Masterclass in Innovation, Transformation and the Future of Banking

Jim Marous:
Hello and welcome to Banking Transformed. I'm your host, Jim Marous, owner and CEO of the Digital Banking Report and co-publisher the Financial Brand. Every financial institution must evaluate how to adapt its technology strategies to support business change, operational resilience and digital response. More than ever, the ability to innovate in speed and scale has become a core competitive requirement. In this year's Digital Banking Report, Innovation in Retail Banking 2021, sponsored by Infosys Finacle and EFMA, it was found that the importance of innovation has taken center stage at many financial institutions. Our guests on the Banking Transformed podcast today are Sanat Rao, CEO of Infosys Finacle and Miguel Rio Tinto, group CIO and CDO at Emirates NBD. We'll discuss the increase in innovation and digital transformation maturity of financial institutions and what still needs to be done.

Jim Marous:
A winning formula for innovation in banking must focus on how it will impact the user experience, whether this is the external customer or the internal employee or both. Taking the experience focused approach can help financial institutions compete with a challenger mindset of startups and scale of big tech players. Whether we are talking about disruptive innovation or incremental improvements, innovation will be a key source of current and longterm competitive advantage and creating the right environment is critical for differentiating for success. As I mentioned, we have two leaders who have made amazing strides in spearheading innovation within their respective organizations. Miguel Rio Tinto is the group CIO and CDO at Emirates NBD and Sanat Rao is the CEO of Infosys Finacle, the sponsor of the Innovation in Retail Banking research that has been done for the past 13 years and it's published by the Digital Banking Report. Before we get started gentlemen, could you share a little bit about yourself and the background for those who are listening, who may not be aware of who you are? Let's start with Miguel.

Miguel Rio:
Hi, Jim. A pleasure being here. Thank you very much for having me. I'm Miguel Rio Tinto, nothing to do with the Rio Tinto Mining Company. But I'm the CDO and the CIO of Emirates NBD. I joined the bank about four and a half years ago. Previously to that, I was a senior partner at McKinsey, actually focused on digital and technology. I was leading digital McKinsey in Iberia for a long time. And I'm an engineer at heart and always been an engineer and will continue to be an engineer until I'm dead.

Jim Marous:
And Sanat.

Sanat Rao:
Yeah. Thanks Jim for having me. And it's a pleasure to be here. I'm Sanat and I'm speaking to you from the UK where I live. I've been privileged to lead Pinnacle's business for the past four plus years at a time when technology is arguably the biggest enabler of both superior business performance on the one hand and of enabling outstanding customer experience on the other. Prior to joining Infosys Finacle, I used to be a senior partner with IBM in the global consulting organization here in the UK. At Finacle of course we are fortunate to work with leading banks all over the world, including leaders such as Emirates NBD.

Sanat Rao:
In the last 18 months of COVID, while we've had to do a lot of work with our clients as they've adjusted to the new way of working, on a personal front, besides technology and banking my passion has really been in an emerging social science called digital anthropology, where I've acquired qualifications and I'm also presently doing an MPhil at the University of Cambridge in the area of AI ethics, which I think is going to be increasingly relevant as we talk about the emerging technologies and how organizations are going to develop and deploy them. A pleasure to be here and looking forward to this conversation.

Jim Marous:
Sanat, let's start with you. The pandemic has been a defining moment for digital adoption. How do you think digital banking transformation banking has evolved or the 18 months? And where do you see the industry heading in the next year?

Sanat Rao:
Jim, may I just start by saying that, like I mentioned to you before we began this regular recording, I'm a regular listener of Banking Transformed and I think you do a great job with the hosts who you have featured weekly on your show. I really love your procedure.

Sanat Rao:
Coming to your question, well COVID is still very much in our midst, though hopefully we've seen the worst of it as different countries and economies come out of the environment that we've seen in the last 18 months. That said, I'd like to believe that the transformational change as a result of COVID is still ongoing and that banks are still discovering ways to reinvent themselves and their offerings as the world adapts to a completely new way of doing business, if you like. And whether it's through relentless innovation, whether it's through back office re-engineering, whether it's the capabilities that are available through modernizing the technology infrastructure or quite simply, whether it's in developing new leadership paradigms. I think banks are aware that there are very different ways in which they can lead.

Sanat Rao:
While there's no doubt that the world has evolved in a manner that was, I would say completely unexpected and unanticipated when COVID hit us early last year, I think the challenge hereon is going to be to ensure that the change that we've begun seeing in the last 18 months is sustained. Mind you, we live in an era where the customer's more demanding than ever before. And if anything, those expectations I think have increased manyfold in the past 18 months and therefore in my opinion, staying relevant is going to be the biggest concern for the leaders of banks today and going forward. Consequently, I think banks are going to be in a stage of continual transformation.

Sanat Rao:
In the report that we recently did with EFMA that you referred to you on your opening comments, Jim, this year's report in Innovation Retail Banking stated that 14% of the respondents felt that their organization's digital transformation has scaled. Now that was 7% last year. To that extent, things have moved in the right direction. Though personally speaking, I was a little surprised that it's only 14%. I thought it might be a little higher than that. While there's no doubt that, there are many different areas to focus on, let me just sort of end by saying that I think banks can scale their digital transformation in one or more of the following areas.

Sanat Rao:
One is of course, I think maximizing the level of digital customer engagements to drive growth. And as we've seen, engagement starting from onboarding is turning out to be an increasingly important element in the way relationships start with their banks. The second is digitizing and automating ubiquitously to cut costs and efficiency of operation has received a lot of attention I think in the last 18 months. The third element I'd point to is the need to continuously innovate and to create new value and indeed to just stay competitive. This is the era of technology and therefore leveraging the power of new technologies, whether it's moving to the cloud, whether it's the unlocking of potential through APIs and Ais, I think that's the fourth element.

Sanat Rao:
And last but not the least, I think something that often doesn't get the kind of credit it deserves is the ability to leverage talented teams. And as we discussed a while ago, Jim, before we started this recording, the fight for talent has become enormous in the recent past and I think the leveraging of talented teams is going to be hugely important for banks and indeed other industries going forward. These are the areas that I'd point to in terms of where I think banks will focus their attention beyond COVID.

Jim Marous:
That's great. Miguel, Emirates NBD is the largest bank in the Middle East, not only serving retail, small business, corporate customers but also digital only brands such as Liv and E20. How has your experience been in the last 18 months? And what are the key differences that you've observed within your organization as it comes out of the COVID phase?

Miguel Rio:
Yeah. As you know and you pointed out in the beginning, Emirates NBD has been quite an innovative company with innovative culture from the onset. And it has been referenced over the past at least two decades on innovating in banking and putting forward the best solutions for its customers. When COVID hit us, we were exactly in the middle of a very big, very broad IT transformation, part of what had been decided at the bank to be a core focus starting in 2017 and going through 2018 and 19, which was really to look at the bank, understand that banking is all about technology currently, understanding what is out there in terms of the best of breed in competing in the technology space, bringing that into banking, bringing that into an incumbent bank. And of course transforming.

Miguel Rio:
We were exactly in the middle of that, doing a little bit of business as usual for a bank like Emirates NBD, but when COVID hit us, I think two things happened. On one hand, all those things that we are doing, all those trends that we were observing, they significantly accelerated. I'll give you two examples. A lot of us had to work from home, had to stay at home, had to interact with our banks from home. A survey we just conducted now reflecting on how our customers would like to interact with our banks, so one third of the customers that about two years ago told us that their preferred channel of interaction with the bank would be through a human in a branch or a call center, one third of those currently now say that they prefer to interact with the digital channels of the bank.

Miguel Rio:
Achieving that in 18 months is a huge change. I know that this was going to come. This would come in the short term but it actually was very, very accelerated. Everything that we were doing in terms of enabling servicing, enabling sales, enabling a fantastic user experience through digital channels in our bank, all that became extremely relevant, much more relevant than before and much more accelerated. On the other hand, we were surprised that because COVID had to hit us and we had to think a little bit out of the box on how to handle much of the obstacles that were coming our way, we were surprised that we discovered new opportunities that were not there before. One of them is this example of working from home.

Miguel Rio:
A bank is typically, so we have a bank here we are total about 25,000 employees. Our operation in Turkey is about 10,000 employees. If you take without Turkey, the 15,000 employees working mainly in the Middle East, one day we had about 99% of those employees working completely from home. And that means call centers working from home, operations working from home, development working from home, IT operations, the data center, command center, all working from home. And so if you can do that, that opens of course opportunities going forward that were not there in the way that you develop in a distributed fashion with people that are not just look working here physically in your offices and so on. That's one example.

Miguel Rio:
The other thing that we saw is that from a perspective of products and services that we actually not even thinking about bringing to a different way of working, a different way of enabling them for the customers remotely, those things were solved. We had a lot of bureaucracy, for example, and regulation around signage of documents, around making business happen and formalized business in the previous environment we were in. A lot pushed by the government as well, that actually opened the avenues for us to solve a lot of those problems remotely. Immediately much of what was impossible before just became possible in one day. And so those are huge opportunities now that they actually can leverage going forward.

Miguel Rio:
And again, as Sanat has said, so these 18 months, this 20 months now, almost 24 months since I heard today in the news that it's today, 24 months that the first case I think was reported or something. It's two years already. I think they were absolutely transformative for Emirates NBD. Now going forward, we have a very ambitious agenda that has been even we are doubling down significantly on what we're doing in the context of what we are doing before but also these new opportunities that open up.

Jim Marous:
Well, sticking with you, Miguel, because interesting dynamics on the change in the work environment and all that but you're in a real competitive marketplace there and you're a large bank. How have you responded to the challenge of competitors that really play by in many cases, different rules? And what is your guidance to incumbent firms like yours based on your experience on how to deal with the FinTechs and more importantly probably the big techs that really are doing things differently and have certainly a different base of business to start with?

Miguel Rio:
Yep, yep. Again, I would answer that question in two planes. One is, so in the market, in the business that we are which is banking, the bank actually understands that in many instances, the value proposition that we have out there to serve our customers needs to be completely reset in the context of some paradigm shifts that are happening. I'll give you an example. You know that we've launched a completely digital bank Liv. And the reason why we did that with a different brand, it's an upside bank in the sense that banking is not the first thing you see when you think about Liv, you see lifestyle, you see offers and then you do banking as something that is embedded in that.

Miguel Rio:
And that came actually from two things that we've noticed, one is we were not getting our market share on the new customers coming into banking into the millennial customers. Apparently our core value proposition, main bank value proposition was not enticing enough for the millennials. What is it that they're thinking about? What is it that we should need to launch for them? Liv became that. And second, even the way that you frame your processes, that you think about straight through completely in a digital setting, no longer leveraging the legacy processes of the bank but really thinking bottom up out of the box to launch that. The bank decided, let's launch a new bank and Liv future of an idea.

Miguel Rio:
We now have about 500,000 customers, half a million customers in the UE, customers of Liv. Monthly we open more accounts in the digital bank Liv than we do in the 100 branches that we have in the main bank. Every month you acquire more customers via a digital app that can be downloaded on an app store and where you can onboard the bank in three minutes, you acquire more customers in this way and more customers in the demographics that you'd like to have than you do with all the 100 branches and all the salespeople that we have acquiring customers that actually are coming to the main bank. And this is absolutely amazing and transformative.

Miguel Rio:
And so this is how we are responding to the market and the competitive pressures that are coming. We are embracing these trends. You have to be courageous enough to challenge your status quo on everything from the value proposition as I highlighted, to the processes, to whatever you're doing now. Sometimes it'll not work for the new paradigms. And you have to be fast enough, innovative enough and transformative enough to launch this proposition. That's more on the business side of things.

Miguel Rio:
On the IT side and on the technology side, I'm very lucky because my XO, my CEO, they have an understanding that is not just from now, it's from years, five, six, seven, eight years before, they have an understanding that technology is a core competency of the bank, probably the most important competency of the bank. And the CEO articulates this very, very well. He is the first to articulate and he's a traditional banker in the sense that he was raised as a traditional banker but he articulate this because he understands that at the heart a bank is a technology company and he phrases that constantly. I've worked as a consultant with other banks previously and many of them, at the core they see themselves as bankers, the bankers are. And here I think the understanding that technology is really at the core is very embedded and very embedded from the top. And the second one that he clearly states is all our strategy goes through digital. If we don't digitize, we're going to die and he articulates that very well as well.

Miguel Rio:
These two things, I'm very lucky because sometimes in other organizations, other incumbent organizations you as a CIO have to convince your board, you have to convince your CEO that, look, this is important. Here I don't need to convince anyone. These guys are the ones putting me pressure and giving me the resources actually, which is very good to be able to do transformation. On technology, and I touched, I highlighted a little bit technology transformation we are doing and that we just concluded a very large four year transformation where really the reference is no longer the best of breed of the banks, the reference is the best of breed of the technology companies that are out there.

Miguel Rio:
What are they using? What kind of technology stacks are they using? What kind of innovative approaches on how they met manage big data sets or how they manage API and integration and all of that? The bank brought this inspiration from the best of what is out there and it's bringing it to banking. And believe me, our reference is no bank out there. There's no bank out there that is our reference. Our reference are FinTechs, are TechFins, are big companies that have solved a lot of these problems of speed and scale and reliability in the context of large scale companies like Amazon and so on, you're bringing that knowhow and bringing it to banking. This is what we have been doing. Two pronged response to you, which one is on the business side and one is on the core on the technology side as well. You have to be transforming constantly.

Jim Marous:
It's interesting, we did one of our podcasts on your solution Liv and it's an extraordinary story because it's an open banking story. It's a segment story. And as you mentioned, we're finding this more and more that organizations have to find new ways to acquire customers. That the traditional ways of waiting for the people come in the branch or waiting people simply to respond to digital marketing. Really, we have to expand our experiences and our realm of influence and where we target. But digital gives you the ability to do that because there's so much information in the digital world. It gives you the ability to do it at scale and in completely different ways. Sanat, it's interesting, many nontraditional entrants leveraging technology led models are differentiating their propositions through innovative business models and they're systematically diminishing the competitive advantages of established banks. Your organization works with banks of various sizes. How do you see banks driving business model innovation in an evolving market context and being able to do it if you're a small bank or a big bank?

Sanat Rao:
You're right, Jim. At Finacle, we've been obviously very fortunate to have been able to work with banks in over a 100 countries and I wouldn't say fortunate, it's actually been our privilege to work with banks in so many different countries, whether it's large banks like Emirates NBD, who've been trendsetters in many ways or indeed many other institutions.

Sanat Rao:
I think the truth is that there's no one size fits all approach and the kind of innovation varies obviously across countries based on a variety of factors, starting with whether a bank is whether you call them a pioneer or a fast follower, sometimes they may be even laggards who've now been pushed to make the kind of change that's necessary because of what COVID has done to the world last 18, 24 months. Certainly it's influenced by the kind of digital infrastructure that's available in the country and around. I think there's a big influence of the policy framework under which it operates. And of course we can't overlook competition and Miguel referred to the kind of benchmarks that non-banks are setting today for the banking industry. I think there are a variety of factors that are obviously at play.

Sanat Rao:
However, I think globally, many traditional banks have seen their competitive advantages, whether that is of reach, the size and scale of the customer base, whether it's the product choice that they make available, the kind of expertise that they have in house, all of this has sort of begun eroding somewhat over the last few years. Now Miguel, here at Emirates NBD who are, I think a great example who dispel the notion that if you're large, then you can't be agile and you can't be innovative but I think Emirates NBD have great example of a bank that has leveraged technology under Miguel's leadership to differentiate themselves consistently.

Sanat Rao:
However that said, it's also true that many others have struggled. To that extent, I think whether it's a non-bank or the new banks who use technology and innovation to diminish those advantages, while differentiating themselves with innovative offerings or great experiences and indeed highly cost efficient services. I think today, the incumbent bank, which are largely vertically integrated through a traditional pipeline business model, is unraveling new models. And a lot of these new models of course are facilitated by the fact that technology supports them. Technology is no longer the hindrance here. Technology indeed is an enabler. And the ability for a bank to transform to a new model is built on factors which are outside of technology.

Sanat Rao:
Jim, I was reminded of a recent podcast that you recorded with Ron Shevlin where both of you were rewinding the great banking debate and something that you touched upon was the business model. I think there are several approaches that a bank that can take towards re-imagining its business model. We've recently completed a research report on digital banking business model innovation, along with 11:FS and we've organized the new model into largely eight different archetypes, if you like where we're seeing a lot of action. I think the model that is seeing a lot of traction is embedded finance and Miguel sort of referred to this. And not unexpectedly I might add here that embedded finance is increasingly assuming more and more importance. I think here companies such as, whether it's Apple, Amazon, Uber and a host of follows of a similar genre, if you like, are masters of engagement and customer insight. They've embedded banking and banking like services and payments into their products and services. I think that's certainly one element of a new model that's increasingly turning out to be relevant.

Sanat Rao:
Now I'd stress this point, that while it's probably not a model that is seen by a majority of institutions, I think the ones who are beginning to adopt that model are going to be the real disruptors. If a bank believes that a majority are not doing this, they shouldn't take false comfort in that because the handful that will take this model will be the one that will really disrupt. Then you have the digital only banks and Miguel referred to Liv, who delivers services entirely through digital touchpoints. Their strengths are high quality of experience from the onboarding process, indeed a much lower operating cost than traditional banks and most target tech savvy consumers and small businesses. And indeed some of them work with even narrower segments and gradually sort of expand their reach.

Sanat Rao:
The third element I'd point to is the banking as a service model. Now I confess that this is something that is still at a very early stage of maturity and therefore this terminology probably means different things to different banks. But these are complete banking processes that are offered through APIs so third parties can embed them in their own products and services. Goldman Sachs, Solaris Bank and a handful of others indeed in different geographies, I think are notable examples. There are of course, other types and other models available, whether it's digital financial advisors, whether it is finance and non-finance marketplaces, whether it's the banking industry utilities, which are talked about but I think not too many have really scaled and banking curators. I think variety of different models that are available but I think I'd point to the first four that I talked about as the ones that I think will assume a larger connotation going forward.

Jim Marous:
What's interesting is so many institutions have to define which business models can be right for them both on their legacy as well as where they want to go. But I think, Sanat, I think you're your point is that standing still is not really an option. The traditional financial institution, that model is really not a winning model with so many people being in that space that you've got to find a new best direction to go. Our research that we've done together found that one of the keys to successful innovation is really to focus on the customer experience and engagement. Now that seems logical but a lot of organizations really didn't build their bank around the experience and engagement, the amount of how often do I go to my mobile app and for something I want to do as opposed to simply checking balances or transferring funds.

Jim Marous:
Sanat, what recommendations do you provide on how banks can drive more intimate customer engagement in this new normal? Because I think we've talked about on a couple recent podcasts that loyalty may not be based on what accounts you hold or how much balances you hold anymore and Liv's a great example. It's how often can we get the customer to really rely on maybe their mobile app or their online app or simply coming to the branch and engaging because if your brand is engaging and if the customer or member want to engage with you, you've made headway. That's what PayPal is trying to do with their super app and what other organizations are trying to do. Again, how do you think banks have to drive this engagement in the new normal?

Sanat Rao:
You've talked a lot about engagements in your podcast, Jim, and I think very often you referred to the fact that you are astonished that your bank has all the data about you and yet they come and ask you questions that they honestly have no business asking. You're right. I think in our opinion, this is more true I think post COVID that customer engagement is probably the single biggest factor that stands between outstanding success and mediocre banking. And when you look at it, Jim, Miguel, all of us, the three of us and indeed everyone else, I think we would probably rank personalization as a very, very important element in defining our banking experiences. From a bank's point of view, this is not just about the kind of experience that they provide a new customer whom they're trying to attract. The onboarding and the pre-onboarding process indeed is very important. But indeed even thereafter, when the bank to retain that customer's loyalty on an ongoing basis.

Sanat Rao:
And as we've discussed in many other forums, retaining customers' loyalty is a far, far more difficult challenge than I think ever in the past. And certainly institutions can't take their customers' loyalty for granted simply because there's choice available for people like you and me. That said, I think while engaging customers has always been a key objective for banks, clearly the unfolding digital trends, if you like, have made it clear that it is indeed I think the number one priority and it's not a surprise really. When you look at some historical data, for example, consider the fact that not too long ago, 15, 20 years ago, well over 50% of banking transactions occurred inside a branch and that figure was even much higher in some other parts of the world, in parts of Asia Pacific, Middle East Africa, which are largely branch driven, historically, those transactions were even higher than 50%.

Sanat Rao:
Today I think in many parts of the world, that figure is down to barely 5% ,since 95% of the transactions in the last 18, 24 months have happened through digital channels. And I think going forward, it's expected that by 2025, over 50% of the transactions will get done through non-bank third party channels, channels that are available and where thanks to embedded finance and open banking initiatives, a customer can leverage the same kind of a facilities and products and services that they might traditionally have opted for through a branch or through a call center.

Sanat Rao:
And this kind of a shift is well underway. We shouldn't believe that this is futuristic. And I'm going to give, I think there are examples from Asia, which are probably more noteworthy than maybe some of the Western markets. If you take India, for example, through the UPI payment mechanism, over 90% of open payments are originating from non-banking platforms, such as Google Pay, PhonePe, Paytm and WhatsApp. This is despite the fact that there are several dozens of banking apps to do these transactions. This kind of a trend is already well underway and I think it's going to sort of pick up even more in other parts of the world.

Sanat Rao:
I think to retain the business of customers who are increasingly carefully looking at the alternative players, whether it's the neobanks or indeed some of the non-banks, I think banks must digitally engage them in ways that fulfill their purpose of leading a much better financial life. And this happens, I just submitted to you across all the four stages, whether it's the ability to onboard them better, once you onboard them, whether it's the ability to converse with them better, whether it's the ability to serve them through your own channels or through non-bank third party channels. And finally, of course, the bank has to sell and cross sell products and services. Whether it's the ability to sell better. I think all of these are relevant and all of these are going to be increasingly important in the entire lifecycle and I believe that banks will very, very closely focus on each of these as they look to innovate in general.

Jim Marous:
Yeah. Great, great insights because it really is. It's changing the importance in what we really focus on. As you mentioned, Liv's a great example of really building an engagement model, as opposed to certainly it's not as much of a banking model, even. That's what's so interesting about this is the whole revenue business case is very different. The revenue comes from outside the four walls of the bank, driven by the organizations that want to engage with these audiences. And then the banking becomes secondary and it's not a push, it's more of a listen and pull. Let's take a short break here and recognize the sponsors of this podcast.

Jim Marous:
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Jim Marous:
Welcome back. I'm joined by Miguel Rio Tinto, group CIO and CDO of Emirates NBD and Sanat Rao, the CEO of Infosys Finacle. We have been discussing the shifting in both digital transformation and innovation maturity since the pandemic. Miguel, at Emirates, what's your approach to leveraging modern technology to drive growth and profitability? What are some of the key initiatives that you're doing to help your bank unlock this value?

Miguel Rio:
Yep. I would just touch very quickly on what Sanat was mentioning before about engagement and how you drive engagement with your customers. And especially relevant now in the context of what is happening with the changing behaviors with consumers with COVID. One of the things that Sanat said, which is true, it's been accelerated, which is the movement of your interaction with your customers is increasingly done by the online channels. And what we're seeing is a overwhelming shift in individuals to the mobile app. And the question then becomes, there was this rich model of interaction with the customer via the branch via the relationship manager and so on. Now, how do you make that happen through digital channels? How do you make that happen through digital channels?

Miguel Rio:
And there is a very, very simple question which is how do you make that your app is actually sitting on the first page in your phone, in your smartphone? You know that we typically organize our apps and the most used apps are on the first or second page. Now that's the first thing. How do I get you to come back and to click on my app and come back? And then adding to that is, how do I interact with you? How do I engage you in a world where there's no human there? How do I do that? That is a very, very deep and very important problem that we are solving. You've touched on some of the stuff we are doing, finding.

Miguel Rio:
Liv is a good example about on having offers and promotions are associated with your preferences, with your hobbies, with your lifestyle so you have a reason to come back to see the promotions. We even offer games, you have games you can play, very simple games in live so that there's a reason for you to come back. You can earn some money by playing games as well And so on. These are examples. But then on the other side, and this links to another discussion, which is in order for me to then engage with you, I have to leverage your data as you correctly pointed out. How do you leverage then the data to put some offer in front of me, to put some insight in front of me? It means things like you've spent so much this month on this.

Miguel Rio:
That's very difficult and it takes a huge effort to bring all of this together. The technology issue is just a small part of it but having the organization as a whole build around this and actually focus on engaging the customer through a mobile app in a bank like ours is an overwhelming effort and it's clear at the center of our priorities. But now linking a little bit to the question you just asked. There is a clear agenda on enabling all that we're doing, sales and services, complex sales driven and engagement through our online channels. And we are putting technology completely at the service of that. And I'll give you some examples. When we do that, banks have a way of trying to digitize by just exposing the functionality on the app but then on the back, everything is manual. You have underwriters, you have compliance officers, you have operations guys and so on. It's not about that.

Miguel Rio:
It's about doing it in a way that is truly digital, a fantastic user experience. And this actually, we call it here STP, completely STP, meaning it doesn't touch a human. It's zero operations. To do that and to code and put in the system the rules, the heuristics that the human was doing as an underwriter or as a compliance software or as operations person, that then takes another, a huge effort. And so our investments are on digitizing these journeys, sales and services journey, including complex ones like personal loans, auto loans and so on, very focused on our mobile to some extent on our online channel as well. And this covers both individuals and corporates and then at the same time making the end to end absolutely STP.

Miguel Rio:
And this means replacing every decision making that is there in the pipe with something that is actually a machine learning model or it is a basic rule system, whatever it is so that we don't have any human in the chain. We are obsessed about that currently. We were before COVID, it's coming from the top, our CO puts us some KPIs on how many journeys have we enabled? What is our STP rate on those journeys? Those are the two metrics he looks at. And then adding to all of this is this has to be done, it's not just about the transactions and the journey, it's about then how do I make it engaging in the app? And how do I make you come to our app so that you favor coming to me instead of going to another app, to a competitor or even to a non-bank where you actually prefer to work with them and actually do your payments and so on outside of our app.

Jim Marous:
It's interesting, Sanat, you mentioned early in our conversation that you have an interest and focus on digital anthropology. It's very curious to learn how you see the relationship between humans and digital era technologies evolving and how organizations can harness that to drive change. And just as importantly, how do we make it so the employees that we do have learn more about digital and feel part of the equation? Because we found in our research that if you don't make them part of the digital experience, they will do everything in their power only because it's human nature to undermine your initiatives in digital. How do you see this work in the future, the humanizing of the digital experience?

Sanat Rao:
Thanks Jim, for that question and it's a topic that I'm very passionately involved in, not just because of our day to day activities but indeed think it's something that's going to be increasingly relevant going forward. I am, I think what you would call an accidental digital anthropologist. I did a Masters in this emerging social science that gave me a broad perspective of how to look at things differently and I'm particularly interested in those points of intersection between technology on the one hand and culture on the other. And as we know, human behaviors in informed by many different things, including our own culture.

Sanat Rao:
But to respond to your question, I'm going to take the liberty of moving away from the banking industry per se and address your question a little more broadly because it's relevant to, I think every industry, banking included. I think as more and more objects, for example, whether it's our phones, fridges, cars, they become augmented with digital sensors and wireless signals, the boundary between material objects on the one hand and information systems is gradually getting blurred. We've heard about smartphones and smart offices, smart cities, even. That's a trend that's already underway. On the one hand, I think augmented objects are now coming to be described as intelligent agents, capable of making decisions. Meanwhile, there are a lot of theories about information are being used to describe the very foundation of our lives itself. For example, what are the emerging practices involving big data, for example or biometric technologies, surveillance amongst other things and how do we they reflect and constitute and transform preexisting biases that all of us have into our practices?

Sanat Rao:
I think banks obviously have a vast amount of data and more and more banks will become big technology shops to leverage data through AI and other emerging technologies. Who in the bank for example, is worrying out what exactly is an algorithm and how does it work? And who's responsible for its output? When a bank lends money in the lending process, as it uses increasingly complex algorithms, who's responsible for and who's looking at the biases that may creep into the lending process? I think a lot of times we focus on the lending process. We to focus on the technologies, we focus on the customer experience. I don't think enough attention is being paid to the biases that may creep into the lending processes because of the algorithm. This is a very simplistic example that I'm giving you.

Sanat Rao:
Technology is obviously a great enabler and it can be wonderful in our personal and our professional lives. That's said, it is precisely because of the great power that has been made available through these technologies and what they embody that we increasingly need to be focused, worried even I'd say, about the way that the technologies are deployed. This broad perspective has led me to take a deeper look at an issue that I think is going to assume far greater implications in our technology driven world and I of course refer to the whole element around the ethics of not just AI, but indeed of the way that technology is getting deployed.

Sanat Rao:
And on a personal front time doing a MPhil program at the University of Cambridge on AI ethics. As my professor first sort of explained to me, there is an aphorism that says that anthropology, if I remember correctly said, anthropology allows you to make the strange familiar and the familiar strange. To me truly, understanding what these powerful technologies can do for us in a progressive manner, how it can harm us in one way if you're not careful but also how it can define the relationships between humans on the one hand and digital area technologies on the other, is going to be the very essence of the way I think organizations and leading banks particularly, are going to deploy technology. It's a big topic, Jim, and something that I can talk on hours at length about and I hope I can discuss that with you some other time.

Jim Marous:
It's very interesting because the whole dynamic from hiring people, training people, making sure you're hiring for the future as we're evolving is what we need for people. And again, that we can't ignore how humans can be involved in the development technology and how technology can assist humans. It's a lot to get your hand around. Finally Miguel, Peter Drucker once said that, "Culture eats strategy for breakfast." Your leadership at your organization obviously supports innovation throughout the entire organization. For those firms that are not as far down the road as Emirates NBD, what kind of culture shift do you believe is required to drive innovation? We had an interview with the CEO of Lemon and he said, "The biggest hindrance to digital transformation is legacy leadership." Now, where would you start if you're an organization and you're working for an organization that you just get the feeling that boy, top management just isn't embracing change, kind of is riding the rails of success that they've had for 30 or more years. What kind of culture shift do you believe is needed to drive innovation going forward?

Miguel Rio:
Jim, fully agree that culture and a culture of innovation is absolutely necessary to thrive in banking, anywhere actually, but in banking in particular in the world we are in. I think there is a prerequisite for that and then there are things you can do to actually move towards a more innovative culture. A prerequisite is at the top if these things are not understood, that for example, in banking, that banking is actually technology company, in, I don't know if it's going to be five years, 10 years, 15 years, banks will have more engineers, software engineers than they will have bankers. If you look at the FinTechs like Revolut and so on, 80, 90% of their employees are engineers. And actually from the top at Emirates NBD, that understandings is there. You have to digitize. Technology is key. You have to hold the knowhow, you have to drive your IT strategy. You have to drive, you have to have engineers and foster them. This is a core competency, is a key advantage for the bank. That I would say is a prerequisite.

Miguel Rio:
And as I was telling, I'm very lucky at board and XO level and particularly CEO, our CEO Shane, he has a fantastic clarity on that. That's a prerequisite. Now that's very nice, but you can have that but then the organization is still the legacy organization. And again, we are fighting every day as an incumbent organization that we are, it's not easy. It's very difficult. The approach here was a little bit of falling. Again, understanding that technology is at the core, let's start a big technology transformation. Let's bring in, for example, a new agile way of working, where we bring squads together, multidisciplinary competencies. And so let's bring it through IT. And then let's start embedding the business into this as well. Let's start eating the business from inside. And this is how we are approaching it and it is very transformative.

Miguel Rio:
We started this technology transformation. One of the key work streams around this is the agile way of working. You form smaller squads, they own an IT product. They enhance the product with a view of the product ownership. Your mobile app is actually a product, it's no longer a banking. A personal loan is not just the product that you have in banking. It's the mobile app is a product, it's a product in itself. That knowledge. Then you start and ask, business, you have to nominate a product owner for this. Someone that will guide us on the enhancements that have to be done here. And so they nominate a product owner. Then this guy has to have stature. This guy has to coordinate across all the priorities and the strategic priorities that are coming.

Miguel Rio:
You start eating the business from inside through the technology stream and this is how we are trying to really foster a different way of working, a much more blended IT business interface. And again, when you do that and you put the right processes in place, you put the right people, because in IT, for example, we had to replace about 40% of our managers to be able to bring that in. It's a mix of changing two thirds of the people that exist and hiring one third of new people as well. And part of the new people that was onboarded to actually change the organization four years ago within IT.

Miguel Rio:
I think these are the two things, so on one hand, a clear leadership from the CEO, from the XO, from the leadership that this is important, this is the way to go. And I have a very clear leadership on that and thankful for that. And at the same time, a thrust to change from within by blending IT and technology further around these ways of working, which actually the Amazons and the Googles and so this is the way they work. They see search as a product. This is new for us. They have been doing it for 20 years now. It's around that. It's not easy. It's an everyday struggle. You find a lot of blockers, compliance, ops risk. But it's part of the journey. And again, if you have then the leadership to be able to take these obstacles that are in the way, these blockers and help you overcome them, then things flow.

Jim Marous:
What an amazing place to end. I want to thank both you gentlemen for your time today. It's interesting because I think I've already developed what the headline or what the title of this podcast is going to be and it's really going to be the masterclass in innovation and digital transformation and the future banking because what a learning experience. You shared a lot of insight, there's a lot of things to do and what you shared is really a path for the future. And again, thank you both for being on the show today.

Miguel Rio:
Thank you, Jim. Thank you very much.

Sanat Rao:
Thank you, Jim. It's our privilege to be associated with you and Digital Banking Report and of course with Miguel and his team at Emirates NBD. Thank you for the opportunity today.

Jim Marous:
Thanks for listening to Banking Transformed, rated as a top five banking podcast. I genuinely appreciate the support you have provided over the past two years. If you enjoy what we are doing, please be sure to follow Banking Transformed in your favorite podcast app. In addition, please take 30 to 45 seconds to show some love in the form of a review. It means a world to us. Finally, be sure to catch my recent articles on the Financial Brand and check out the amazing research we're doing for the Digital Banking Report. This has been a production of Evergreen Podcasts. A special thank you to our producer Leah Longbrake, audio engineer, Sean Rule-Hoffman and video producer, Will Pritts. I'm your host, Jim Marous. Until next time, remember innovation doesn't just come from giving people incentives, it comes from creating environments where their ideas can connect.