They may be competitors, but on this, banking executives agree: Cybersecurity ranks right up there with credit risk as an area of focus for banks.
As financial technology evolves, customer expectations change, and companies outside the financial sector attempt to disrupt the industry, banks have become more nimble, forward-thinking, and even collaborative to serve customers and lead the fintech evolution.
CEO and President Tim Sloan joined three leading banking executives — and fellow members of the expanded ZelleSM person-to-person (P2P) digital payment network — in early November for a “CEO Roundtable on the Business of Banking” at The Clearing House®’s annual conference in New York City.
The Clearing House is an industry group that provides payments systems and thought leadership on policy and more. Its three-day conference brought together financial services executives, regulators, policymakers, and academics.
In one of its most dynamic discussions, CEOs at the roundtable explained how cyber risk is different from a more traditional form of risk: credit risk.
“We know credit moves in cycles,” Sloan said. “You can learn and make improvements, but it’s somewhat repetitive. I think the difference with cyber risk is that it’s not repetitive.”
Just a few years ago, the industry was working together to fight denial-of-service attacks, but the ever-changing landscape has introduced new risks, Sloan said.
Although “we can never feel like we’ve got our arms around it,” Sloan told attendees, banks must always monitor evolving cybersecurity threats and continue to adapt.
Other panelists at the roundtable included Greg Carmichael, CEO of Fifth Third Bancorp; Andy Cecere, CEO of U.S. Bancorp; and Grayson Hall, CEO of Regions Bank. More than 300 people watched the panel discussion, which was moderated by Somesh Khanna, the global leader of Digital McKinsey of the consulting firm McKinsey & Company. Khanna and audience members asked Sloan and the other panelists questions about the economy, interest rates, innovation, customer trends, and more — but the discussion largely focused on how banking continues to change.
“More has changed in the last two years than in my 30 years in the industry,” Cecere said.
Adapting, swiftly, to customers' needs
All of the executives agreed the pace of change in the industry has accelerated in recent years, and generally agreed on focus areas for the industry, such as cybersecurity and competition from non-bank companies that are entering the fintech sector.
Changing customer expectations and innovation was another thread that ran throughout the panel discussion. Broadly, Sloan first talked about creating a personal connection with customers across devices and platforms. “We’ve got to be able to offer our products and services in a way our customers want,” he said.
And, more specifically, Sloan cited Wells Fargo’s decision to centralize innovation activities into one group — Payments, Virtual Solutions and Innovation — to “apply what we were doing for one customer set to all of our customers.” That has increased speed, which has “allowed us to prioritize in terms of how we were investing,” he said.
Wells Fargo is also re-engineering the way data is shared, so it’s done on a customer basis and not a product basis. This is critical to provide that “you know me” type of experience, he said.
“Speed, simplification, and use of data: All of our technology projects fit into these areas,” Cecere said. “What used to be payments and moving money is now data.”
Apple, Amazon, and opportunity
Investing in technology and innovation should also be an area of focus for banks to take on, Sloan said, and doing it now will create a better relationship with customers in the long term.
For example, Wells Fargo recently worked with Blend Labs, a startup, to develop a new online mortgage application (which is now in pilot with team members). It’s important to leverage the ideas in Silicon Valley and beyond, Sloan said.
The innovations come as non-bank companies, such as Amazon and Apple, are increasing their presence in the fintech sector.
“We’ve seen disruption in the industry,” Carmichael said, “but we have to treat it as an opportunity.”
Sloan said he doesn’t view companies such as Amazon and Apple as competitors — even when they tread in a sliver of financial services.
Of Apple Pay, a digital wallet and mobile payment service, Sloan said, “it was a great idea and offers that convenience to the customer, and we’ve benefited because we’ve allowed our customers to get to their Wells Fargo relationship through Apple Pay.”
Sloan also sees the opportunity in working with others. Companies like Amazon and Apple “want to use financial services products to help their customers succeed,” he said. “That’s what we do every day. We’ve got a big opportunity to work more closely with them; to be able to understand what their customers need and see if we can’t provide it.”
All of the banks represented are part of the person-to-person payments network, Zelle. Sloan candidly said he thinks the financial services industry “missed a big opportunity in payments,” but that the industry has caught up.
“I think what you’re seeing in the industry today — because we’re organized differently, because we’re more focused on technology, because we’re partnering differently in places like real-time payments with Zelle — we’re now creating an infrastructure and the ability for our customers to deal directly with us without having to go through an intermediary to make a payment,” Sloan said.
“You’ve got to set the course and set optimism in an industry that’s going through a lot of challenge,” Sloan added when asked about running a large financial institution. “You’ve got to be resilient with your team while facing those challenges. We’ve got to move a lot faster than we ever thought, and we have to make sure we’re attracting that next generation of talent.”
One of the ways to attract and retain talent, he said, was to tell the “incredible” story of the financial services industry and “the difference we make in the economy every day.”