Unlocking Growth Mode Series #3 How Banks Are Failing Their Most Valuable Clients

Jim Marous (00:12):

Welcome to Banking Transformed, the top podcast in retail banking. I'm your host, Jim Marous. While consumer digital banking has seen tremendous innovation, commercial and wealth management sectors often lag behind creating frustration for some of banking's most valuable customers.

Jim Marous (00:28):

We're joined in the Banking Transformed Podcast today by Alex Jimenez, Lead Principal Consultant at Backbase. Alex helps us understand the critical differences between consumer, small business, commercial, and wealth solution customers, and why a one size fits all approach fails in today's competitive landscape.

Jim Marous (00:49):

He also explores the unique needs of the commercial and wealth segments examining the performance gaps currently plaguing the industry. The message is clear, financial institutions can no longer afford to focus exclusively on consumer digital experience enhancement while neglecting their commercial and wealth management clients.

Jim Marous (01:12):

Every banking segment has unique requirements, challenges, and opportunities. The banks that will thrive in the future are those that recognize these differences and create very tailored digital experiences that address the specific needs of every client group, including the very profitable, commercial and wealth management clients.

Jim Marous (01:33):

So, Alex, I have known you for well over a decade, and you have helped many firms crack the code on building better digital banking experiences. Can you provide a short background on your role at Backbase and how your previous roles really helped you build into what you're doing today?

Alex Jimenez (01:51):

Sure. Yeah. So, I am part of a consulting group that's within Backbase and our role is to help our customers and our prospects define their strategy, how they're going to implement our platform, and how to optimize it. And we serve retail, small business, commercial, wealth management lines of business so we understand it across all four different segments or however many you define them to be.

Alex Jimenez (02:27):

Prior to me being at Backbase I spent a few years in consulting with Extractable and with EPAM. Somewhere in there, I also worked with a company that you, I believe know pretty well, Analytics AI and before that I was with banks.

Alex Jimenez (02:50):

I started my banking career with Fleet bank, which was then acquired by B of A and then I moved to Rockland Trust in the Boston area. And in Rockland Trust, I was their first head of digital and so I helped them transform their bank and this is now 10 years ago, so-

Jim Marous (03:11):

I know this differs across financial institutions, but could you share a little bit of your perspective on the current state of digital banking maturity across different customer segments, be it consumer, small business, commercial, and wealth management?

Alex Jimenez (03:26):

Yeah. So, as retail consumer users we all have our apps on our phone, we've done online banking for a long time, it's a fairly mature technology. And so, we see that while vendors have different capabilities, and we certainly have capabilities that are different than others, the experience is already one that is at least satisfactory.

Alex Jimenez (03:59):

And if you go and just pick up any bank of any kind and look at the ratings, you're going to find them somewhere between four and five, if you're under four, give me a call. But somewhere between four and five is what most organizations have because there's an experience has been built through the past decade on what it is and how it's presented to customers.

Alex Jimenez (04:24):

We start getting iffy once you're a sole prop. As you know, Jim, it's difficult running a business, a small business and getting digital experiences that are akin to what you get in the retail side, or better yet akin to what you get from PayPal or some other organizations that are out there. So, that's with the smallest of small businesses, but then go up market, go to middle market commercial customers, treasury customers, and it gets even more complicated.

Alex Jimenez (04:57):

You go even further up in the market, you get to corporates, corporates are not users of digital banking much, but what they're expecting is the ability to connect to the bank data, and there's issues there as well. So, we're not serving businesses of any size wealth as an industry and then look at wealth and wealth is a different animal.

Alex Jimenez (05:23):

Private banks, wealth management companies don't necessarily want you to be out there day trading, that's not their model. Their model is here's your portfolio, you have a private banker, private banker will talk to you, they will take action for you, they will manage your portfolio but increasingly, people are asking for that view they get in their consumer banking platform.

Alex Jimenez (05:50):

They want to see what the portfolio is, they want to be able to talk to their banker every day when the S&P or the NASDAQ goes up or down, how is that impacting me? And they're serving those kind of clients but not well from a digital standpoint. So, you may have a pie chart, you may have your monthly blurb about what happened in the market last month, and that's pretty much all you get in the digital experience.

Alex Jimenez (06:22):

So, wealth management clients are asking for more, business clients are asking for more, and we just have not matured how we serve those businesses digitally and a lot of that is because we haven't had to.

Alex Jimenez (06:38):

When the business owner does not use digital banking, and the person that actually uses is their finance team or their bookkeeper, you say, "Well, they're going to have to live with my decision on what bank it picked and whatever they show you, that's what you're going to do, and it's part of your job."

Alex Jimenez (06:56):

That also doesn't work anymore. Those people are now complaining to their employees and say, "Why? This is terrible. I'm spending all my time trying to make things work with your bank and it's not working." So, that's the big gap that I see just going up market from retail.

Jim Marous (07:13):

To your point, consumer digital banking has seen a significant advancement to a degree. I mean, they're able to deliver everything digitally. And as Michael Abbott on our show said a couple weeks ago, but the challenge is there's very little differentiation between providers.

Jim Marous (07:29):

You got commercial and wealth now that has somewhat as you referenced, lagged behind. Is that lag caused more by the financial institutions not moving to that level, or because there aren't as many solutions out there to serve that marketplace, or because there are clients have not asked for it or a combo?

Alex Jimenez (07:52):

It's a combo. So, clients in the past have not asked for it, and therefore banks have not felt that they had to fulfill that. And therefore, the vendors that are in that space are smaller, there's less of them. They have less capabilities, so it's all of that.

Alex Jimenez (08:09):

But that’s changed quite a lot. Last year, Coalition Greenwich did their annual study of middle market, small and commercial customers and they found that over 60% of smaller to medium sized businesses saying that they call themselves digital native which I thought was kind of funny because they're not, they're not digital native.

Alex Jimenez (08:36):

But what it mean, what it actually means is that the people that are now running these businesses, that are running the finance functions, that are running the accounting department are millennials or Gen Zers, and therefore they're asking for something different. They're asking for, "Hey, you know, I can do this with my Chime app, why can’t I do that for my business?"

Alex Jimenez (09:01):

So, they're starting to say those things and banks are hearing it, but then what they have as far as solutions are not a one discreet solution. So, if you look at the example of treasury management, you may have treasury management with four or five different providers providing all kinds of different things.

Alex Jimenez (09:25):

And if you've done a good job, you might've been able to put that behind some sort of framework that generally a user can navigate, but it's still clunky. There are times when you have to log out and log into something new. They might have SSOs that allow you to log into new functionality, but sometimes they're not.

Alex Jimenez (09:51):

You have merchant services, which is separate, you have payroll, which might be separate, then you want to be able to access all of that through Xero or QuickBooks and you may not be able to have a connection to your bank, all of those things make it a really chaotic environment.

Alex Jimenez (10:09):

So, from a technology standpoint, it's hard for a bank to say, "Okay, we're going to take all these things and we're going to switch to Backbase," and that's a tough thing for them to do and to rationalize.

Jim Marous (10:25):

It's interesting, Alex, when you look at this, and you mentioned it about the employees that are now running these different parts. We've always known in banking that commercial clients are still people, they're still individuals but there's different individuals across the different functionalities of what that commercial client does.

Jim Marous (10:44):

So, you have a different guy or woman running payroll than you do treasury, a different person running daily balances, and you do their investments. On the other hand, in the wealth area, you have that wealth client actually going much more down market as far as good clients that a financial institution wants.

Jim Marous (11:04):

So, it's not just the old, gray-haired person that has all the wealth, it's now a much younger customer that's trading much more that's actually worth more financially to a traditional financial institution and more likely to get that customer than a traditional wealth customer who probably stays with their traditional broker or does it themselves.

Jim Marous (11:26):

What's happened is, with all these individual transactions, and I'm referencing your earlier comment that says, "These are actually people that are managing things but they want the information.” They want access to tools, they want access to data, insights, all this, that they can't get an outside a digital world. They don't want to wait until their quarterly account client rep comes in and says, "Well, here's what we know about your financial relationship," they want it accessible today.

Jim Marous (11:56):

How does a provider like Backbase address these extraordinarily expanding relationships and needs that go far beyond what the consumer or small business want. I mean, moving from consumer to small business was a big jump because they also have a number of different functionalities if they're a very active and a good-sized small business.

Jim Marous (12:20):

But when you talk about commercial and wealth clients, you're talking about completely different ways of using the financial institution. How does an organization like Backbase help to address the needs of these clients with your platform?

Alex Jimenez (12:36):

So, our platform is cross channel and cross business unit. So, the learnings that we've had in the retail world, we are now applying to these other areas, small business, commercial and wealth. But think about 10 years ago when we started talking about design thinking and start talking about customer journeys and so on, it's really just applying the same sort of thinking to the new client, to these new clients, or to these new personas or these new segments.

Alex Jimenez (13:12):

And one thing that you said, on the wealth side, it's no longer just the older client that has all the money that is asking for the same I'm going to pick up my phone and talk to my banker, no matter where I am, no matter what time they're going to answer the phone because of all the experience that now everybody of all ages have had with digital, the experience is now really different. Some of those people who used to just pick up the phone and call are not doing that. They want to be able to go into an app and do it, so it's not just that.

Alex Jimenez (13:54):

The other thing in particular, in the wealth space is right now we're going through a huge moment in time where a lot of the wealth is being transferred from the oldest boomers and silent generations that are still out there to their children which are Gen Xers or Gen Zs or millennials. And again, all of those groups come with very different expectations so it's really a matter of looking at what it is that they want.

Alex Jimenez (14:31):

So, in the case that I mentioned already on a wealth management customer, they want to be able to get a daily summary of what's happening to us, what is it that my portfolio was just affected by S&P going down 900 points, whatever, how is that going to affect me and what do I need to do? Do I need to sell?

Alex Jimenez (14:57):

Generally, that would be a phone call, and your private banker would tell you, "No, don't worry about it. This is the up and downs of the market, et cetera." But you could go to an app and now get a blurb that's written by generative AI, for example. Tells you what your position and is very specific to you, to your portfolio.

Alex Jimenez (15:16):

So, we are doing those sort of things where we are taking what the expectations are of people and having that feeling that I'm dealing with someone that knows me really well and not having to hamper the private banker that has to take all the calls from everybody in their portfolio because the S&P went down 900 points.

Alex Jimenez (15:42):

So, it's the how do we automate that relationship give enough information, and also, it's not to replace the private banker, but it's to augment them. On the other side, our platform is also used for the advisor and the wealth side. In fact, our platform has more functionality for the advisor than it does for the consumer, for the wealth owner.

Alex Jimenez (16:06):

And we're giving a lot of the capabilities that you would see are sort of akin to what you see in the retail world to the advisor, and they're taking action. Because if you look at the amount of time that advisors spend on non-relationship management capabilities it's something like 60% they're doing administrative work. If we can reduce that, that's a huge win.

Alex Jimenez (16:39):

So, in a well space, we focus on that, on the commercial and small business space, we look at those personas of the accountant or the accounts receivable clerk, the payroll clerk, and so on and we build experiences that help them do their job better.

Jim Marous (16:57):

So, we've been in this business long enough to know that banking tries to find shortcuts, they try to find ways to save money, even as they look at AI, a lot of it's towards efficiency and effectiveness as opposed to better relationships.

Jim Marous (17:12):

But in the same sense, we see traditional financial institutions trying to adopt or adapt their retail digital platforms for commercial use, as opposed to finding a platform that can serve this broader customer segment, relationship base in commercial and in wealth.

Jim Marous (17:31):

What are the pitfalls of trying to take a retail digital platform and try to make it so that it can work for commercial as opposed to finding either a commercial platform, but more likely a platform that really is more of a foundational platform that can help them get to all these segments?

Alex Jimenez (17:52):

This is interesting and in my previous role, I did a survey of business owners, this is in 2023, and this was actually a global survey. We had 10 countries and this was a retail specific survey, but as part of that, we had a set of questions for businesses.

Alex Jimenez (18:15):

And we had a sizable number of business owners that responded to the survey and the amount of business owners that were using their retail banking products and therefore the digital banking for businesses was huge.

Alex Jimenez (18:32):

And we all kind of know this but the numbers were really surprising to me because as you would expect, the larger the organization, the less use of personal accounts for business was not entirely correct.

Alex Jimenez (18:50):

Actually, it did show that the larger you get, the less you use but we actually get to a point that the larger you got, all of a sudden we started using more consumer accounts, which I still cannot explain but it was in the data, and it was significant number of people in that survey.

Alex Jimenez (19:11):

One of the other questions we asked is, how well are you being supported? And it was a resounding no, "I'm using my retail accounts because it's easier for me than trying to go and open a banking account," and why is that an issue?

Alex Jimenez (19:30):

Well, in many places, including some parts of the U.S., you can only open a bank, a business account, if you go to the branch and if you're a digital person, a heavy digital user, you're going to want to do it through the digital channel. If you don't, then maybe I'll just continue to try to use the retail.

Alex Jimenez (19:53):

But the big problem is there's no functionality in the retail world to be able to do things like payroll or to be able to do things like ACH and wire, none of those capabilities exist in the retail space. So, therefore you need to move to something else. And there are platforms out there or single solutions that address some of those needs.

Alex Jimenez (20:21):

But you wind up with a bank that has a retail solution, and then you'll have a business solution, and you're supporting these two solutions and what happens to small businesses, small businesses don't all look the same.

Alex Jimenez (20:34):

Just because you have three employees does not mean that you act like somebody else has three employees, you might be vastly different depending on your industry, and you might be better served to be in the commercial side than in the retail side.

Alex Jimenez (20:47):

So, I see banks struggling with the people that get lost in the gap and then being able to provide capabilities that are as fast as we are moving in the world. One of the challenges we had in the commercial space is trying to sell real-time payments. We don't really have a good solution to sell to the market as an industry.

Alex Jimenez (21:12):

We go and tell somebody, "Hey, we have this real time payments," and they said, "How much is that going to cost me?" And they're like, "Well, we don't have a product for that." "Okay, well, don't sell me that until you come back with a product and by the way, I'm okay with waiting one day with ACH." So, ultimately you cannot serve businesses on the retail platform, period. And so, what do you do? How do you serve them? And that's the struggle.

Jim Marous (21:42):

So, let's put your traditional banker's hat on and you have a retail digital banking platform, you are looking to serve the commercial and wealth area and so you have some solutions out there you could bring in, as you mentioned like in payroll or maybe in wealth management, all this.

Jim Marous (22:02):

What are the decisions you'd have to make as a banker to say, "Do I bring these elements in and try to side card them with what I already have or do I look for more overarching solution that can really serve all these needs when I need them?" What goes into your decision process as a banker to look at your alternatives in the marketplace today?

Jim Marous (22:29):

Because we have so many solutions. You can do a rip and replace, you can do a side card solution either within or outside of your traditional solution provider. I know you're going to be somewhat biased, but that's good, what are the decisions, things that you have to put in your mind saying the advantages and disadvantages?

Alex Jimenez (22:52):

I think the side card idea was one that a lot of us did because really that was the only good solution that we had but it's really just not addressing the issue. Again, the collating experiences under a single front door, if you will and then sometimes things are clunky and so on, that's not working anymore.

Alex Jimenez (23:18):

So, really, it's got to be more of how do we have a system that's built that allows us to serve a sole prop all the way to someone who's about to become a corporate? How do you do that? It's got to be really extensible, it's got to be able to turn on things on and off.

Alex Jimenez (23:42):

And by the way, it's funny because one of the things that we found is as we start working and building our solution that is addressing a lot of these issues, we realize that some of these things we can actually take back into the retail world.

Alex Jimenez (23:59):

So, an example that we have, we have family banking in our retail platform, and family banking is really, at the end of the day, is just a small business. I'm the dad, I do the banking, I'm the administrator, I administer what my children are going to be able to use on the retail platform, and whether I issue a debit card or not, that's family banking but we actually took a business thing that we brought back to retail, so it actually works both ways.

Alex Jimenez (24:30):

But going back to your question the other thing that when you start looking at how you are serving your commercial customers or your business customers, you realize that you have a duplication of technologies not just the two different systems, but when I worked at Zions Bank which I did forget to mention earlier, when I worked at Zions Bank, we spent a lot of time looking at our tech debt, and we realized that we had five different ways to do document signatures.

Alex Jimenez (25:09):

Our mortgage team used DocuSign and our retail team used something else, and our commercial used something else. We were paying five times for the same capability. How do we collapse that into a single capability? How do we do that? And so, when you start looking at how you are collating all those experiences for business customers, you realize there's a lot of that duplicity or not duplicity, duplication.

Alex Jimenez (25:40):

You have things like, okay this vendor requires me to do a sign on that is 10 characters with a special character in two numbers, but this other one does it a different way, and therefore we're going to not have a single sign on and we're going to do it.

Alex Jimenez (26:02):

I mean, these are all dumb decisions that we made back in the day, but when you start looking at the experience, you realize how broken it is and how you need to serve the clients in a different way for all the reasons that we just talked about.

Jim Marous (26:17):

And I know enough about the Backbase system to know that if you have a client that brings in a specific new account opening platform, that your platform works well with those things, it's just I think really gets down to, and we're talking about it a lot lately on the podcast, is the need to understand your true North star.

Jim Marous (26:38):

And so, that means that when you have these meetings with your solution providers, you want a solution provider that's going to ask those really tough questions and keep digging until you really get to the foundation on what you want to build because you can build it in pieces, even with Backbase, it provides just an overarching solution, you don't have to do it all at once.

Jim Marous (26:59):

But the reality is, if you don't know where you're going, your different parts, even with a major solution like Backbase, are not going to be facing the right direction if you haven't figured out where you need to go.

Jim Marous (27:12):

And especially as you start looking at wealth management and commercial where your true North star or what you want to be as a financial institution can really define certainly the order in which you deploy these solutions, but then what these solutions actually do.

Jim Marous (27:29):

Which gets me to my next question, which is, we talk a lot about technology, and you've met with enough financial institutions in your today to know that we all talk about buying that next best technology.

Jim Marous (27:43):

But as you step back and as I've stepped back over the last couple years to look and say, "Geez, if the leadership and culture isn't right, it doesn't matter what technology they buy or what the capabilities and technology are, it's not going to be deployed well."

Jim Marous (27:57):

How do you help a prospect/client, one that's in the midst of working with you? On the consultancy basis, how do you work with organizations to actually work with the leadership, work with the culture to say it's not about the technology, you need to fix these things within your organization, because it's hard, I would imagine it's very hard to say this right in their faces.

Jim Marous (28:25):

I do it in a group setting a lot of times, and you get this stunned look on your face going, "Yeah, I understand," but you realize they don't really get it. How do you do as a consultant that really is the ombudsman?

Jim Marous (28:38):

We just had a interview with Lacey and your and she talks about building the exceptional customer experiences both from the end customer, meaning the client or the small business or the commercial, but also your clients themselves. How do you work with organizations to make it so they can get the most out of the platform you provide, the technology you provide?

Alex Jimenez (29:02):

That's a great question and that's a lot of what I do. When we talk to a prospect or a client, there are some clients who know where their North star is. They have the strategy down pat, they really don't need my help much, this is where we're going, this is what we need and they're very clear.

Alex Jimenez (29:25):

And it's not always who you think, sometimes this is small credit union that is very focused, they know where they're going. They might need some help in building a business case and so on from just real basic stuff but they know their strategy and so on.

Alex Jimenez (29:41):

And then there's some large organizations where you think, "Oh, well, that's a really large regional bank, they surely have the strategy, and sometimes they don't." Or they have silos that are very, very deep and the people in the call center don't talk to the people in the business unit, and this business unit doesn't talk to that business unit and so on.

Alex Jimenez (30:05):

So, trying to talk about a platform that can take information and conserve clients for various different products is a challenge. So, a lot of times, one of the first things that we do is trying to gauge their strategy. Where are they? Sometimes they just take out the McKinsey strategy that they just paid $3 million for and say, "Here it is."

Alex Jimenez (30:29):

And that doesn't mean that they actually have it because if they haven't really bought into it then they don't really have it. But it's trying to understand who's behind this, who's pushing, who's the person that is going to be making the decisions and not the decisions of purchasing our platform. Certainly, we do that to understand that but who's actually making the decisions of what goes where?

Alex Jimenez (30:59):

And if that person is not in the C-suite, it is difficult. Because if we are dealing with someone in the middle of the organization that has this vision, but they have to continually sell it to the C-suite, then it's going to be difficult, and it's going to be a difficult time for them to transform and to be a digital enabled organization.

Alex Jimenez (31:24):

That's what I did when I was at a bank. I was in the middle. I was continually selling to a C-suite about what we needed to do and it took a long time for them to say, "Oh, okay, I got it, alright. Now we can start putting some investments around this." So, trying to bring in the appropriate teams together, trying to get the technology, teams trying to get the business teams, the support areas, the back office, the front office, all behind that idea-

Jim Marous (31:53):

Compliance.

Alex Jimenez (31:54):

Whatever. Absolutely, compliance and then get them, if they're all aligned, fantastic, if they're not, then it'll be us convincing the client that they need to help us get you there and sometimes they don't and we know we're going to have a difficult time, so it's different for every organization.

Jim Marous (32:23):

We can't get into any of these technological and platform conversations without talking about security and risk. I mean, at the end of the day, none of this makes any difference if we can't make it so our customers have trust in us being able to secure their information. How does Backbase work on an ongoing basis to improve the security and risk components within your platform, but the way you work with different clients, be it consumer, commercial, small business, or wealth?

Jim Marous (32:57):

How do you address these variations, these needs, and how do you try to stay ahead of the game? Because honestly, my experience is, as much as the financial institutions try to do so, many don't know the foundation of the platform, they're using enough to know what to protect from. How do you work to do that as your organization on behalf of your clients?

Alex Jimenez (33:20):

Oh, there's different levels. So, our legacy clients, the clients have been with us for a long time, they're the solutions on-prem. A lot of that, I'm not saying that now it's on them to do it. Obviously, we're involved, but it's a different level of risk than our newer clients that are on the cloud and therefore, our involvement is more robust from a day-to-day standpoint.

Alex Jimenez (33:51):

Like any organization in this space, we have a large team of security people doing testing and making sure that the system is as bombproof as possible. So, I'm not the expert in the security, so I can't really speak too much about the very detailed things in the space but certainly, we spent a ton of time doing R&D in all areas of our platform, including security.

Alex Jimenez (34:28):

One thing that I've noticed and it's really different from where we were as an industry when I was at a bank, eight years ago or so on, banks have really upped their game as far as their CISOs and their technology security routine so that's good to see and certainly we work with those teams as we deploy.

Alex Jimenez (34:50):

It used to be that the people that we had doing security at banks were not up on the latest and nowadays, you talk to a security person at a bank, and they're worried about what's happening today and they're very well informed, much more so than they used to be.

Jim Marous (35:18):

So, I know you could name, but I'm not going to ask you the name of a financial institution that's really doing an exceptional job of creating segment specific digital experiences, but let's put it in the context of an organization that is doing that. What are they doing differently in the marketplace? How are they looking at things? How are they deploying things? How are these organizations excelling in developing really good segment specific solutions?

Alex Jimenez (35:52):

If you remember back in the day when we had, before technology was the main driver of banking, we spent a lot of time trying to figure out how the branch could support all the different clients that we were serving. And the branch network had a unique role being really the true front office to clients.

Alex Jimenez (36:20):

Certainly, they still have a role and it's significantly less than it used to be, but digital is now the front door. And if you have organizations where digital is siloed, just like you silo everything else, then you're going to have a problem. So, having the ability to think what the digital experience is going to be across the organization for all the products, for all the segments, is an important role.

Alex Jimenez (36:56):

So, I see organizations that have their digital teams that report to the CIO, CTO and many times they're really just looking at the technology. They're focused on the technology and not necessarily looking at the business. On the other side, you have some digital teams that are in the business and are kind of far away from the technology and generally they're managing a vendor as opposed to actually managing the technology.

Alex Jimenez (37:26):

And so, they have that silo world of this is what we're going to do for our consumer client, our commercial client, our mortgage client, or whatever client and there's no single encompassing view. The organizations that I see doing a really great job regardless of where this role sits, whether it is at the C-suite, as a chief digital officer, or anywhere else, as long as their breadth is the full digital experience with certainly specialists underneath that, I think that's really needed at this point.

Alex Jimenez (38:00):

We've gotten to the point where digital is such an important part of banking, regardless of what area that it can no longer be, "Okay, I'm the digital guy for the mortgage department and this is the experiences for our mortgage customers."

Alex Jimenez (38:17):

Because guess what, if you really want to build a share of wallet and make sure that people stay with your bank for most products, you're going to be able to incorporate that into the overall and not just say, "Well, that's mortgage and that's separate, we do it some other way."

Alex Jimenez (38:37):

And I love the banks to have mortgage absolutely separate from home equity. What? How do you do that differently? How do you serve them differently? How is it that you can do some things with your home equity, but you can't do them with a mortgage? That drives me crazy because I'm in that role, I'm in that boat. It makes no sense.

Jim Marous (38:55):

Yes, exactly. Well, it's interesting because it gets back to how do we make things seamless if we put different barriers in the way of everything and we're the sides that don't talk to each other. We had talked to your CEO and founder, Jouk Pleiter and we talked about the fact that the future of banking is probably not product based anyway, it's overall relationship.

Jim Marous (39:22):

It's as you mentioned, the family of services, and it's really looking and saying, "How do you bring these together by flipping switches the way you want to?" In some cases, it may involve all the different segments. You may be a consumer, small business, commercial client and a wealth client and you may want an overall view of your relationship but there's times when you only want parts of that.

Jim Marous (39:45):

And the future of digital allows you to do that, where paper didn't obviously. And we've kid about this on other discussions, you and I, that digitalization is not a matter of making paper digital, it's a completely different way of looking at things.

Jim Marous (40:04):

And especially as you get in the more complex relationships of small business, commercial and wealth, you really have to look at the foundation differently to be able to build for the future. Because if you don't, you're not going to have the flexibility or resilience to go forward.

Jim Marous (40:23):

I mean, the thing we don't talk about enough is that if you build the right technology base, you'll have resilience that no matter what comes up change in rates, change in the markets, a change in the way that risk and security, possibly, the ability to move on a dime because of the technology base can support that, is what you really have to be working towards, where you're not going to have to change everything when a new products’ introduced or it doesn't hold back innovation.

Jim Marous (40:54):

And Alex, from an innovation standpoint and from looking at what's coming up down the line, I think at one point, I used to say 10 years ahead, but now, we'll say just one to three years ahead, what excites you about the future of not only digital banking within the commercial and wealth space, but in the overall banking space?

Alex Jimenez (41:21):

I will sound like everybody else, and I will say AI begrudgingly. And why I say begrudgingly is because AI is not where-

Jim Marous (41:29):

It's the easy answer.

Alex Jimenez (41:31):

Yeah, that's true but it's the possibility and not necessarily the current capabilities. You get an inkling of what you can do with large language models from what you can do today with ChatGPT but we haven't really gotten even close to scratching the surface and what could be possible, and certainly not in financial services.

Alex Jimenez (42:03):

If anybody out there in financial services is thinking of using ChatGPT on there to serve their clients, I would counsel them to hold on and think of that very carefully. But there's also a lot of AI that's not really AI. I just recently saw an RPA vendor start talking about their AI solution, and it's just RPA.

Alex Jimenez (42:39):

So, when you look at Erica, for example, at Bank of America and the chat bot, it's a terrible chat bot, I'm sorry, to my former colleagues at B of A, but I have not had any good luck with it. It is just not ready.

Alex Jimenez (42:55):

Just like Amazon solution, which I can't say the name because I will wake it up right now and it doesn't have the capabilities that you see from a ChatGPT, but there's also the risk of hallucination is a problem we need to address that, it needs to be dealt with. I use ChatGPT and other large language models enough to know that the vast majority of responses are incorrect in some way.

Alex Jimenez (43:31):

The grammar might be perfect, the sentence structure might be great, but what's there is not necessarily always true and so, it's not ready for us to use, but there's some capabilities that we can use, such as the one that I mentioned earlier about for wealth management, where is a lower risk and the solutions already available and is giving enough real results to use.

Alex Jimenez (44:01):

I see AI really as a tool that's going to help the bankers, however a banker is defined, in doing their job better as opposed to replacing them. I hate to see people saying, "Hey, we have our marketing team. We've got to get rid of our content people, because we're going to replace that with ChatGPT."

Alex Jimenez (44:25):

I read enough, and you know this, Jim, I read enough articles in the FinancialPress and I can spot an AI built written article a mile away. And it's not because of the wording or the writing, it's just, there's no soul there and a lot of this information is rolling.

Alex Jimenez (44:47):

So, you got to be careful how you use it. You got to understand what the capabilities are, what the limitations are. But we are already using AI, predictive AI for things like fraud detection and underwriting and so on and we have a good experience with that, it's just getting better.

Alex Jimenez (45:04):

But we also need to remember that we need the guardrails, and we need to build those, we need the compliance people to be involved and understanding how things are done. We need explainable AI, can't be a black box, we need to be able to make sure that we don't slide back to the world of redlining, for example just because we don't know what's going on inside the box.

Jim Marous (45:31):

Alex, it's been great talking to you. I refer back to the conversation I had with Alex and Tim from your team about the fact that we're not talking about a core replacement, we're talking about modernization of banking, and this is not optional and it's not a rip and replace platform conversion. It is really something that can be done in stages, it can be done faster than we ever would've imagined.

Jim Marous (45:58):

I mean, we go back, there's some organizations out there that've taken 8 to 10 years to do something that given where they started timing wise, it wasn't 8 to 10-year conversion, the reality is the marketplace has changed so much today.

Jim Marous (46:13):

If I came to you and said, "I want to build a modern commercial or modern wealth platform," you can help me solve that in less than what's left in this calendar year to a degree that's going to be significantly different in bringing ROI that will be positive in that length of time.

Jim Marous (46:32):

That is something that my mind can't even comprehend given that we couldn't install ATMs back when I was in banking in that kind of time period. The reality is the marketplace is moving very quickly. The ability for solution providers to bring solutions to the table that can be deployed quickly is there.

Jim Marous (46:51):

It gets down to is your leadership and culture ready to deploy technology at the speed of capability and get out of their own way when it comes to holding on to old legacy processes, procedures, steps that can really throw a wrench into things, everything we talk about, what can be. You mentioned in your last comment, the art of the possible, what can be in AI or anything we're talking about is so tremendous if you let it be, if you let it happen.

[Music Playing]

Jim Marous (47:26):

And this is where core providers and providers of solutions are so instrumental because they are thinking at the speed of the consumer that is their job to bring these solutions to bear. The reality is we need to partner in a way that lets these organizations truly bring the skill sets and the technology and the mindset that they have to bear. Alex, great to talk to you, can't believe it's been so long since we talked, let alone on a podcast but really appreciate your insights today.

Alex Jimenez (47:58):

Great chatting with you, Jim. Thank you for having me.

Jim Marous (48:03):

Thanks for listening to Banking Transformed, the winner three international awards for podcast excellence. If you enjoy our work, please give us a positive review. Finally, check out the articles I'm writing for The Financial Brand and our fantastic research from the Digital Banking Report. This has been a production of Evergreen Podcasts, a special thank you to our senior producer Leah Haslage and our audio engineer and video producer Will Pritts.

Jim Marous (48:28):

If you've not already done so, remember to subscribe to Banking Transformed on your favorite podcast app and on YouTube for more thought-provoking discussions on the intersection between finance, technology and leadership.

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