I'd like to welcome down to Greece Citizens Financial and also George Patterson from Jim Quantitative Solutions. First thing I want to do is kind of set the table for for everyone here and give them an idea of how you're involved in the latest technology, what you're doing. Don Hewitt said we spoke earlier that leveraging technology has been this multiyear modernization. I mean, from everything from customer call centers migrating to the cloud. So just kind of set the table. So just just by way of background, we
IPO Citizens Bank ten years ago and before that we were owned by a bankrupt British bank, Royal Bank of Scotland. So it wasn't a go go investment period for the eight years before the IPO. So when we inherited the company, we had an enormous amount of work to do on our technology stack and it was really there was a couple of big themes. One is we were almost 100% outsourced with vendors and we didn't have the engineering talent that we thought we needed to serve our customers the correct way.
Number two, we were unstable and we had a lot of work to do to increase the stability of the company. And we've been on a multi-year journey really, and it has three different components to it. First was moving from that outsourced environment into an engineering environment, and we probably went from a handful of engineers and what they really did was manage vendors to hundreds and hundreds of hundreds of internal engineers that are actually building applications for us now. The second thing is we reorganized the entire technology delivery around agile ways of working, which means we put our technologists and teams together with product specialists, together with marketing specialists, and surrounded everything we do in technology around customer journeys and customer delivery, and did it on a totally integrated basis.
And we kind of instead of the way banks usually would do this was we go approve a business plan. We take months and months and months to deliver. The business plan probably doesn't work. You have to go back to the drawing board and it's a really incremental delivery. This is a persistent investment in our technology and our customer. And so think about a mobile app. We released them now, you know, every
three weeks and we update them. And those technology teams are are doing that. In the last piece, which we're almost finished with, is we're migrating basically all of our applications into the cloud. And so we we will be done with 70% of the company by year end, 24 will be done with the entire application migration by year end 25. And what that allows us to do is deliver faster, have more stability in the infrastructure and and adjust just the the way we do business internally. So it's a lot going on,
an ongoing process, it seems like, continuing the journey. Now, George Feachem on the investment on the investment side. Explain what kind of technology are using, but also explain the the thought process behind it and how you decided to go in that direction.
So my firm is a little bit more quantitative in terms of that. So we're typically called a quant in the investment firm in the investment world where we build models, and the models largely determine what we're buying and selling. So it is you know, we don't have traditional fundamental analysts. So that piece of software is really our
intellectual property. That's something that we need to develop and own in-house. However, there's many other areas of support functions that we've decided to use external solutions, mostly just because it's it's really not part of our core value proposition.
You know, we are always focused on like what what the clients want from us, what do we deliver to clients? And if it's if it's part of that core value proposition, we're going to do it in-house. If it's if it's not. We're going to evaluate whether we want to do it in-house. But a lot of times I think it's it's very difficult to kind of get the buy versus build calculation right, because when you build something, you're not thinking as much about upgrades, you're not thinking about documentation, you're not thinking about, you know, changes in the developer pool. When you buy something or license something, you're getting upgrade, you're getting future upgrades, you're getting documentation. You could hire people that know how to use that system. So you have to think about the total
cost of ownership as opposed to, oh, my guys can can write something fast today and solve this in the near term. You kind of have to think about the longer term opportunity. And you touched upon that, the build versus buy. So go a little bit deeper into how you decide when because you mentioned the engineers that you have.
And so we look and I don't want to give the impression that we don't use partners. We need partners all the time. But we've gone from big platform partners, by and large, to specialty delivery partners. And one of the big things that we're doing in the company is really upgrading our payments business. And you've heard about embedded finance, which is a big new trend in the payments business, which is, you know, you take a customer's receivables and payables and you get services under them, say payroll or kind of working capital management, and that we will use partners to actually deliver the. Services because to your point, they get upgraded constantly.
Keep current on that. So every single thing we do, we look at building it ourselves, buying it from somebody or partnering with somebody. So of also one of the interesting things that we've done over the last three years is we bought a very big technology investment bank out Silicon Valley, and we're using that investment back in their research. And a lot of what they do is very, very early stage tech. They used to be a lot of venture. That's obviously not going that well right now, but but they're still following all sorts of early stage innovative tech companies, and we're working with them to identify new what new new companies that have unique services that we may want to go and invest in or partner in very early on so that we can influence the outcome of what that company is building and think about how we add into our service bundles. And it's all it's all I go back to the
agile way of working. Everything we do is centered around a client need, you know, what do we think a client need might be and what is a service that we want to deliver? And then we go figure out the best way to execute that against it so we can deliver it as cheaply as possible and as quickly as possible. And I think you make a good point there as far as advice, you know, for anyone out there who's looking to start this out, think about what your priorities are.
You know, what other advice do you have for people who say, you know what, I want to jump on this train and get started? I just I think it's a customer, customer, customer, customer. I mean, you know, banks have traditionally been notorious about not thinking about customers and trying to build products and sell them. So we're trying to turn the whole thing on its head and say, you know, let's let's talk to our companies about what they need. And interestingly, it's increasingly moving into non-financial areas.
So think about ESG or think about cyber management. We do that as a company really well. So we'll run service programs for our middle market companies in particular. A couple of people made the comment on small companies just don't have the resources to do this themselves. So we're trying to actually kind of spend our time with our banking teams to say you've got to really deeply understand the pain points that your your clients have. And then we have to go manufacturing
solutions to actually deal with those pain points. Now, George, are you surprised at how much older technology is out there now? It's there, yeah. And typically you you'll talk to someone who'll say, oh, yes, we can do that for you, or we'd love to, we'd love to partner with you or this or that. And we say, Great, here's what we're looking for, here's our use case. And they'll say, Yeah, well, that's not
quite exactly we're not quite there yet in terms of delivering it. So there is a lot of talent. There is a lot of legacy technology that's out there. You know, virtually every firm has it.
I think it's a question of, you know, acknowledging and engaging in in a program of trying to modernize it and of course, making change. It's not always easy. There are certain headwinds you face, certain challenges. And what are some of the the challenges
that Citizen Financial has got? Oh, there's never a problem. You work perfectly. I'd say the thing we spend the most time is, is two things. One makes make making sure in the planning stages and the development stages that were very complete around, you know, the entire kind of architecture of any build that we're doing. And a lot of times what used to happen and I've been doing this for 41 years, what used to happen is you build like three quarters of something and then all of a sudden you wake up at the end of the project and it's like, well, that actually doesn't work. So you go back to the drawing board and have to reinvest in it.
So really good kind of planning with, as I said, organized teams with all the right people in the room. So everybody is lined up. And so if you think about us delivering a technology, we'll need a product specialist and then we'll need someone from cyber and we'll need someone from infrastructure will need and not having them all together, kind of figuring out the path we're going to go down is one is one challenge, which I think we've cracked the code on. And then the other thing we spend an enormous amount of time on is migrations. So once once you actually build a platform, you've got to migrate your clients and you need that to be as seamless and as painless as possible. And there's been notorious, you know, I hear from all my clients when they migrate on to a new ERP system or something, Oh my God, we just we just lost a quarter. And so and so we've got it.
We do it. We spend a lot of time hand-holding customers as we migrate them to the new platforms. Continue testing and testing. Yeah, data migration is one of the things that people that they never factor into, into their plans.
It's just, you know, it's kind of the the ugly stepchild, right. Or the redhead stepchild that they think, oh, yeah, this will all go fine. Data migration is just where companies burn hours and hours and huge amounts of dollars to get it right. And what are some of those those
headwinds that you would face? I mean, if you could do something different that you didn't know before, what would that be? So one thing I one thing I think about a lot of times is when you're when you're getting involved with a partner, you have to think about, okay, what's the average the average piece of software last maybe seven years or the average relationship may last kind of 5 to 7 years. What does that next step look like? So when you're getting when you're getting a contract in place, what is it look like if you need to migrate to someone else? Sometimes that company that you're partnering with may be acquired and they may long may no longer be the right partner for your organization anymore. They may be acquired by a competitor. So there's a lot of things that can that you have to kind of do a little contingency planning and thinking about, okay, well, how does this go wrong and how stuck am I in this contract? Do I have ways of getting out? Do I also have, you know, limits on price increases? I mean, everyone's you know, like inevitably I buy the team that manages contract is always coming to me and say so and so is raising their prices so and so I was raising their prices on data. And you know, it's something that, you know, now increasingly when we're doing a lot of relationships, we're actually establishing okay, what our long term expectations.
We need to have some assurances that, you know, we're not going to be held hostage for, you know, two years down the road or three years down the road. Now, on the flip side, well, we had spoken earlier, you talked about how it's helping bring different businesses together, whether it's equity, fixed income. So dig a little bit to that. Yeah. So PJM is is a very much of a boutique model where each business does what is in the interest of that particular business. So whether equity focuses on equity, it uses whatever systems that are most relevant for our clients.
The same thing is true with fixed income. Historically, that has led to different systems across the organization. But what we're now seeing is, is like having, you know, recent technology migrations have provided a bit more of a backbone, and that allows us to work much more efficiently across the organization. So I think in the early days, people didn't appreciate that, that you need to it. It's no longer build the best stock selection strategy. Stock people stock guys need to think about the fixed income world, what's happening in the credit space.
Same thing. Credit in credit. They have to worry about what's happening in the equity world. So I think it's I think it's really just a you know, that's the way markets have moved. Those are the needs.
And I think technology has been used to bring them together. And what are some of the advantages? How is it help Citizen Financial and all the technology investments that you're I just I go back to serving the clients. I'll give you one interesting example before we before we kind of took to the engineering orientation, we really had challenges building APIs. Along comes Covid, right? And there was a program people will remember called the Payroll Protection Program, PGP that was administered by the Small Business Administration. We generally did maybe 300 small business loans a quarter with our clients and basically fill out the application. All of a sudden every client on the
planet wants the payroll protection problem. But payroll protection program, we were able to build an interface in two days with the SBA and electronically process 10,000 applications in three weeks, and eventually we processed 85,000 applications for $8.5 billion. That would have never happened if we hadn't got to go into an engineering type stack. And there were there were many banks across the country that could not support their clients at the time of need because, you know, the cash flows were evaporating. So I just think it enables you to do things. The other thing that it's we've we're now seeing similar to what you just said, we're seeing clients ask for things together.
So one of the things we're doing at citizens is we're building a big, big, big private bank. We hired about 250 of the old First Republic private bankers. And what that what their clients want to see is they want to see their personal accounts and their business accounts together on one, you know, on one report. We've never done that before. We have consumer over here and commercial over here. So we would have never been able to do
that if we hadn't invested in the technology to do it. So it just allows you to be much more flexible in terms of serving the requirements that the clients are pushing forward. And then, you know, you mentioned the data center thing. There's there's a huge security and cyber and other protection that goes along with that, which is obviously stability and security is paramount when you're sitting in a big financial institution now. And on that, how do you deal with that, all the the risks associated with it.
On top of that, how do you stay on top of that? So like many organizations, we have a cybersecurity officer and and, you know, a relatively large investment in terms of like people on the ground that are like running the data centers. Of course, for large financial firms, you're over you're running multiple data centers because you need have fail oversights so. You know, it's not for the faint of heart. It is. You know, there is a lot of manual work that needs to be done and a lot of it needs to be done on weekends, because when you're doing upgrades, a lot of that stuff needs to be done when financial markets are closed. So there's there is a group of very dedicated people that will go in and do a lot of the security updates over the weekends just because they need to take systems that are offline for a period of time.
And we appreciate those. We do. We do. So all the talk we've been having about the technology and how fast it seems to be advancing. Where do you see it headed? I mean, maybe the question is if what do you want it to do that it's not doing now? Daniel, I'll start with you. I think, you know, one of the one of the panels talked a lot about just in general about AI and that whole arena. And I agree that that the the promised land of General John Day is a ways off.
But I think I think using robotics and AI and eventually Gen AI to actually kind of speed up what we can do from a technical technology stack standpoint and use it to interface with our clients in a more substantial way. So I'll give you another example. We just we just rolled out something called our Digital Butler, which is basically it's, it's like it's like, hey, it has its customers ability to self-service on their platform, but we've enabled that with all sorts of technology enhancements and search features which allow us to actually digitally interface with our clients 90% of the time and solve problems not in three days, but in 3 minutes. And we have steering mechanisms where you can see keywords that come in and it'll steer it to a specialty department in our operations units to basically get it to the right people's hands if it needs if any, human intervention. So none of that would have been possible if we if we actually hadn't built the technology that actually we have enjoyed.
What are you excited about? You know, think looking ahead. Well, quite honestly, I think as we've heard before, there is a lot of hype around a, you know, general review. I, I mean, listen, I've been building models for years. You know, air is another form of modeling. It requires massive amounts of data. I think, you know, I'm excited about the fact that people are now collecting and storing data. Right. We weren't doing that for many years. People had we generated data and it was
thrown away because we didn't have enough storage. We couldn't afford to store it. Now people are understanding that data is value. If anything, I would argue that the
value is in the data and not in the algorithms. And that's really where that's really where the value is. And you've seen this with the various firms going out there and making acquisitions and locking up certain vendors or locking up certain types of data, but then they make, you know, harder to get it. It's harder to get access to or licensing fees are very high. Think about indices in general, right. As an example of that. So I but I think data is I mean, we're at the beginning of a very different period of time, just because we're going to have data that, you know, we never anticipated we're going to have, whether it's individual users or, you know, a whole host of data that's out there.
And finally, in the few minutes we have left. One of the questions a lot of people ask is how do you get everyone on board? You know, on board the here's another upgrade and here we go. And how do you get everyone excited about it and keep everyone's spirits up as we move on? Well, when you do it successfully, it's a lot easier to do the next one than if you fail the prior time. That's true. So, you know, we try to shield, you know, 80% of the people in the company have no idea what we're doing on the technology side. So you want to you want to shield it from the customers and you want to shield it from, in my case, my bankers and my investment bankers in my in my product teams and really have have people rally around the delivery who are actually impactful on that delivery.
So what we've been able to do back from this reorganization of these and these we called pods, this this organization of teams around customer oriented delivery is they get really excited because they're working on things which are actually incredibly accretive to the customer experience. And if that happens, then the stickiness of that customer goes up and the ability to do other things with that customer goes up because their loyalty goes up. So I think as we've broken it down into into teams with kind of even within technology, we shield huge parts of technology from the individual thing that we're delivering. And so and so a lot of dedication and a
lot of kind of purpose driven activity around I keep using the customer, the customer, the customer end of that. And if you're saying to a technologist, you know, you're implicit or complicit in that customer's experience, they haven't thought about that way to put it. I think in a startup or a real early stage company, that's all they think about. But in a big bank, the technologies
we're thinking about customer experience. And so it kind of creates a new element to their to their day, which which gets me excited. Excellent. And we have like about 2 minutes left. What do you think, George?
I get everyone around. Around. So one of the things I would say culturally is that, you know, I tell my team, if you make a mistake. Yeah, I'm I'm I'm totally fine with it. As long as you don't make the same mistake twice. Right. So there's a lot of concern your children. Yes, I think a lot of concern of like, oh, we were doing this project and we made a mistake along the way.
And people are nervous. And I'm like, Guys, look, I expect there are going to be road bumps. There are going to be lots of problems along the way. There's something you design, even if you think perfectly about planning everything, there's going to be something that comes up that you didn't plan for.
And I say, That's fine. I'm very happy that that's life, right? As long as we don't do it again, I think that's a success story. And I'm not looking to you know, I'm not looking to to kind of, you know, go after someone or or make it an issue. I think that's just the nature of the process. If if you learn something, you take away from it. From my perspective, and even better, if you can get the the senior members of the team to educate the the junior developers or the junior engineers to kind of embrace that, it's even that it's the way forward. You can't you have to take a long term
view. All right, Tom, and thank you very much for your time. It's a great pleasure. Another round of applause for that interview.
2024-11-04