The Future of Banking: Beyond the Glass

Jim Marous (00:12):

I think it's about time to start. I want to thank everybody who's in the room. This isn't the easiest place to find. I think maybe a quarter or a half of the people in the room just decided, "I don't even know how I can go back." So, they maybe just sat here from the last one saying, "I'll make an excursion. I'll pick up my breadcrumbs along the way."

Jim Marous (00:31):

My name's Jim Marous, I'm the co-publisher of the Financial Brand, the owner and CEO of the Digital Banking Report, and also the host of the Banking Transformed Podcast, which for the very first time, you're a part of.

Jim Marous (00:43):

We've never done a live podcast where we're actually recording it live. These will be put up online on both YouTube and our podcast channels in the next few weeks.

Jim Marous (00:54):

But we thought what we'd want to do is we have this gathering of so many people, and we have so many leaders that we can interview. What are some of the topics we can cover that will bring value to the equation as part of a breakout session?

Jim Marous (01:07):

We have the ability to get really, really high-octane guests because they don't have to build a PowerPoint presentation, which is hard to get anybody to want to do that. So, we said we're going to try to have this interactive nature where we're going to have to have discussions on stage.

Jim Marous (01:24):

We are going to be asking you to ask questions if you want to, we're going to get better at that. We did two out of three in the last session where I messed up on the last one, didn't restate the questions. So, we're going to do the best we can there. But I want to thank you for being here.

Jim Marous (01:36):

Want to introduce first our guest for this session. Derek White is the CEO of Galileo. I have known Derek for probably almost a decade. During that time period, he's had at least four jobs and before that, he had even more.

Jim Marous (01:54):

If there's a thought leader in the banking industry that's on the cutting edge of innovation and digital transformation, it’s Derek. He has been on both sides of the pond. I'll let him just mention all the companies he's been a part of. But from his diverse background, you'll understand more about the direction he's going and what he's passionate about. Derek, good to see you.

Derek White (02:22):

Thank you, Jim. Great to be with all of you here in Vegas again.

Jim Marous (02:27):

So, before we start, first off, we're going to set it up by saying the last time we were on a stage together was about seven years ago maybe at Money20/20. We had 7,000 people in the room, we had the main stage at that time. I was a moderator of an event just very similar to this. And we had two people on the couch, Derek being one and a person from Citibank being the other.

Jim Marous (02:54):

And the one thing you try to find out when you're building a program like this is make sure that all parties want to be involved and discuss things. Derek and I found very quickly that two of the three of us had great conversations, the third person you could tell just really didn't want to be on stage.

Jim Marous (03:10):

So, Derek is a person I look to and say, if I falter, he has no problem taking over the entire conversation. So, thanks for being here. I mentioned a little bit about your background. Go through the organizations you've been a part of that really have led you to right now being the CEO of Galileo.

Derek White (03:28):

Thank you, Jim. Thanks for that warm and kind introduction.

Derek White (03:33):

So, my career has been really at the intersection of people and technology and money. We'll come onto that in just a minute. The first part of my career was in payments and financial services. We had a very successful exit of one of the very first internet banks. As part of that exit, I told my wife, "Let's go celebrate."

Jim Marous (03:57):

What bank was that?

Derek White (03:58):

That one was Juniper. We started the world's first internet bank according to Clayton Christensen called Wingspan.

Jim Marous (04:07):

Out in Arizona.

Derek White (04:09):

Out of Arizona and out of Wilmington, Delaware. The second one was we raised $20 million from Bill Gurley at Benchmark and created a bank called Juniper. We sold that to a British company that was looking to increase their presence in the United States, and that was Barclays.

Derek White (04:28):

With that exit, they asked for one person to move across the pond. I told my wife it'd be six months, and that turned into 15 years. So, we spent 15 years overseas in three different locations with Barclays, twice in London and then in Dubai.

Derek White (04:49):

And then I got a call from a guy that happened to be the number one banker in the world at the time, a guy by the name of Francisco Gonzalez that was the chairman of BBVA. And he said, “Will you come to Spain and lead the future of the company?"

Derek White (05:09):

And I said, "Francisco, I don't speak Spanish." And he said, "Exactly, that's why we want you to come." And so, we moved the family then to Spain. So, that culminated in about 14, almost 15 years overseas. And then for family reasons, we moved home, and we moved back to our place in Utah, in the mountains of Utah.

Jim Marous (05:31):

Probably the only ones in the neighborhood that have kids that have English or different accents than Utahans have.

Derek White (05:38):

Yeah, there's a funny story there. When we first moved to the UK, we'd been there maybe six months, and my oldest, who just got married, our oldest had in six months very quickly adopted the British accent. So, as we came home for the holidays, everybody's asking him to speak a little bit of British.

Derek White (05:59):

And so, he did that. We got back to the UK, he goes into his teacher the first day, he's got his little cap on, his shorts and his uniform — and he walks right into Mrs. Neiber, tips his cap and says, "Good morning, Mrs. Neiber," in a very British accent.

Derek White (06:19):

He then talks with her in a few sentences, turns right around and talks to me in American. He'd become fluent in accents in such a short period of time, and that's really shaped a big part of who he is now today. But it's been fascinating raising a family.

Derek White (06:37):

We have four kids, two born in the states, two born overseas, and it's been a fascinating experience raising a family both domestically and internationally, and the experiences that they've had as part of that. But now, we're in Utah.

Derek White (06:54):

After we got back to Utah, I helped Andy Cecere and the team at U.S. Bank become a bit more digital, and then worked with Thomas Kurian and the crew at Google Cloud to set up their financial services cloud, and then took over Galileo. It was a founder led business for 20 years and handed over to run and to scale Galileo, a little Utah company and taking it global.

Jim Marous (07:21):

So, it's interesting, the previous podcast was all about the branch. You are probably the antithesis of that, and that there was no part of your career that really was focused on branch or physical delivery. I remember Wingspan because it is part of Chase Bank now, but Bank One at the time.

Jim Marous (07:41):

And I always will believe that the demise of that organization was the fact that you still had in a 70-story building in New York, 35 stories that were built on branch people, and they weren't going to let go of that and make the competition.

Jim Marous (07:55):

I say that because my wife started Bath & Body Works back a long time ago as part of the Express, and when she brought the digital nature to it, she immediately became the enemy of the store. And that’s what we’re up against.

Jim Marous (08:09):

We're up against dynamics that are not as simple as a easy equation saying, “Digital is better.” The headline of this podcast is interesting because it comes out of your lexicon. Your terminology is working with what's above the glass, and also looking at what's below the glass. Explain that for those who haven't been familiar with our previous discussions on this topic.

Derek White (08:34):

Having worked with large scale financial institutions all over the world, I just found the terminology when working with businesses and to bring people together to talk about what is the experience that we want to enable for the end user regardless of who that human user is.

Derek White (08:55):

Whether it's a corporate banker, whether it's an employee, whether it's a treasurer of Coca-Cola, whether it's an individual consumer — it's ultimately a human that is engaging in an experience and interacting in some way with money. And there's three primary interaction models that we can come onto and talk about at some point.

Derek White (09:15):

But the concept of the above the glass experience versus what is the technology and the environment that sits below the glass that enables those experiences. Because one of the biggest learnings out of COVID was that prior to COVID, about 50% of the financial institutions in the United States allowed you to open a checking account online.

Derek White (09:40):

COVID dramatically accelerated the glass. The availability of features and functionality to a point where largely most financial institutions in the United States now have a functional mobile or glass experience for consumers. Now, consumer banking is much more advanced than institutional or corporate banking when it comes to enabling that glass experience.

Derek White (10:10):

But the term above the glass and below the glass is to help bring people in an organization together to understand above the glass, we're really looking at who the end human user is.

Derek White (10:22):

COVID has advanced that functionally, and the reason I run the company that I run now and chose to come run this company, is I believe over the next 7 to 10 years, the glass experience for the end user, much of that's going to go away. That’s why this is termed “beyond the glass.”

Derek White (10:41):

Because the glass experience will continue for some, but it's looking beyond the glass. And in order to enable that next wave of experience, you have to have to improve the below the glass technology and environment. Because the waves and phases of evolution requires that kind of below the glass evolution.

Jim Marous (11:07):

You're familiar with the research we've done, I mentioned it yesterday in the innovation workshop. When we do research around how many organizations have a digital new account experience or digital new account capability, it comes out to about 87%, is really getting close to the ultimate level where you want to go.

Jim Marous (11:25):

However, we then ask a question later in the survey saying, "How many of your organizations require a person to come into a branch for any part of your digital account opening experience?" More than 70% require a consumer to come into a branch to complete the process.

Jim Marous (11:43):

We then say, "How many of your digital account opening experiences are between three and five minutes long than it takes?" We're getting down to around 17% max. Those 83% that don't allow the opening within three to five minutes, we will argue that's not a digital experience. That's not when the consumer is doing them, when they want to start opening an account.

Jim Marous (12:10):

We have solution providers here today that can bring a three-to-five-minute account opening experience to the table. They partner with other organizations that will give you the ability to do digital authentication of the person who's opening the account to know your customer component.

Jim Marous (12:24):

The problem is, as these companies will explain to you, they get the account sold, they come into the financial institution, and the financial institution can't get out of their own way. And they say, "By the way, I agree with everything you say, I want to go three to five minutes. We need to start with the driver's license." That's 10 minutes right there. Because what you're doing is making the consumer actually punch in their information.

Jim Marous (12:50):

Why is it so difficult (because you're having to deal with it every day) for organizations to actually … they buy into the concept, they buy into digital banking, they buy into simplicity, authentication, automation, all these different components.

Jim Marous (13:04):

Why is it so difficult to deploy against what you have the capability of doing? Why is it so hard to move from where we are to where we can be in today's marketplace with relative ease?

Derek White (13:19):

I think the biggest part of it is looking at product versus human. If you really boil it down to the experience of how a big tech, a big ecosystem, a digital business builds their business versus how a financial institution builds and manages and runs their business, it's about looking at that human interaction, and that human interaction in a very, very, very different way.

Derek White (13:52):

A typical large financial institution will have four big businesses. It's consumer banking business, it's payments business, a wealth management business, and a corporate and institutional bank. Those are hugely siloed P&Ls.

Derek White (14:06):

And the P&Ls roll up into a quarterly reporting, those P&Ls then break down to 50 to 80 P&Ls across a business. Each one of those P&L owners has responsibility for delivering their P&L. And it's not uncommon to walk into a financial institution and they refer to the customer as the product, meaning they have a credit card, but the debit card is in a different business.

Derek White (14:32):

And ultimately, it's one human that sits on top of those products. And the end goal is to ultimately design an end user experience that is beautiful for the end human user. So, how do you design those end human user experiences when managing a complex organization with P&Ls that are largely product-oriented?

Derek White (14:52):

One way to do that is dramatically change the organizational structure, but very few, very few people actually want to do that. So, then how do you create the experience, that above the glass experience in a way that is connected across business lines?

Derek White (15:07):

It's ultimately changing the mindset and training people to think like digital organizations do, and starting to measure things very differently. And all of this can be learned if you're measuring the right kinds of things.

Derek White (15:22):

As an example, bankers spend an enormous amount of time looking at basis points movement on billions and trillions of balance sheet. But the currency of the future isn't just financial currency, the currency is the way human interactions are changing and have changed and have already shifted.

Derek White (15:49):

And focusing on basis points of movement on those interactions that are the leading indicator of monetization is the way to start to change that overall experience, and educating the organization. As you started to describe there, Jim, on the account opening experience, that every minute, every step that delays that experience, you have to have controls and trust and compliance, et cetera. But it can be designed in a way that is around the end human user more so than just monetizing through a financial product.

Jim Marous (16:24):

We know the roadblocks from a traditional financial institution perspective that get in the way of digital transformation, fixing the below the glass models and the way they do it. It's not taking paper and turning into PDFs, it's rethinking the entire process of what we've done in the past.

Jim Marous (16:44):

However, the reality of the situation that every one of these people are up against, is that those employees run those back-office areas have been with a financial institution, bank or credit union or wealth management company for literally decades. Because to get seniority, you'd have to be there for a while.

Jim Marous (17:01):

So, the most stable, most secure, most important people in that process are people that have been very successful and have not really changed the way they've done things since I was a management trainee at National City Bank in 1976.

Jim Marous (17:17):

In fact, some of the processes, some of the experiences I can go back and replicate and say, "I know why this happened because of the same damn rules that were in place when I started in banking."

Jim Marous (17:29):

With that in mind, you've worked in traditional financial institutions that were progressive, but even they had legacy employees. How do you work with legacy groups that have not been unsuccessful, do not really know the pain of the consumer of the future?

Jim Marous (17:47):

And they're not comparing — they're comparing it to the bank down the street, not to Hulu, Netflix over Amazon, the true digital players. How do you work with an internal team? And I know you're a digital first organization, so you don't have these legacy people in place, but you've been to those organizations. How do you do that?

Derek White (18:10):

We are a digital platform today that digital businesses are built on. But increasingly, a big part of our business is now helping to transform these legacy organizations into digital powerhouses. Because they're looking at who did all of these digital banks in the United States build their business on? They're built on our platform.

Derek White (18:37):

So, as regional banks are looking to build now a national footprint outside of their physical footprint, they're looking at building a national footprint. So, how do we help them do that? Or within a financial institution, how do they go about doing it?

Derek White (18:54):

I can only speak from the experience that I've had across sitting on the management committee of $350 billion market cap multinational companies. And it starts with painting a vision of what the potential possibility is, and understanding the language of the organization, and how do you marry the end human user experience with the P&L.

Derek White (19:19):

The P&L is an output of human interactions and somewhere between the human interaction and the P&L is a product that monetizes that human interaction. So, it's painting a vision of what that end human user experience can be. But then the biggest thing culturally is finding the believers, people that lean in, people that want to transform.

Derek White (19:44):

It's finding the believers and enabling them, empowering them, giving them the space and the oxygen to actually create, but it's doing it not at program wholesale, program transformation level. It starts with finding the believers and doing one thing and doing it amazing, and doing it beautifully. And doing it amazing and beautifully, and then tracing that to how does that have P&L impact on the organization?

Jim Marous (20:12):

And then go from there.

Derek White (20:13):

And then it compounds. And after you do that and you ship product and it has impact and it is amazing and people feel it and see it, then it starts to get more believers. And you get more and more believers.

Jim Marous (20:27):

And that's been a major difference between, let's say five or seven years ago and today, is that five or seven years ago, if you wanted to build a digital organization, you almost had to completely pick up throughout the core. We know because there's very many big financial institutions that have been in a core conversion process for more than a decade. I think both of us know one very easily.

Jim Marous (20:49):

And the process, then you start looking back and saying, "Okay, if it's been done in further back than four years, you've got to throw that stuff out," and that's part of the old process. With that in mind and with the knowledge that most organizations you're going to be working with, with Galileo and most any digital platform is going to be working with, number one, you have the ability of having composable solutions.

Jim Marous (21:10):

So, you can build at a point at time, as you said, build on your successes and get the oxygen going, get everybody on board, which is a major cultural accomplishment, but can't be done by a rip and replace. It's really got to be done with that in mind.

Jim Marous (21:26):

In addition, while many organizations may know the knowledge and the forethought and the advantage of being a completely digital organization, they're still dealing with branches and people above the glass, what I'm going to call above the glass.

Jim Marous (21:43):

How do you humanize the digital experience today? From your perspective when you're helping an organization and say, "I'm not going to be running the way I run with some of my digital only or digital first organizations, but I'm going to be integrating the two" — how do you work with those organizations to integrate the two, so they still have the human aspect and the digital aspect, and it actually lifts beyond the glass.

Derek White (22:09):

The most basic elementary metric that can be introduced to anybody regardless of their fluency in digital, in any company, in banking, in any sector, any business, is a super, super, super simple measurement.

Derek White (22:30):

You can take a banker that's been the best banker in the world for 30 years and knows nothing about digital, or a CEO or a chairman. And I can't tell you how many CEOs and chairman I've talked to about this.

Derek White (22:41):

A typical CEO or chairman I've already talked about has had 50 to 80 P&Ls that they're looking at, and they're looking at where do I invest across their spreadsheets or the cells of their business. They measure all the financial metrics.

Derek White (22:54):

The one very simple first metric to measure digital maturity across all of those 50 to 80 businesses is one simple thing, and that is DIY.

Derek White (23:09):

Can Jim by himself, regardless of what the business is, whoever the end human user is, how much of that experience out of the top 10 things Jim wants to do, out of the top 30 things Jim wants to do (sales and service) can he do by himself in the glass or does he need another human.

Derek White (23:34):

In the technology world, they refer to that as how many humans are in the loop. At Google, we had a design principle that everything should be designed, that there's one human in the loop, and that one human in the loop is Jim.

Derek White (23:49):

The business model of banking has shifted. Banks are yes and incredibly important. When I was at BBVA, I ran 6,000 plus branches, and you have to look at that end user experience. There’s three primary interaction models for any human that a business can be designed around, but the first is to do it yourself.

Derek White (24:11):

And it's shocking Jim, just in Q1, a $60 billion market cap bank with over 120 million customers published in their annual report, their 55% DIY in 2023, annual results. A $70 billion market cap company is only 55% DIY. So, that means 45% of their business has to come into the branch.

Jim Marous (24:47):

And therefore, we justify the branch because of the people that are coming in daily.

Derek White (24:52):

But do they want to come into the branch? That's the simple concept of DIY because you then take this human experience of do they want to interact with you? Do they want to be able to DIY — the other two interaction models, the three interaction models (and we could spend hours on this) are DIY, do it together, or do it for me.

Derek White (25:08):

And you want to look at the evolution of the business, the very first basic element — and I'm shocked today that even in 2023 there's a multi-billion-dollar institution that's 55% DIY. It's shocking. New bank, a hundred million customers is almost a hundred percent DIY.

Derek White (25:25):

But at an experience level, if you take a DIY experience, does a customer want to be able to interact with you in the branch or do they have to, and use that across every one of your P&Ls … I've done it across multiple institutions. In consumer business it’ll be about 80, in institutional business it’ll be about 30, 35%.

Derek White (25:47):

But then you start to take that and you translate it into the P&L, and the consumer business, this human experience that is DIY is a 20% cost income ratio business. A do it together model is a 60% cost income ratio business. A do it for me model, we don't know yet because we haven't really gotten there and that's where we're going next.

Jim Marous (26:06):

So, with that in mind, we've talked about this offline, that not all size organizations are created equal. And that we talked about it today that we're seeing a lot of good movement on the biggest banks because they have money to burn in some cases.

Jim Marous (26:22):

We're seeing a surprising amount of advanced thinking and digitalization of the experiences at the smallest financial institution level and we're kind of missing that mid-range. What do you account for that? Is it because there's less layers and it's easier to get your leadership to convert their thinking into what has to be done in the future.

Jim Marous (26:42):

Is it fear, is it foresight? What do you see? Because you're working with a lot of organizations and a lot of different sizes, and who are the easiest ones to work with?

Derek White (26:53):

There's probably three key ingredients, and number one starts with leadership. And does leadership recognize the fundamental shift in behavior? Because banks can sit on a legacy asset base and milk that for years, and you can just drive efficiency, and most financial institutions could survive for years off of their balance sheet by just optimizing efficiencies.

Derek White (27:21):

But to truly create the future, it starts with a leader that has a vision that recognizes how human interaction has and will fundamentally change with technology. It's changed.

Jim Marous (27:35):

It's happening all around us. It's outside the financial institutions as well.

Derek White (27:39):

It is. Which is exciting to see that you got these leaders. A big part of what our business, just to divert for just a second — a big part of what we're also seeing is mega brands that have hundreds of millions of customers and their traditional business is not financial services but the whole essence of embedded finance, is to start to build and recognize that human interactions and the majority of human interactions have some component of a monetary element to it.

Derek White (28:08):

If you're buying something while you're shopping, if you are buying something to go on a vacation, money touches every aspect of every business of everything on the planet. So, when these big brands start to have hundreds of millions of customers on them, they look at and they study ecosystem and human interactions, they start to see, “Actually, are we more of a financial services and monetary business than we are a transport business or a retail business?”

Derek White (28:42):

One of our customers in Latin America as an example, is one of the largest retailers in Latin America, they decided to build an ecosystem in a financial services business. Now, the financial services business contributes more to their bottom line than their retail business, and they've got lots of locations.

Derek White (28:57):

But coming back to the question of the leaders and what's the difference between pace of change and why are we seeing innovation at the top and at the bottom rather than perhaps in the middle, part of it comes from number one, leadership.

Derek White (29:14):

Number two is how good organizations are deploying the three capitals, which is financial capital, human capital, and technical capital. And if they recognize how to deploy their human capital and the right kinds of human capital that they need to translate that vision into execution, that's essential.

Derek White (29:38):

And then the third is the actual creation model itself, and how do you actually go about. If you have the vision and you have the capitals, then it's the model to actually create that future. And those leaders that are seeing the future and they need to change, recognize that any project you have — and we were talking with our good friend Don earlier, the pace at which AI as an example is changing the way the pace at which you can ship product is phenomenal.

Derek White (30:11):

And recognizing having 4-year, 10-year horizons on a project probably just doesn't work. So, you got to be able to chunk the work down into something that ships in no moss, no more than nine months.

Derek White (30:28):

You got to have a project that in three days, you can assemble a team. Within six hours to six weeks at most, you have a prototype and you're shipping product in no more than nine months. If it's taking you more than nine months to ship product, that's the biggest difference.

Jim Marous (30:44):

Everything's changed again. It's interesting we have the solution providers in this building today that can build those platforms that can move you forward, yourselves included. What is interesting is it's also about the deployment.

Jim Marous (30:58):

I used the example yesterday in my session, I said, "How many of you have Salesforce in your organization?" Firstly, everybody does. How many actually know how are you using Salesforce today? It's the deployment, it's actually utilization, it's how you're putting it to market.

Jim Marous (31:12):

I also gave the example of my Hulu where the other day when I was about to go on a major trip, I said, “I have to get my Jeep fixed.” I was talking to my wife at dinnertime. I said I can't remember the name of the dealership. I know one of them, but it's not the one I want to go to. I wish I knew the company's name.

Jim Marous (31:29):

On TV, over her shoulder, during national news, they break to a commercial, it’s for the company that I already knew about. I said, “Well, that's just interesting,” that's all. The next one, back-to-back was the dealership I was looking for. You don't put car dealerships back-to-back unless you're listening while you do that.

Jim Marous (31:49):

And believe me, Hulu’s making money on that ability to listen and deploy against a solution the person's looking for.

Jim Marous (31:55):

Take an Uber. Nowadays, when I go overseas and I get an Uber, it not only gives me the ability to say where am I in my journey, but it's telling me where I can pick up my takeout food in the area based on my eating habits that they know because of open table. If I don't take action on that, they say, "Well, you might want to go to a restaurant, here's restaurants near the hotel." Again, going beyond a taxi service.

Jim Marous (32:17):

The most interesting of which is very much like an Airbnb experience, where the third thing they go is, "Here's things you can do in the area." Because they know, they'll be a part of every one of those interactions. They're raising the value of the Uber experience beyond transportation.

Jim Marous (32:31):

I say these because we've got to look at financial services beyond money. We have a couple of organizations overseas that have built really nice open banking systems for the youth market where banking is virtually no part of it, even though a bank account drives it.

Jim Marous (32:47):

But it's all the partnerships that are around it where people want to have the relationships with Emirates MBDs customers and saying, "I'll pay for that ability." So, the revenue model is completely changing. I mean, there's so many things moving.

Jim Marous (33:01):

As you said, "If you don't move fast enough, you're not going to be ready for the true AI experience, the generative AI experience." How many of us … I'm saying seven years ago, I don't know when Erica came out from Bank of America and we all go voice banking, not big deal.

Jim Marous (33:18):

The percentage of people that right now are interacting with Erica is massive within their base. And every single conversation is picking up data that, geez, it's going to look pretty damn good when they deploy generative AI, they have a head start on everybody in that category.

Jim Marous (33:35):

When you look beyond the glass, when you look at what banking's going to become in the short term (you have a three-year timeframe), how do you see the digital experience changing from what it even is today at the best organizations you work with?

Derek White (33:49):

To keep it simple, we refer to it as the age of brick, the age of glass, and the age of air. Brick was the age of branches, we're now in the age of glass and we're very soon going to be moving into the age of air.

Derek White (34:00):

Age of air means hence free interactions where it's more voice enabled than touch enabled. Touch will always be a part of our interaction model. But increasingly, AI will start to solve problems through the air, and solving and anticipating questions that we don't even have to interact with.

Derek White (34:21):

So, just as Uber is taking (in the example that you mentioned) and anticipating and sending you prompts ahead of time, so will that happen in financial services. That will happen for employees as they're coding with increasingly the pace at which ideas shift to coding. It will happen in the risk world, it will happen in the end user experience world.

Derek White (34:49):

And that is fundamentally going to change the way that we interact with money in the future with big brands, with big financial institutions and within our families.

Derek White (35:05):

One of the aspects of technology that I love is being able to create family experiences around money, and helping parents educate their children on their first bank account, as an example. You use this as an example. To be able to have the technologies and leveraging technology and the controls to be able to set guidelines and parameters to educate children in the right way, so a kid that's 12-years-old can have their own bank account and to be able to set it up so that the technology enables transactions at a specific merchant location, and at that specific merchant's location.

Derek White (35:56):

For example, being able to say to my daughter, she can go to 12th Street Starbucks or Subway, but not the 24th Street Starbucks or Subway because that's a little bit far away. But to be able to set up those controls and for her to have the money available in her wallet or on her account, that technology's available, is live today and people are using that. And it's easy to spin up that kind of capability for institutions that they don't have to build themselves.

Jim Marous (36:28):

So, on our podcast, we did an interview with Brian Romley, who I know you're familiar with. He's kind of like the savant of AI. He stays on top of things way beyond where my mindset can be. But in his conversation, he brought the fact that in the future of generative AI, we'll have this dialogue going on and we'll slowly but surely be building digital twins of every single consumer that we work with in the financial institution.

Jim Marous (36:51):

His perspective was the conversation will start being questions and answers as opposed to simply trying to use models to build an answer we're not really sure of, and every question will generate the next level of intelligence.

Jim Marous (37:05):

That's a really cool idea. Scary at times, but it's a value transfer as opposed to money transfer. It's why we pay $170 a year for Amazon Prime, even though you can't describe why you're doing it. It's just that they haven't effed it up.

Jim Marous (37:19):

So, you go, "I'm going to keep doing this, I don't know what I'll lose if I stop." I mean, I know I'll start being offered colored clothes I won't buy if I have to move away from Prime, but the reality is the whole experience is changing.

Jim Marous (37:32):

When you look at what's going to happen in the future, maybe digital twins, maybe not — what's the likelihood that financial institutions will actually be the one that manages the identity or will be another type of organization?

Jim Marous (37:48):

Because that's the question that's out there. Because the digital identity is like the hub, or I mean the consumer students still control it. Where do you see this going?

Derek White (37:58):

I'd give three models as examples if we can because no one model is going to win. Several years ago, I talked about can banks be the big threat to big tech rather than big tech being the threat to banking. And the battleground is simply around interactions. I cannot say this enough, but it is the way in which organizations look at interactions.

Derek White (38:25):

So, let's take the ecosystem model of China. You can look at the ecosystem model of the U.S. or Latin America or Africa, but the ecosystem model in China is notably different from the United States because of one reason. And it's different from the Europe because of one reason, and that is regulation. China enables the big ecosystem to play in financial services more so than others.

Derek White (38:49):

I was running a business in China, and at that time, the Chinese enabled 1,200 person-to-person payments businesses to operate over for about two years. And then literally overnight, they shut it down and said, "Unless you have one of the 29 licenses, you can't operate." We fortunately had one of those 29 licenses, but 1,100 businesses were literally shut down overnight.

Derek White (39:13):

And recognizing the ecosystem businesses, and there's three different starting points of Xiaomi or other ecosystem businesses. Xiaomi started with physical hardware, and they built an ecosystem off of it and they've gotten into financial services. So, that's kind of big tech ecosystem. In the United States businesses, Google’s on their fifth attempt at money.

Derek White (39:37):

Amazon keeps playing in this space and they do partnerships with really big banks because they don't want to get into the regulated space. This line of regulation protects consumers, but it's different on every continent and in every country. So, the biggest space is looking at one, the ecosystem players. The second is look at the really big, really successful digital banks.

Derek White (40:01):

So, your question is, is it going to be the banks that manage identity in the future? It might be, but it might not be the banks or financial institutions as we know them today. Take Revolut and take NewBank, have you noticed the products that they're rolling out? Their products aren't just financial services products.

Derek White (40:23):

They started as a bank and they're going the opposite way of the Chinese. They're building ecosystem because they're looking at who is their customer? What financial products does the customers have?

Derek White (40:38):

As financial entities, you have insight into what those customers are spending on. And then it's a natural one hop adjacency to start a business, it's not seven hops away from your core business. You start to offer telco experiences, which Revolut is offering telco.

Jim Marous (40:54):

We've never had that in the U.S. We've had companies put their foot in the water and they have the branch, they have everything we need.

Derek White (41:02):

You have lots of telcos that are trying to play in financial services, and they keep trying and some are more successful than others. The AT&T credit card was in its day, hugely successful. So, there’s the Chinese model and the U.S. kind of ecosystem model, but that’s delineated by regulation.

Derek White (41:20):

There's the new emerging mega players of NewBank and Revolut and others, I think are just doing incredible things here. There's several others that we could talk about as well, but they're building ecosystem. And the ecosystem is based on interactions and monetization of interactions in a different way.

Derek White (41:39):

Now, the third space is traditional or legacy financial institutions. And legacy financial institutions, there are a couple that actually are looking at interactions as the leading indicator of their future of their business. And the more you find an executive that is looking at the interactions of their customers, it’s phenomenal.

Jim Marous (42:00):

As opposed to an MPS score. I mean, I'm sorry, but the whole engagement level-

Derek White (42:04):

MPS is a laggard after the interaction model, and then they're more so just a beautiful test as I've talked to CEOs and chairmen across the world. If you are a CEO or a chairman, look at your calendar and see how much of your time in a week, in a month, in a quarter, in a year is spent on balance sheet and P&L.

Derek White (42:28):

How much of your time is spent understanding customer interactions, customer opportunities or complaints, and designing the future end user experience. And if that's not your area of expertise, who do you have sitting at your table that's the equivalent of your CFO on your balance sheet? Who's the equivalent of that expert that knows how to design and create that future ecosystem and the evolution business?

Jim Marous (42:52):

Last question before we throw it over, we don't have much time even for the crowd. But all these organizations are going to be meeting with companies downstairs. All of them are going to be looking for solutions, but we can't wait. I mean, we got to do this now.

Derek White (43:05):

Because every day you don't do it, every day you accept the solution is going to take a year or two years to deploy, is giving up time, which none of us have enough of. And oh, by the way, the consumer marketplace, the overall marketplace is moving much faster than we can’t even keep up with. If you’re out on that side, what would you give a suggestion as to what they need to do first today?

Derek White (43:28):

So, in this audience, I'm speaking to legacy companies?

Jim Marous (43:36):

Legacy company, most likely a front-facing retail banker, marketer, product developer, a customer experience — that's pretty much most of the people in the audience.

Derek White (43:46):

You didn't give me much stage to roam on here, Jim. It's really hard for me to stay this long in one seat. So, I apologize. This is a great question.

Jim Marous (43:54):

Try to do it with passion if you can.

Derek White (43:58):

I'll try to unleash. I'm going to uncork on you here. So, again, if you're a legacy institution, the number one thing, because you're a CEO and/or chairman, especially if you're publicly traded, understand how many P&Ls do you have in your business, and then go back and measure how DIY — number one, go back and measure how DIY your business is. It is super simple.

Derek White (44:17):

Take the top 50 reasons why a human walks into a branch. Take the top 50 reasons, top 10 reasons why a wealth customer contacts your wealth management business. If you're a corporate banker, what's the top reasons why your customers are contacting you? Is it because they want to or is it because they have to? Start with the top 10, it's super simple. Top five sales, top five service. Are they contacting you because they want to, they have to, or is it DIYable?

Derek White (44:53):

Because if Google came in, took over your business today, look at it like Google or Zuckerberg comes in and takes over your business, flips your business on the head and says, "If I were to design this with zero humans in the loop, one human above the glass, zero humans below the glass,” what does your business model look like? Because that's where we're heading. That's the first phase, that's the first step.

Derek White (45:16):

Once you make it available and if you're a marketer, there's the five As of how to run this: is the product available? Are customers aware of it? Are they adopting it? How amazing is the product so that they become advocates?

Derek White (45:29):

It's super simple. First, it has to be available for them to be able to interact in the current and/or future interaction model. It's super simple, anybody can measure it, that's where you start. If you're at 30%, be alarmed. If you're at 85%, you're ready for phase two.

Derek White (45:47):

After you get to DIY and things are available, then you start making it intelligent. You have to make it functionally available. Not PDFs online, but you make it functionally available. Once it's available, are you getting interactions off of that? Then you start to make it intelligent.

Derek White (46:05):

Because again, imagine Zuckerberg comes in or whoever, name your tech executive — they come in, flip your business on its head, they immediately start to leverage the data you have today to make it intelligent. And there's five Cs of data, if you want to get into the five Cs of data.

Derek White (46:20):

Once you make it intelligent, then you can start to anticipate, how do you remove decisions for a customer? The biggest stress in any human's life is money. The biggest stress in any human's life is money, there's lots of studies on this. Not getting married, not a divorce, not a loss in family, not remodeling a house, it's money. How do you remove decisions for them? That's the world beyond the glass.

Jim Marous (46:48):

Wow. So, we all feel a whole lot further behind the eight ball than we started with, isn't that a good feel good moment. The reality though is I will test that. Based on what Derek just said, the reality is we're wasting money on marketing if we don't have a DIY experience.

Jim Marous (47:12):

Because if we're using marketing money to try to generate new accounts, we're putting the marketer's hands behind their back and handcuffing them, going, "Good luck with this one because we're not going to let those customers come in that you're trying to generate."

Jim Marous (47:23):

Take some of that money, allocate it towards the back office, the behind the glass, and work quickly. Because if you start looking at what generative AI is going to have the potential to do, or how generative AI is making the consumer aware of what could possibly be done, consumers are going to start making decisions based on your ability to deliver against that.

Jim Marous (47:46):

We don't have any time for questions. But Derek's around and I'll tell you, this is why we've done Banking Transformed Podcast. It's for people like this to get on the YouTube channel, on our podcast channel and have interactions, and hopefully, bankers learning how you can be better bankers.

Jim Marous (48:06):

He's been involved in a lot of different organizations, in each place he's been, his stamp is easily found today, in some cases, 15 to 20 years later. That's a good thing, by the way. Galileo's on the cutting edge of what's being done. Even if you don't use Galileo, be aware of what they're doing.

Jim Marous (48:24):

They're serving not just SoFi, but organizations across the entire universe, financial and non-financial. Be on the cutting edge, be aware of how you become resilient. We didn't use that word amazingly, but you will not be resilient if you're not moving forward quickly.

Jim Marous (48:42):

This is a ball. This is fun. Banking's never been more fun, never been more energized, never been more potential because digital allows you to do it in a nanosecond instead of building a branch that takes 18 months. I'm not against branches, you better make them talk to each other though. Thank you for being here. Thank you-

Derek White (49:03):

Thank you, Jim.

Jim Marous (49:05):

For being a guest. I really appreciate it. Thank you.

Jim Marous (49:10):

This podcast will be going live in about two to three weeks both on YouTube as well as the podcast channels. It'll be located on the drop-down menu as they all are in the Financial Brand website. Thank you so much for being here today. Enjoy your lunch.

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