not throwing things up because you can, but being able to have that conversation. I would amend one thing though, at least I would posit it differently. It is actually product, but product now includes the experience, the education, the engagement and the marketing. Whereas we used to think of, I've been in a banker for too long, so in the old days we used to think of products as only the financial products. Then you had channels and you had all of these other things. Now, it's all one thing. So the financial product is an element of the entire product, but all of it has to knit together. It all has to be a seamless experience and you have to add value.

Jim Marous:

As you're collecting the data and helping to solve the consumer's needs in a financial and even non-financial way, in certain areas of the world, we're seeing open banking solutions that involve outside partnerships that really changed the revenue model as we look at it today. The revenue may be coming from outside organizations that want access to customers that are very focused on a certain segment. Do you see this happening possibly in the future?

Dominic Venturo:

Well, I mean we've had it in the United States. We've had difference of these that have showed up because you had the merchant funded loyalty programs, you had some of the package good loyalty programs that partnered with financial institutions. So we've seen a number of these things, I would call them sort of the big epics of loyalty and rewards over the last 20 years. So some of the things that were missing were common platforms. Then the other thing that was missing was fungibility of the rewards. In other words, I could only use them at certain places, not at the places that I wanted to and so they generally weren't as successful.

Some of the examples that I know you're referring to in Europe and elsewhere have fungibility of rewards. You can use it anywhere like cash. They also have mass participation and they have good protections around the data because of privacy rights and the other things. So some of the things that we saw 10 years ago may come back to life again as now the technology has gotten better, we've gotten smarter around the way that these things might work together in terms of the economics and then the actual piece.

But loyalty, pricing engines and the data analytics will also become the critical competitive things, not product feature or function. It will be those things that will be the difference between I think the big winners and those that are of at the lower level growth.

Jim Marous:

It's interesting, I never sit down without learning a lot about banking. You're a master in a lot of these fields, but as we look at the industry as a whole, and if you're talking to organizations of any size out there and they're looking at their 2023 plan and it's a person who's involved in the digital banking side, what recommendation, what priority you say don't go anywhere until you solve this first, what is it?

Dominic Venturo:

So sort of where we were at the beginning where I was talking about if you're going to deliver anything, that experience needs to be seamless. So if all you did was make a couple of basic functionalities very seamless, then you can begin to capitalize on that. You earn the right to do more. So having something that is mediocre, that you're not happy with or what have you, but it's good enough because I have to have this service is probably not what you want to prioritize. You want to prioritize getting what small thing that you do done really well and then you have the ability to earn the right to capitalize on that.

Jim Marous:

I'll add to that because of the conversation we had before is that it's not top of glass.

Dominic Venturo:

That's right.

Jim Marous:

It's behind the glass, it's back office.

Dominic Venturo:

It's got to work.

Jim Marous:

I mean, two years ago we talked about the thing we were focused on more than anything else was fixing the back office so it could deliver what the front office wants to be able to deliver without faking it.

Dominic Venturo:

That's exactly right.

Jim Marous:

We fake it often. Finally, so you look at U.S. Bank one to three years from now and the digital banking realm of it, what do you hope you get to say we did it?

Dominic Venturo:

I don't think you ever get to done. But when we were talking earlier on the panel at the conference, I mentioned the digital assistant. I think we will continue to see some pretty incredible advancements in that technology. I think it will become less of a thing that feels contained or constrained. In other words, I go to ask a question or get help and a digital assistant is the way most customers behave. But to where you might actually start asking it for advice, you might actually instructing it to do jobs.

For instance, pay my credit card on the 8th from my checking account and then that creates an action that actually causes that to happen. Now, we can do some of those things, but a lot of folks can't. That's when you start to really unlock the power. The last thing I would say is small business and commercial are just behind consumer in terms of some of these digital advancements. So I know we've spent to a ton of time on consumer, but all of this then is transferable to the next things that you do in the small business.

Jim Marous:

Should be transferable.

Dominic Venturo:

Should be, if you're building things in a reusable way and you're designing things properly, you should be able to scale up, leverage and transfer a lot of these to first small business and then to commercial, corporate as well. So if you're not in the consumer world and you're listening, it's all directly applicable in terms of the same kinds of thought process and approach you would take.

Jim Marous:

When we talked about it, you know mentioned small business, commercial. They're the most underserved segments because we never could automate what we want to do. There are now ways to make this all really easy. As a small business owner, I get frustrated when I go, "Come on, guy." The good old, "Come on guys, you can do better than that. You're doing it on my consumer side. You can't do it on my small business side. I'm the same person. I have the same needs." But Dom, again, thank you so much for being on the show. It is always a pleasure to meet with you and talk to you and to learn from you. I appreciate that.

Dominic Venturo:

Awesome. Great to see you. Thanks very much.

Jim Marous:

Thanks, thanks.

Dominic Venturo:

Yeah, I appreciate it.

Jim Marous:

Thanks for listening to Banking Transformed, the winner of three international awards for podcast excellence. If you enjoyed what we're doing on today's interview, please be sure to give us a five star rating in your favorite podcast app. Also be sure to catch my latest articles on The Financial Brand and the research we're doing for the Digital Bank Report.

This has been a production of Evergreen Podcast. A special thanks to producer Leah Haslage, audio engineer Dave Douglas and Sean Roll-Hoffman, and a video producer Will Pritts. I'm your host, Jim Marous. Remember, until next time. Meeting customer needs involves looking beyond today, embracing the change that's on the horizon.