In a live conversation for the Banking Transformed podcast at The Financial Brand Forum 2024, host Jim Marous sat down with Derek White, CEO of Galileo, an internationally renowned business leader, investor and ecosystem builder who has been at the forefront of financial services innovation for over two decades.
As a veteran of the financial services industry with a diverse background spanning multiple continents and organizations, White brings a unique perspective on the future of banking in the age of AI and beyond the glass.
The Significance of ‘Above the Glass’ and ‘Below the Glass’ in Digital Transformation
Q: Your terminology works with what’s “above the glass” and also looks at “what’s below the glass.” Explain that for those who haven’t been familiar with our previous discussions on this topic.
Derek White: 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. One of the biggest learnings 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. 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. But the terms “above the glass” and “below the glass” help bring people in an organization together to understand that, above the glass, we’re really looking at who the end human user is.
Q: Why is it so difficult for financial institutions to deploy digital solutions and overcome legacy mindsets despite recognizing the need for change?
White: 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. A typical large financial institution will have four big businesses.
It’s a consumer banking business, a payments business, a wealth management business and a corporate and institutional bank. Those are hugely siloed P&Ls. And the P&Ls roll up into 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. It’s not uncommon to walk into a financial institution and refer to the customer as the product, meaning they have a credit card, but the debit card is in a different business.
Ultimately, it’s one human who sits on top of those products. The end goal is ultimately to 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?
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Measuring Digital Maturity: The Power of the DIY Metric
Q: What is the DIY (Do-It-Yourself) metric and why is it crucial for financial institutions to measure their digital maturity?
White: 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.
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. 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.
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.
Q: How can financial institutions leverage the DIY metric to drive digital transformation and improve customer experiences?
White: 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 are three primary interaction models for any human that a business can be designed around, but the first is to do it yourself.
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.
But do they want to come into the branch? That’s the simple concept of DIY because you then take this human experience, or 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. 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.
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The Future of Banking: From the Age of Glass to the Age of Air
Q: How do you see the digital banking experience evolving in the near future, particularly with the advent of AI and the shift from the age of glass to the age of air?
White: 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. 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 solve and anticipate questions that we don’t even have to interact with. 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. 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.
Q: What role will AI play in anticipating customer needs and removing friction in the banking experience?
White: 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, for 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.
For example, I am able to tell my daughter that she can go to 12th Street Starbucks or Subway, but not 24th Street Starbucks or Subway because that’s a little bit far away. But to be able to set up those controls and to have the money available in her wallet or on her account, that technology’s available, is live today and people are using it
And it’s easy to spin up that kind of capability for institutions that they don’t have to build themselves.
Can Banks Become the Big Threat to Big Tech?
Q: You’ve mentioned that banks have the potential to become a big threat to big tech. Can you elaborate on this idea and how financial institutions can leverage customer interactions to gain a competitive edge?
White: I cannot say this enough, but it is the way in which organizations look at interactions. So, let’s take China’s ecosystem model. You can look at the ecosystem model of the U.S., 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 Europe because of one reason and that is regulation.
China enables the big ecosystem to play more in financial services than others. I was running a business in China and at that time, the Chinese enabled 1,200 person-to-person payments businesses to operate 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. And recognizing the ecosystem businesses and there are three different starting points for Xiaomi or other ecosystem businesses.
Xiaomi started with physical hardware and they built an ecosystem off of it. They’ve gotten into financial services. So, that’s kind of a big tech ecosystem. In the United States, businesses and
Google are on their fifth attempt at money. 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 to look at the really big, really successful digital banks.
Q: What advice would you give to financial institution leaders who are looking to embrace digital transformation and stay ahead of the curve in an increasingly competitive landscape?
White: So, in this audience, I’m speaking to legacy institutions, 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 your business is. It is super simple. Take the top 50 reasons why a human walks into a branch.
Take the top 50 reasons and top 10 reasons why a wealth customer contacts your wealth management business. If you’re a corporate banker, what are 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 services. Are they contacting you because they want to, they have to, or is it DIYable?
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.
For a longer version of this conversation, listen to “The Future of Banking: Beyond the Glass” on the Banking Transformed podcast with Jim Marous. This Q&A has been edited and condensed for clarity.
Justin Estes is an award-winning writer, strategist, and financial marketing expert with expertise in banking, investments, and fintech. His clients include the NYSE, Franklin Templeton, Credit Karma, Citi and, UBS, and his work has appeared in Forbes, Barrons and ThinkAdvisor as well as The Financial Brand.