Agile development of new financial products and innovations in concept and design are imperatives in the banking industry these days. An indicator of the increasing urgency is one Bank of America executive’s observation that “rapid agile” is giving way to “hyper agile” in the planning process at the megabanks. The shift is apparent in how these banks are increasingly driving the development process in new ways, with lines of business playing a more central role than in the past, to shorten the distance from seeing a market need to filling it.
At JPMorgan Chase, for example, the watchword for development is “controlled autonomy,” according to Roman Eisenberg, managing director and head of technology for Chase Digital Banking. This approach enables lines of business to develop their own technology and take it to market quickly — independent of central processes.
At Bank of America, innovation and development has been pushed way down the org chart, with not only lines of business but even staff functions like compliance becoming part of the potential mix of developers.
“Anybody in the bank can say, ‘Hey, I’m working on an idea. I want to pitch it and I want to try a proof of concept and be able to drive that into a business roadmap,'” says Hari Gopalkrishnan, managing director and head of retail, preferred, small business and wealth technology at BofA. He believes “hyper agile” will be the state of things going forward.
The shifting view on how and where technological change should originate reflects the nature of the banking industry itself, according to Nick Nadgauda, managing director and global head of treasury and trade solutions technology at Citibank.
Major banks are sprawling behemoths and heavily regulated. Through embedded banking and other new types of technology, they have become intertwined more closely with nonbank companies, says Nadgauda. Providing payment services for a food delivery app or a ride-share app may also entail handling compensation for the gig workers who do the delivering or the driving.
“And this is where a lot of our growth has come from in the past few years,” Nadgauda says of the banking industry.
It’s part of the reason banks feel so much pressure to match the speed that fintechs can bring to development, he adds.
JPMorgan Chase Democratizes Tech Development
The three banking executives made their remarks in separate presentations during Tearsheet’s “Big Bank Theory” virtual event.
Much of what Chase’s Eisenberg spoke about concerns its mobile and web applications, used by more than 60 million customers engaging in 20 million to 35 million active sessions daily. Eisenberg says this encompasses an “ecosystem” of over 100 products and services, which all need to be capable of working together.
“Our goal is to turn a complex and risk-averse ecosystem into simple, fast, secure and always available experiences for our customers — all in the palm of their hands.”
— Roman Eisenberg, JPMorgan Chase
A key strategy Chase uses for tech development is to focus its teams on products, rather than on projects, according to Eisenberg. “We look at our solutions the way customers use them,” rather than the way bank staff is organized, he says.
Traditionally, going back decades, the IT department has been a frequent stumbling block for business units that wanted to get a new idea into the market or to counter a competitor’s move. Eisenberg says his digital technology function recognizes the need to avoid being a “bottleneck,” in his words, preventing timely change.
The pressure to transform banking practices and to introduce innovations makes this necessary, he says. With “controlled autonomy,” says Eisenberg, “they don’t have to wait for my team in digital technology to do things for them. They can do that work themselves.”
“Controlled autonomy” means that lines of business can develop and implement new features and new products in their specialties, which hook into the whole of Chase’s technology network. It is a philosophy that allows the units to launch final versions of these technologies on their own.
Making that happen without causing chaos requires setting technological standards to be met.
Eisenberg says the standards include a testing model to ensure that the new processes and services work without causing issues. This speeds software delivery without compromising quality and availability.
Chase focuses on “four nines” when it comes to availability of services to customers, Eisenberg adds. (This is technical parlance for “99.99%” uptime.)
To understand the scope of the challenge, consider that Chase has around 95 teams working on consumer banking products alone, with 400 engineers in all, many working independently. This is how the bank is able to add to its mobile features — with both all-new and updated ones — about every two weeks, Eisenberg says. It’s digital transformation as a continuous process.
Essential to making new ideas work is an experimentation effort that often involves live tests. Eisenberg says these are structured, using such conventions as A/B tests, to give ideas a decent live tryout. “These experiments enable us to find underperforming features and to roll them back quickly,” Eisenberg says.
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Bank of America Builds on the Erica Chatbot Experience
BofA’s Gopalkrishnan believes the idea of “omnichannel” needs to evolve. Today, for many in banking, it has come to mean that a transaction started in one channel, such as online banking, can be seamlessly resumed later whether online or in a branch, depending on customer needs. Gopalkrishnan thinks this is dated. Much of the friction with online functions that used to drive customers to branches no longer exists. So processes can be handled completely digitally — or in a hybrid fashion.
While consumers may consider human intervention to be a default path, he says there is no reason it can’t be seamless. That’s why BofA’s Erica natural language chatbot is designed to allow a human agent to come into a transaction when needed, but then is able to return the customer to the chatbot conversation afterward. This is similar to having a live supervisor step over to answer a question from a call-center employee, and then stepping away while the employee resumes their talk with the customer.
Gopalkrishnan says that Erica is moving past day-to-day banking to begin assisting customers with more complicated tasks, such as answering questions about products like individual retirement accounts.
Developing this capability and the other technology advances he discussed increasingly comes from seeking innovation input across BofA more broadly. Digital transformation has become every department’s job.
“We don’t have a set of people sitting in an office in Palo Alto who are the smart people who come up with all the ideas and then tell everybody else what to do.”
— Hari Gopalkrishnan, Bank of America
Gopalkrishnan says BofA’s patent holdings include many ideas that originated outside of its technology functions. Every quarter, he adds, the bank runs “sprint cycles” that include as many as 1,500 staff members around the world. The teams have 48 hours to come up with ideas. Of the 100+ addressed, a voting session selects those with the most potential viability and return on investment.
“Four years ago, these would have been tech-only innovation sessions,” says Gopalkrishnan. Participation was broadened because BofA realized that including technologists alone risked missing key elements of the process under scrutiny.
“How can you commercialize an idea without including everybody else?” Gopalkrishnan asks.
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Citibank Benefits from the Fallout in Fintech
Fintech partnerships have proven critical to the innovation efforts of many financial institutions, large and small. At Citi, identification of partnership opportunities, and finding the right companies to work with, used to be a function of innovation groups within the company’s divisions.
“That worked to a certain extent,” says Nadgauda. “But you never really got a lot of breadth.”
So Citi employees in the lines of business are frequently included in these efforts. This change is leading to more exposure to additional potential partners and more new ideas.
Something else that is producing more cross-pollination is the troubles among fintech companies. Nadgauda says that former Citi employees are beginning to come back to the bank, having been laid off from the fintech jobs they left for not so long ago.
“They’re saying, ‘It looked good. I took a chance. It didn’t work out. Can I come back?'” says Nadgauda. This is happening enough that the bank set up a special program and has a name for them: “returners.”
“In some ways it’s a win-win,” says Nadgauda. “You get people who know the institution, but they now have a little bit of a different perspective and they can bring that perspective with them when they come back.”