Reimagining The Future of Digital Delivery at Capital One

Jim Marous:
Hello, and welcome to Banking Transformed, the top podcast in banking. I'm your host, Jim Marous, owner and CEO of the Digital Banking Report and co-publisher The Financial Brand. The pandemic greatly accelerated the consumer desire to adopt digital first banking experiences. That said, consumer preferences for how to do banking have also become increasingly hybrid. Few institutions have innovated the customer experience across multiple platforms more than Capital One. From their award-winning mobile app to their Capital One cafes, the bank continues to test new ways to build engagement. We are fortunate to have Jennifer Windbeck, head of retail bank channels and operations at Capital One on the show today. She will discuss Capital One's commitment to deliver experiences based not just on the needs of the bank, but on how the consumer wants to bank.

Jim Marous:
Post pandemic, nearly half of consumers stated they preferred to bank digitally only, while more than 30% preferred a hybrid approach, leveraging digital banking tools and in-person banking in approximately the same amount. Going forward, banks must build engagement by evolving both digital banking tools and in-person interactions to proactively anticipate and support consumer needs in ways that differentiate based on experiences.

Jim Marous:
Jennifer, can you share with our audience your role over the past decade at Capital One and what you've learned about how consumers want financial services to be delivered?

Jennifer Windbeck:
Gladly. Hi, Jim. So glad to be here and excited to be here in our Georgetown cafe. I've been with the cafe since 2014. Prior to that at Capital One, I had been engaged with the branches, which I am now too. So I lead the Capital One branches in addition to the cafes and bank operations and ATMs.

Jennifer Windbeck:
What we've learned in the cafes is that people really want different kinds of choice. And so there is certainly a connection between a digital connection to a bank or an in-person connection to a bank. And there are some consumers who enjoy the rhythm and the traditional bank branch and the transactions there. But what we found is that there are a lot of customers who like to bank digitally, who like to do their basic transactions in a very simple way, but also want that human connection. And they want kind of a different type way to interact with their bank. That's at the heart of what we are trying to accomplish with the cafes.

Jim Marous:
With digital transformation being a word that we're all using more and more, and with consumers going more and more towards digital channels, why do you feel that bank branches, or in your case even cafes, are still necessary?

Jennifer Windbeck:
Yeah, I think it does come down to that human connection. So backing up a little bit, going back in time, Capital One had acquired ING Direct a number of years ago, and we became the largest online bank in the country. We started talking to customers about what does it mean to be an online bank and what do you want in banking. And what we found was that many consumers were very willing and actually preferred to work with the bank on their own terms and to work online, to work from the comfort of their home, but had a lot of concerns about money and were feeling a lot of stress about money in general, and in some cases had concerns or hesitancy about the traditional branch banking interaction.

Jennifer Windbeck:
And so as we looked at it, as we talked to many consumers, as we did research as Capital One does over the years, we heard from customer as we continue to refine the experience that it's really all about choice. So some consumers prefer to not have to talk to someone. A lot of consumers are telling us, "I want to learn from someone like me. So I feel intimidated going into a bank branch and sitting across from someone behind a desk in a suit and feeling like there are things I need to know. I'd rather sit down on a couch next to someone and get good advice from someone who can show me what to do and can teach me." And so that's where the cafes came from.

Jennifer Windbeck:
Similarly, there are other consumers who love a bank branch and who want that... They want the human connection. They want the physical act of taking their money and giving it to someone and watching it be deposited into an account. We appreciate that. And I think across the industry, everyone sees that everyone has different preferences and the key is to offer choices, I think, to consumers.

Jim Marous:
So question, do you believe internally that the traditional branch bank model may die within the next decade? Or is there a formula for success in more of a hybrid world?

Jennifer Windbeck:
I think it's all about evolution. So, no, I do not see the traditional bank branch model dying. I do see it evolving. And that's happening even today in many ways as digital comes more and more into bank branches, as consumers visit bank branches less than they had in the past. But I do think it's about evolving. And for us, again, at Capital One, we have both bank branches and cafes. Even if they meet different needs and appeal to different set of consumers, I think there's no set formula and there's no clear answer to what will a bank branch look like in 10 years or physical presence. But I do think it's about innovating and trying new things and offering choices to consumers, offering digital offerings that compliment the in-person experience or can be done at home.

Jennifer Windbeck:
I do think the in-person experience of a branch, or in our case, of a cafe as well, offers that humanity piece that people want and human connection and ways to talk to other people to get advice, to get guidance about things. One of the things we've seen is that consumers in particular want that guidance and want that help when they're making a financial decision. So if they're opening a new account, if they're experiencing a life event, they do want to sit with someone and they do want to talk to someone. But many people feel more comfortable if, I'm doing is moving money or depositing a check. I can do that on my own terms digitally. So I think that balance of both digital and in-person experiences are important, and I certainly expect that we will continue to see physical presence, including bank branches and cafes far into the future.

Jim Marous:
So it's interesting. Capital One is a big financial institution. I was surprised that despite all the discussion around innovation and delivery that Capital One has had, that your branch network has actually fallen steadily from about 702 locations across the country in 2016, to just 327 in 2021. So when you're most known in many ways for unique branch engagements and their digital first strategy, where will new customers most likely engage in the future? I know you're going to say that there's going to be a split, but what is the secret right now? Or what have you changed in your branch delivery, your cafe delivery recently to really move to where the consumer's going?

Jennifer Windbeck:
Certainly. I think let me start with the cafes a bit. So you're right, while we have reduced our branch network, and I'll talk about that in a moment, we have grown our cafe network. So we now have close to 55 cafes across the country. The top 25 MSAs is our goal to get to those. And so we are adding a different type of physical presence and a different touchpoint for customers at the same time that we have reduced our branch network. Our branch network reduction is really in response to customer traffic patterns. So we saw fewer and fewer people coming for those day to day needs and those day to day types of transactions.

Jennifer Windbeck:
What we found is that as customers come to the branch less and as customers come even to cafes less, they're willing to travel a little bit farther and they're willing to, if I'm only going to go in once or twice a year, potentially to get advice in a bank branch or to sit with someone, I'm willing to drive 30 minutes or 45 minutes to get there, versus 10, 20 years ago when I was first a young banker and customers would come in almost daily in some cases.

Jennifer Windbeck:
And so I think in our case, we're able to turn the efficiency of a thinner branch network and still having a branch network, which is really important to us, and a very thin cafe network. We can turn that efficiency into value for the customers. And so that enables us to deliver really great digital first experiences, but also things like being able to offer the same accounts in our branches that we offer online with the same great interest rates to be able to have no fee checking accounts and really compelling savings offerings. As you've likely heard, we've recently eliminated overdraft and NSF fees. And again, having a very efficient branch model helps us to provide that value to customers in a really unique way.

Jim Marous:
I mean, the cafe become then more like a hub flagship type differentiation in the marketplace. It makes it so that your name recognition becomes higher. People go by it. As you mentioned the top 25 MSAs go by it and recognize the name as they recognize it on their credit cards and such. So while scaling back, a branch network could be justified on a straight economic basis to most financial institutions risk commoditization or degradation of the emotional connection they have with their financial institution if they see fewer physical facilities?

Jennifer Windbeck:
I think it's all about what happens when someone is in one of those facilities. So it's certainly a very valid risk and a valid concern that having fewer locations could lead to that. But I think it's all about what happens when you do go into one and when consumers come into one. And I think that's one of the things we're trying to achieve with the cafes too. That the cafes are open to anyone, not just Capital One customers. They're open to people to come in literally to use as a cafe to enjoy a cup of coffee or some food, to use free wifi. And that provides kind of a unique type of thing. And it is. It's a unique brand of moment. It's a unique way to experience Capital One in a different way.

Jennifer Windbeck:
Similarly, in our branches, we are striving to achieve an in-person experience that customers leave feeling, again, an emotional connection. They leave feeling like their problem's been solved. And I think as long as that happens, it gives the value to the customer to say, "Okay, yeah, I'll drive 20 minutes to get to this location because I have a need to." That I think is just different than it was again, 10, 20, 30 years ago, when customers were looking to go very frequently and that convenience and proximity was important. So I think having fewer locations, but really compelling experiences in them can help to differentiate anyone in the industry.

Jim Marous:
So there's various models around the world. Before our podcast, we talked about the fact that there's no one set model and it may not even be one set model for any one financial institution given marketplace differences and all that. Have you seen anything internationally that peaks your interest? Because you've been in charge of delivery for quite some time. I've seen ideas like popup branches and shared facilities. Can you discuss where your thinking has been and where some of your rethinking has been over the past few years? Even in the jewelry network that you have. So in branches and in your cafes, what's changed or what other things are you looking to maybe test in the future?

Jennifer Windbeck:
Most certainly. Certainly we have drawn inspiration from international banks, particularly a lot of European banks have tried and done different formats. As I mentioned earlier, the cafe concept in itself was something that ING Direct had developed, which Capital One acquired in the US, but ING Direct had tried a cafe format internationally, and I think had a lot of good learnings from that. And so I do think we at times can get in this inertia loop a bit in the US. And that's something we've been trying to break at Capital One, which is, let's start with, what would people want from a financial institution in-person versus starting with this is what we've always had, is a bank branch? And so that's what we've gone back to. We've gone back to the, well, time after time after time and ask people that. What do you want in a bank and what do you want in a financial institution?

Jennifer Windbeck:
I think there are lots of insights from that. Again, I mentioned the cafe concept in general. Many competitors and many other banks have tried digital first options or other things in branches that I think are interesting and compelling. And for us, the real differentiator and the thing that we've tried to innovate on is we've drawn inspiration not just from banking, but from retail industries in general. It really does come back to that human connection piece of... In a digital world, which is wonderful and affords lots of advantages and lots of conveniences to people, there is that hunger for human connection. I think that's something that we've tried to achieve and tried to support with the cafes and also with how we've continued to evolve our branch experience.

Jim Marous:
So I mentioned to you that I visited one of your cafes in Florida near where we're living in the wintertime. I was really amazed by the activity. It wasn't in a peak part of the day, but there was a lot of activity, a lot of people doing different things. There's the branch staff, or I shouldn't say the branch staff. There's the person standing there willing to help. There's the cafe person. There's offices. There's all kinds of dynamics in that. What was interesting, my take takeaway was, "Geez, how does this whole concept work in the metaverse, in a world that's going to have VR and AR and MR? And all these different concepts that are possibly on in the future. How do you see the integration of the digital and physical coming together in the future? And how does that play out from a ability to sell and to build trust?

Jennifer Windbeck:
That's one of the most exciting things. I think the rate of technological innovation is remarkable. And thinking about how does that play into the in-person physical experiences is really cool and exciting. And go back again a few years in banking, we thought about online banking and digital banking and ATM as distinct and separate channels from the branch and from the in-person experience. And across the industry, we've certainly seen those come together. We talk so much in the industry about omnichannel experiences, but there's real truth in that and there's real power in this omnichannel concept of, they're not separate experiences. They're not even complementary experiences, their fully integrated experiences.

Jennifer Windbeck:
And for us, a few places where that shows up, one is when a customer comes in to open an account in our branches or in our cafes with the cafe ambassadors as you've met. We help them to enroll in a new account if that's what they're wanting to do using their own device or using one of our devices, but using the same online experience that someone would use at home. It's not a separate "Sit there and key it in and tell me your Social Security Number." It's like, "Let me guide you. Let me show you through this." And that's from the start of our banking relationship with the customers where we are bringing together that digital experience. Similarly with most servicing types of dates, we guide the customer through using their own app, their own bank.

Jennifer Windbeck:
On a deeper level than that, than even just banking products, we offer money and life services through the cafes. And you may have seen that in Delray or you may not have the day that you were there. But we have money in life mentors who are cafe ambassadors who are specially trained in skills that help people to connect with their values and takes a deep look at what's important to you and then how does that affect your relationship with money. And we have digital experiences that support that process too. And so a customer or a non-customer, anyone, can meet with someone in-person, but they can also go through a lot of these experiences digitally, and they have tools to support them in that journey.

Jennifer Windbeck:
So I think whether it's very traditional banking services and account enrollment and those kinds of things, all the way through to experiential and kind of purposeful things like this money and life mentoring, there are ways to bring those two together. To get to your question, you mentioned the sales piece and how does that affect kind of cross selling and the in-person selling. For us, we don't focus on that. And we're proud not to. We really do believe having just great compelling products and authentic human experiences and support sells itself. And so when someone comes into the cafe, we don't want them to come in say "Gosh, I felt like do you want a savings account with that latte?" That's not the experience at all. We're not trying to sell to them.

Jennifer Windbeck:
I think that's kind of an interesting thing in the industry too, is just watching the evolution of in-person sales versus, increasingly, I think customer driven account discovery, making people aware through digital and written materials, the things that are available but not doing the heavy push. Because again, we think that our products and services are helpful and beneficial to customers.

Jim Marous:
So your branch model and your cafe model are obviously very different from look, feel, certainly size, and everything else that goes with that. I would imagine there are different KPIs that you have for the branch model versus the cafe model. And your return on investment on a square foot basis, I can't imagine being the same for cafes. How do you justify the size and the dynamics of a cafe versus a branch? And is part of this around just a better branding of what Capital One represents?

Jennifer Windbeck:
That's a fair question. That's a very fair question. And I think you're right. One thing is the distribution model. So with cafes, we have anywhere from one to six cafes in an MSA. So they are in the centers of commerce where people are gathering and done. We're on M Street in Georgetown here today. So we are in the city centers. For that reason, we don't have to have one on every corner. Whereas our branch networks we've had through our bank acquisitions over the years and we really like as a great regional bank, you do have to have a broader distribution. So that's one thing, which is I would say the number of cafes required are less than the number of branches required. And so there certainly some efficiencies in that.

Jennifer Windbeck:
Certainly, we do think that the cafes are a great way for customers to get to know Capital One, that they are an important part of our brand and in some ways an extension of our marketing, that Capital One is so proud of and participates in quite a lot. And so for the cafes, we certainly do see that as a branded moment. For both, we are looking at... Most, we are looking at net promoter scores and things like that, customer satisfaction indices, our primary KPIs that we look at for the branches and for the cafes.

Jim Marous:
So, Jennifer, what challenges do you face in the transformation of product delivery within what is considered legacy financial institution like Capital One? How important is leadership and culture in addressing these challenges?

Jennifer Windbeck:
Leadership and culture are certainly at the core of that. Capital One's unique actually in that we're a fairly young bank. We've been in existence less than 30 years, so we're still newer than many financial institutions. But we have also seen an evolution and a journey over those almost three decades ourselves. We've had had technology at the center of what we do a very long time, but that's taken certainly even more and more of a front burner and leading piece of what we're doing as a company.

Jennifer Windbeck:
I think the culture of the type of people you attract and hire changes dramatically for that. And that starts from the top. We're so fortunate to be still founder-led at Capital One, and that permeates through the culture. As we look at recruiting and retention and talent, we do try to be a place where we are appealing to people who have a technical background, a financial background, a wide diversity of skills and talents. We look to continue to grow that workforce and to develop from within. So I think that's a pretty big thing. We also try to have kind of that healthy mix of challenger mindset along with traditional banking fundamentals. And so the culture of being exceptionally well managed of understanding and mitigating risk while still testing and learning and trying new things and integrating tech principles I think has really helped us a lot.

Jim Marous:
It goes without saying that Capital One is a household name. I don't think I watched TV one night without seeing a Capital One commercial, and certainly not sporting events without seeing a Capital One commercial. But you have a rather modest branch distribution network. Do you see your bank as being uniquely positioned to become kind of a premier digital bank with a physical branch support? In other words, the best combo of physical and scale?

Jennifer Windbeck:
Yes. I think the key is that right mix. Totally. So, yes, I certainly like where we are and like where we're headed. I do think that our thin network of cafes has enabled us to get into many cities relatively quickly, again, just in the past seven to eight years or so. That combination of a differentiated in-person experience with really compelling products and really great digital services, I think serves us really well. And we're excited for that.

Jennifer Windbeck:
Again, as we've opened 50 plus cafes in these top markets, at the same time as that, we have an award-winning mobile app. We won many different industry designations and third party designations as the Best in Customer Service or Best Bank. And we're proud to have that balance, I think, of a digital bank and an in-person. And that's complimented really by this in-person experience.

Jim Marous:
So it's interesting. From a size of customer base, many of your customers, if not the majority, are served as part of the credit card portfolio as opposed to having their primary checking account at Capital One. How does Capital One try to move customers to either a broader relationship through digital channels or one served by your branches/ cafes?

Jennifer Windbeck:
We're certainly very proud of our great legacy as a trusted credit card company. As you mentioned, so many people know us for our credit cards. I think what we've done there is, again, really building compelling products that people will want. And we lead with the product and the value of the product, complimenting that with the great knowledge of the ambassadors who are in our cafes and branches and can help people to understand those, providing a redesigned and reimagined and ever evolving experience both on our online and digital and mobile platforms and in-person. And making things overall across all of those channels really simple and straightforward. And so when we do that, the products speak for themselves and the experiences speak for themselves. And so increasingly, we see people not thinking of us as only a credit card company, but also understanding we are a bank and we have a lot of great services and great bank accounts. And people tell their friends about them and learn that way.

Jennifer Windbeck:
So just a few examples of that, again, would be things like we're offering our 360 checking product that doesn't have fees or minimums. It has 24/7 access across this award-winning app. That's something that as people experience the credit cards, certainly can learn about that as they're interacting with us digitally through their credit card, that we hope and we see that they're much more willing to consider us as a bank when they've had these really positive experiences with us as a credit card customer.

Jim Marous:
Well, you've been known forever at being an amazing data company as well. So when you talk about the foundation of data and analytics as the foundation of growing a relationship, does that help you quite a bit in your primary marketers that you've been putting cafes and then branches in to be able to expand beyond the credit card relationship? Having that data already, I would think in a digital world more than the physical world allows you really to speed up the account opening process beyond what most of your competition can do.

Jennifer Windbeck:
Yeah. We think so. Most certainly. We are able to use our data and our technology to take information we already have about customers. So if they're wanting to open a new account or to service across accounts, that we're able to do that in a really meaningful way. Also, I think our skills at using data help us to determine where we want to be from a physical presence too. And so I think because we are really skilled at understanding where do we see centers of commerce and how do we use lots of available public data to help inform where do people gather and where do we want to be, I think that helps us a lot with our physical experience too/

Jim Marous:
It's interesting. As we've gone to a digital world, we sometimes are too confined in our thought around distribution networks. And while we don't talk much about it in a traditional distribution strategy, Capital One is a nationwide network of 70,000 fee-free ATMs. Given the move to digital and the reduced lines on a branch and network and cash, do you see the ATM's role in the whole distribution network changing because of the move to digital?

Jennifer Windbeck:
Count me as one who certainly believes cash is here to stay. I know there's a lot of debate in the industry about that, but so many people do rely on cash for both, paid in cash or prefer and use cash. I think most consumers at some time find yourself needing cash. Easy ways to access cash are what are really important. So, yes, ATMs, I think are fundamental in that I think will continue to play a really important role in people's banking lives and payment lives. Our 70,000 ATMs include both Capital One ATMs and third party providers. We're really proud of that network, and we think that's important.

Jennifer Windbeck:
But in addition to that, I think it's important for companies and consumer to think about what are other ways to access and use cash. So for example, we've fairly recently introduced the capability to add cash in store currently through CVS stores. So our banking customers can go to a CVS user mobile app to add cash to their checking account at a CVS store and through the convenience of kind of the local pharmacy to be able to interact with cash in a new way. We've done some things like early paycheck where although there's a bit of a digital piece there too, I think that certainly provides people with access to their cash sooner. But I do think these cash touch points are going to remain super important for a very, very long time.

Jim Marous:
So obviously, the world's getting more and more crowded with regards to new financial service providers. What do you see as Capital One's differentiation that you're going to be taking forward just to have you stand out in an increasingly crowded marketplace?

Jennifer Windbeck:
A big piece of it for us is the connections that we have with our communities and within all of the communities that we serve, particularly those where we have our in-person presence with cafes and branches. And that we are more than just kind of a digital company. We are proud to be digital and we are proud to be part of our customers' lives and our community's lives. I think certainly from a business perspective, the cafes and branches provide that in-person touchpoint. But there are so many things that we do to try to uplift the communities that we're in. And that's something we're really proud of. And we think that differentiates us in a very meaningful way.

Jennifer Windbeck:
We have the Capital One Impact Initiative in which we are very actively supporting growth of underserved communities and trying to advance socioeconomic mobility by closing gaps and equity and opportunity. It's the right thing to do and we think that's important and it differentiates us. Through the cafes, we have a partnership with many organizations, including Dress for Success, which helps to really provide financial independence for women in particular. And so we've got countless things like that. But I think that's what makes us special, I think, is beyond just being a digital company, we're also a really important part and see ourselves as a positive agent for change in the communities we serve.

Jim Marous:
We've talked about a lot of really good things about Capital One, but every financial institution is facing challenges today. What do you consider to be the biggest challenge or challenges that Capital One faces in the next three years? We used to say five or 10 years, but that's ridiculous timeframe given what we've gone through in the last three years. So in the next three years, what do you see is the biggest challenges that Capital One's facing from a standpoint of maybe as a overall organization or maybe just a distribution?

Jennifer Windbeck:
One is the rate and pace of change. And so, again, the world is developing new technology and new payments and new ways of interacting with money so rapidly. We like to be on the leading edge of that, but it's hard. I mean, there's so much to do. And so I think the rate of change, the competition for great tech talent is certainly a big one. I think the key there and the path to success there is just relentless prioritization and making the right calls as the right things to invest in the right times.

Jennifer Windbeck:
I think the other challenge that not just Capital One but really all financial institutions and particularly those with physical distribution phase is what is the post pandemic world. And so we are hopefully, knock on wood, coming out of the pandemic after two really challenging years. We've seen during the pandemic customer patterns change and people interact in different ways with retailers in general, but also with banks. And so the ability to understand that, to adapt, to be nimble and to provide new experiences in the ways customers want to adapt the experiences we have I think can be really important over the next three, five years.

Jim Marous:
Jennifer, thanks so much for being on the show. I can't believe it's been so long that we've never talked before in the podcast, but I wish you all the luck in the world. Hopefully everything stays open. As you mentioned, we're kind of getting used to that now. I think there was an opening baseball game yesterday or the day before in the Washington area. Get back to sports, get back to the things that we love. Yeah, we sometimes are questioning ourselves, "Okay. Are we okay yet?" But we're resilient. So that's the best news. So thank you again, Jennifer, for being on the show.

Jennifer Windbeck:
Thank you, Jim. It was my pleasure. We hope to see you in our Ohio cafes when you're in Ohio. Thank you so much. Appreciate your time.

Jim Marous:
Thanks for listening to Banking Transformed, winner of three international awards for podcast excellence. If you enjoy what we're doing, please take some time to give us some rating on your favorite podcast app. Finally, be sure to catch my recent articles on The Financial Brand and the research we're doing with the Digital Banking Report. This has been a production of Evergreen Podcast. A special thank you for our producer, Leah Longbrake, audio engineer, Sean Rule-Hoffman, and video producer, Will Pritts. I'm your host, Jim Marous. Until next time, remember, in banking, many consumers will want a balance between access and convenience to digital and the human touch of in-person experiences.