With this issue of the San Diego Business Journal focusing on the technological evolution in banking, we asked the top executives of the region’s largest locally based and non-locally based banks to answer three questions about their banks and technology innovation. Answers are presented in alphabetical order by bank name.
1. How does your bank innovate to gain a competitive advantage?
Rick Bregman, San Diego market president, Bank of America:
Most customer interactions occur in the digital space, and our digital and online platforms lead the industry to support over 29 million online banking users, over half paying more than $230 billion in bills electronically annually. Having one of the largest online banking sites in the world is certainly a competitive advantage.
This expertise creates other game-changers, like being the first bank to launch mobile banking in 2007, having the first financial app to launch on Apple iStore, RIM and Android, and the most downloaded of the financial services applications. These new digital platforms support our fastest growing banking channel of mobile users.
Tory Nixon, San Diego division president, California Bank &Trust:
California Bank & Trust is known for building long-term relationships with our clients. Our customer-focused approach to banking allows us to provide the financial insight our clients need to succeed. We lead by staying in touch with the needs of our clients and build our innovations around offering products and services that help to create efficiencies to enhance their operations. We also offer alternative channels for them to manage their financial needs, while providing professional bankers with industry and market expertise to guide them along the way. We lead with a personal approach and complement our efforts by implementing product and service innovations that allow our customers to do what they do best — run their businesses.
Peter Barker, chairman of California, Chase Bank:
Chase is a recognized leader in providing customers with leading technologies to make their banking experience convenient and enjoyable. We ask our customers their preferences and research technology trends to stay ahead of our competitors. We also continue to advance older technologies, such as the ATM that’s been around since the late 1960s. Our more than 16,000 ATMs can accept deposits of cash and checks without the need for an envelope. The ATM scans the deposited items and provides an accounting to the depositor. However, we don’t stop there. We have made great investments in technologies such as Chase Mobile, allowing customers to conduct almost all of their banking needs from virtually anywhere, including paying bills, transferring money or using Chase Quick Deposit to take a photo of a check and deposit it electronically. We’ve also recently rolled out Chase QuickPay, giving our customers the ability to pay or receive money from others via email or a mobile telephone number.
Greg Mitchell, CEO, Pacific Trust Bank:
We look and listen. We evaluate changes in market conditions and pressures facing our competitors and prospective clients and then work to develop value-added solutions for current and prospective clients. This allows us to gain share, while maintaining a high level of relevance with our clientele.
Dan Yates, CEO, Regents Bank:
We have created a corporate culture that encourages and rewards new ideas to continually streamline our internal processes and procedures with the goal to continually find ways to improve our client’s banking experience, while at the same time seeking to lower our operating costs so that we can pass along these savings to our clients and shareholders. For example, we recently launched several new social media sites (e.g., Facebook, Twitter, and a blog) and we are using these tools to better serve our clients by sharing innovative suggestions, strategies, tips, and ideas to help improve our client’s bottom line results and solve various key business issues that they are dealing with. By sharing our business knowledge, we strive to demonstrate that in these challenging economic times a bank can be more useful than just offering the same commoditized products and services that can be found at virtually every bank.
Gary Cady, CEO, Torrey Pines Bank:
For Torrey Pines Bank, our practice is to offer a high-touch level of service for customers. This is especially helpful when it comes to lending decisions for small and middle market business owners because we can structure loans in a creative way that you won’t necessarily see from other institutions. I would not classify Torrey Pines Bank as an innovator, rather, we have the financial resources, infrastructure, and, most importantly, the right team of bankers in place to help entrepreneurs and business owners — the true economic innovators — achieve their financial goals. As a community bank with capacity, I believe our timeliness and responsiveness in working with our customers is where we have a clear competitive advantage.
Kim Young, president of Wells Fargo’s Southern California Region:
We use technology to personalize service, not to de-personalize it. Our outstanding technology and operations team members are our stagehands behind the curtain — the show can’t go on without them. Our customer contact people rely on them every time we serve a customer and provide a product. Technology enables our customers to control when, where and how they want to be served. It gives our customer contact team the power to be self-sufficient in using information to earn 100 percent of every customer’s business. Technology alone does not give us a competitive advantage. What’s important is the creativity and speed with which we use it to benefit our customers.
2. How has the introduction of new technologies changed the business of banking in the last 10 years?
Rick Bregman, Bank of America:
Think back to the 1970s when Bank of America introduced the first Automated Teller Machines that revolutionized how people could bank. Remember Versatellers? Since converting our ATMs to deposit-image ATMs in 2009, more than 50 percent of deposits – 292 million — are now made at these ATMs.
Laws recognizing an electronic check image resulted in our ability to process and clear billions of checks, worth trillions of dollars, in seconds versus days. And we process more than nine billion check payments each year.
Our online banking platform has created huge new business opportunities, with 25 percent of new accounts opened online today.
Mobile banking is our fastest growing channel, with more than 8 million customers using cell phones and texting. These users are projected to grow more than 30 percent annually.
In developing any new product, we ask our customers what they want in ease of banking, do lots of listening and direct customer research.
Tory Nixon, California Bank &Trust:
Technology has played a significant role in our industry in the past 10 years. New advancements in this area have helped provide added value for our clients through services such as remote deposit, online banking, mobile banking and online credit applications. The advancement in technology has also allowed us to continue our focus of staying in touch with our clients by opening up additional channels of communication. This enables us to respond faster, allowing us to better meet the needs of our customers.
Peter Barker, Chase Bank:
Technology has changed the customer’s access to their finances from what was once referred to as “banker’s hours” into 24/7 access. At Chase, we view this as an opportunity to help customers manage their finances. Technology allows us to alert customers when their balance gets too low or when a check has cleared. We also view it as a convenience for the customer, not as a substitute for replacing a customer’s interaction and experience with a live banker. While many banks have used the technology to replace brick and mortar operations in an effort to cut costs, we believe it should be a value-add, and, as such, have continued to open branches, giving customers the choice of coming in or doing their banking from a virtual location, or both. We continue to value the in-person relationships we have with our customers.
Greg Mitchell, Pacific Trust Bank:
Significantly! Technology and intense competition among technology providers has leveled the playing field between high-touch community banks that have historically led with service and values, and the money center banks that have been light on service and high on convenience and technology. Community banks like PacTrust are now able to out service the big banks, while providing comparable levels of technology and convenience. Beyond benefits to the bank, technology has greatly increased the power of choice for retail and commercial banking clients by providing them with the ability to access banking products when, how and where they want them. The bank may now be found on a consumer’s smart phone, computer or home phone, with cash accessible at more than one million ATMs throughout the world. That’s revolutionary.
Dan Yates, Regents Bank:
Certain technologies are game changers. ATMs certainly fit that description in the 1970s when they were introduced. More recently, the introduction of remote deposit capture (RDC) devices have had a similar significant impact on helping community banks level the playing field in competing with large retail banks that have multiple branch offices. Clients no longer need to select their bank based on where the nearest branch is geographically located. With RDC, clients typically have no need to travel to their bank simply to make a deposit. Today, they scan checks into a terminal and can view their deposit online within minutes. Other technologies such as enhanced ACH (automated clearing house) products, more robust bill pay and online banking services, expansion of worldwide ATM networks, greater adoption of debit cards, etc., have all combined to make it easier than ever to obtain cash, make electronic purchases of products and services without the need to visit a bank or write a check — making the visit to a branch banking office an obsolete experience. Banker’s hours are also a thing of the past. Today, clients can contact their bankers 24/7 as most executives are available via their smart phone devices so as to serve client needs day and night.
Gary Cady, Torrey Pines Bank:
In general, technology is enabling banks to keep up with the demands of customers who want and deserve access to information at their convenience. Immediately following the events of 9/11, Check 21 was launched and has helped expedite the flow of currency throughout the banking system. As a result, technologies such as remote deposit capture and ACH, are ubiquitous throughout the industry. Both of these products are available through a customer’s online banking platform, which enables him or her to pull information that is stored over a longer period of time, rather than requesting research from the bank, which previously required time and money. On the loan side, we’re a process-oriented industry, but on the deposit side, banks are better equipped to provide paperless transactions like remote deposit capture, ACH and eStatements. This helps us meet the needs of our customers faster, and also helps with green initiatives, which are friendlier to the environment.
Kim Young, Wells Fargo:
In 2000, especially for our commercial business banking customers, Wells Fargo launched the first comprehensive Internet portal of its kind with Commercial Electronic Office (CEO), which provides customers instant online access to dozens of financial services, including cash management, credit, foreign exchange, trade services, health benefit services, and trust and investment services. In 2007, we were also the first bank to offer mobile services for commercial and corporate customers. Last year, marked the 10th anniversary of the CEO portal, which now serves more than 330,000 commercial banking customers. This year, Wells Fargo introduced CEO Mobile Deposit service designed specifically for commercial and corporate banking customers. CIO magazine named us among the Top 100 Companies for Technology Innovations that Advance Business Results for 2011.
3. How has technology enabled and streamlined lending practices?
Rick Bregman, Bank of America:
The digitization of documents revolutionized how banks review and process loan decisions in far less time than ever before, and new capabilities around electronic signature technologies further advance this. Bank of America Merrill Lynch has helped our business clients evolve from paper to electronic for payables and receivables, including extensive online functionality through our CashPro Online portal and advancements in card technology that help eliminate the need for cutting checks.
But it’s more than just lending — we continuously test and invest in new capabilities like mobile payments and deposits that benefit everyone from college students to the largest global companies. The rapid use of mobile technology by customers keeps us in this space. We don’t look at profit alone, but at the cost savings and synergies it brings, because if our customers are there, we want to be there. That is where we find the future business opportunities.
Tory Nixon, California Bank &Trust:
The new advancements in technology in the past 10 years have allowed our clients to receive more effective credit guidance and faster approvals. Online applications, the ability to communicate with customers through multiple channels, and the automation of the credit review process have all contributed to a more streamlined lending practice. The enhancements to online banking have also allowed customers to manage their credit transactions more frequently, giving them immediate access to their financial resources, while providing them with a detailed depiction of their financial portfolio in real time.
Peter Barker, Chase Bank:
Our use of technology helps to speed up the credit underwriting, approval and documentation process, creating increased efficiency. Our continued investment in internal systems has allowed us to electronically share the information between the banker, underwriter and the documentation teams. Whether our customers provide their information to us in an electronic file or we convert it to an electronic file, technology allows us retain historical information in a safe environment, which makes subsequent approvals easier for them by needing to provide only new or current information, not to mention making the process greener by reducing use of paper.
Greg Mitchell, Pacific Trust Bank:
At the expense of personal privacy, technology has, among other things, greatly increased the ability of banks (and other players) to acquire vast amounts of information regarding the character and cash flow of borrowers, as well as data on collateral values and the performance of individual businesses. This type of information serves to streamline the approval process for commercial and residential credits, while also greatly enhancing a bank’s ability to proactively manage relationships and credit risk.
Dan Yates, Regents Bank:
Regents Bank has invested in technologies that we use to perform detailed credit analysis to help determine if a borrower can and will repay a loan if we extend it. The technology includes tools that help us spread financial statements, calculate key financial ratios, look at important trend analyses, conduct peer comparisons, budgeting, cash flow forecasting, and industry analysis, all of which play a factor in our ability to assess the risk of extending credit to a given business entity. We also use technology to prepare loan documents, to monitor and manage existing credit relationships, to monitor bankwide portfolio concentration risks, and to manage sophisticated borrowing relationships that require tools to mitigate credit risks. All of these tools enable Regents Bank to increase our ability to make loans to a wide range of borrowers in various industries and to lower the risk associated with making these loans. We also use technology to conduct interest rate forecasting and to hedge interest rate risks, which enables us to extend long-term fixed-rate loans at competitive rates without placing the bank’s long-term earnings at undue risk. Finally, we use technology for communications (e.g., video conferencing for loan related meetings, and for such things as real estate appraisals, digital photography and various online databases) to determine market values.
Gary Cady, Torrey Pines Bank:
Information is now at our fingertips. In years past, the onus was on the borrower to provide the necessary information in order for the bank to make a credit decision. Today, our analysts have the ability to find information on companies and industries faster, which lessens the burden on the borrower and makes our team of bankers more knowledgeable about the industry in which they are underwriting. Technology is helping consumers research and find the best solution for their banking needs, which makes for a more competitive marketplace. Tools like credit scoring have streamlined the bank’s response time as a means to compete in a competitive environment. Regardless of the loan process, prudent lending requires judgmental decision-making, which is best handled locally by decision-makers who have local market expertise.
Internally, technology is helping banks to perform broader assessments of its loan portfolio, including stress testing and loan migration analysis. Historically, the strength of a community bank’s loan portfolio is indicative of its long term viability. Torrey Pines Bank’s nonperforming assets represent a mere 0.73% of total assets ($1.6 billion), as of September 30, 2011, which is indicative of extraordinary credit quality and strength.
Kim Young, Wells Fargo:
The lending process is still very much a relationship-based business, which by definition involves people. We use technology as a tool to facilitate the process for our relationship managers and customers alike. A relationship is based on people — not technology. We view technology as an enabler to make sure that we can offer the right products to our customers as quickly and efficiently as possible. Technology has streamlined the lending process by reducing the amount of information we need to ask the customer to provide. We also use technology to track the life of a loan.
