Cheryl Gurz is head of banking operations at The Bancorp, and looks after design, implementation and governance of products such as deposit operations, new accounts, ACH and wire operations. Prior to this, she was head of emerging technologies around payments at BNY Mellon in New York.
I’m delighted to be able to share an interview that took place at last year’s Sibos, in which Cheryl talks about working with fintech startups, technology in payments, and the influence of blockchain.
We first spoke when you were heading the GTB Emerging Payment Technology function at BNY Mellon. You’ve since moved to head up operations at The Bancorp. Can you explain a little about your role at The Bancorp?
I joined The Bancorp to lead the deposit operations functions, including the overall design, direction, implementation and governance of retail banking. The Bancorp is one of the few companies in the world specialized in providing private label banking and technology solutions to meet the unique business needs of non-bank companies. The change provides me with the opportunity to evolve the strategic learnings and discussions around disruptive payment technologies, and be in a position to shepherd and implement practical applications.
How closely did you work with fintech startups at BNY Mellon, and how closely do you work with them now at Bancorp?
While at BNY Mellon, my role provided me with the chance to meet and engage with leading experts and champions of blockchain and other technologies. To give an example of scale, one of my tracking metrics showed I had spoken with over 100 individuals in a two-month period. A subset of these conversations led to proof of concepts when a viable business use case was identified. At The Bancorp, I will continue to engage in these industry dialogues and look to produce business cases and initiate proof of concepts related to our specific banking segments and business models. Moving from a wholesale-focused bank to a retail-focused bank opens up so many new possibilities when exploring these technologies.
How has been your experience working with these startups?
It’s been really motivating. Dealing with these new change agents, I’ve come to be re-energized by the enthusiasm the fintechs are bringing to the payments conversations. Many of their ideas are contagious, and it’s an exciting time in an industry that has been internally focused since the financial crisis. There are so many smart people in fintech that you can listen and debate new topics with a receptive audience, and you become more and more impressed with their vision of a future driven by technology.
I’ll be honest: I started out as very skeptical, but I kept an open mind, and as I became more familiar with these innovations, I started to see the potential – how these technologies can help us rethink certain age-old assumptions we’ve had around delivering payments. Taking a closer look at what’s happening opened my eyes to different business models, where new technologies show promise to help us re-engineer how we deliver products and services to our clients so that we can strive to meet their evolving expectations in the marketplace. It’s an exciting time in the space, because we have an opportunity to change the legacy thinking and infrastructure in a way that we couldn’t have imagined five years ago.
Is there any favorite fintech startup you worked with that you’ve seen has the potential to change the way you work?
Well, in payments, there’s a broad spectrum of startups, developing solutions using blockchain technology and deploying new identity, authentication, and retail products. From my vantage point, I view a few as game-changers. In the mobile and authentication space, there are a few firms who are delivering transformational changes around identity management, which is so important for us to manage risk in a world that’s more mobile and global. There are blockchain companies emerging who are promoting change so disruptive that it will be impacting our lives for the next few decades. And specific to payments, a handful of companies are already bringing their products to market for the global payments space, and addressing financial inclusion using distributed ledgers and bitcoin.
A lot of the B2C technologies can actually work in the B2B sector, in the wholesale banking sector, and it’s interesting that you’re talking to B2C fintech startups to see what they can do on the other side. Do you see any use cases there?
I do, and I think that’s because of my background. I’ve been in operations and product functions for the majority of my career, obtaining a deep understanding of the four core payment rails from different perspectives within the organization. I think that, because of my horizontal experience, I see commonalities between the different payment types, B2C and B2B, that others may not see because of the silos that were built around payments in banks. But when you drill down far enough, the fundamentals have many similarities. It’s all a payment settlement at the end of the day.
For example, look at what’s happening in high value and low value payments. High value has traditionally supported business to business settlement in a real-time system environment. On the low value side, it’s handled in an offline batch environment and not real-time, and the customer experiences are different. Yet, fundamentally, both end in a payment settlement between two parties with the bank as the intermediary. So today, the marketplace is looking to experience this high value real-time experience across all payment rails, and at a price point that’s acceptable to the marketplace.
The end state being looked for is a consistent B2B and B2C experience. The user experience is now driving marketplace expectations and product development. Consumers are demanding that the origination of a payment be uncomplicated; they’re looking for a simple button. This is driving API discussions, technology at the forefront to make payments easier for better customer experience between merchants and buyers.
Is customer experience a big driving factor behind you looking at all these technologies?
I would say that without customers there’s no need for technology. We begin innovation discussions today from a customer point of view: how can we deploy technology to enhance our customer experiences? Many times, payments in a B2B world take longer because the data required by the payment system isn’t all there, and the transaction fails. This failure has multiple unacceptable consequences to the person sending and receiving the funds, and a delivery problem for the bank. We need to look at how technology can enhance our customers’ experiences, and this is an area some fintech are focusing their innovation on. If we can make the end-to-end payment process frictionless by bringing the entire ecosystem together using technology advances, our industry and our customers will benefit.
Do you think banking access on devices has a big role to play in technology, because that’s where we spend most of our time?
Yes, devices are driving marketplace expectations. At one time, the only access channel was a teller. Fast-forward to today and we have mobile and tablets, and wearables are exploding. Banking has to support the multiple channels customers use; very rarely is a channel demised. Supporting access to all channels is a critical success factor for a bank, and the only way to accomplish this is with technology. Customers expect choice, and banks need to support the multiple ways they access their financial information.
Who’s going to get there first? Will it be banks, or perhaps Amazon, or Apple, or someone else?
There will be collaboration, moving the industry ahead by merging the core competencies the different parties bring to the table. Strategic technology partnerships will become a key business strategy for banks in order to continue to meet customer expectations for better products and experiences. Banks may not want to build customer interfaces if there are non-banks with strong solutions – we’re seeing this coming together with tech firms and banks. Where in the payments value chain will a bank actually own the technology – a question that’s taking place between CIOs and business managers today? Is there value in owning the end-to-end technology to support payments? The successful banks will inventory their strengths and find partners who can complement and assist in growing their payments business – technology and business strategies being aligned.
Coming back to technology, what do you think is the future of blockchain?
I think blockchain technology has potential, but I would also say that we’re in the R&D stage and need to recognize this isn’t an industrial strength technology at this time. If the technology is able to meet all the expectations it’s being promoted for, and there’s a high bar to meet since legacy systems do meet much of the industry’s expectations, it will have a great future. I caution it is not going to solve every business problem in the financial services industry, so we have to find where it belongs, what it’s good at, and evaluate our business processes and truly know what the technology does before blindly promoting it for each innovation idea.
An understanding of what our future holds will require open collaboration. I challenge us all to encourage dialogue around this invention as an industry, bring together legacy banks and fintech startups. This will require a fundamental shift, because the degree of openness and collaboration characteristic of emerging technologies is much different from the product development approach banks have traditionally taken. Until now, it’s pretty much been closed networks and private relationships with clients.
Yet, blockchain technology is stirring things up with its focus on open networks and public data. It’s taking us to places we’ve never been. Hopefully, the end result will be about getting us to a productive future. It’s going to take a lot of critical thinking and a lot of debate as to where this might be taking us – more than just saying that we’ll have a lot more payments in 20 years.
What do you think is going to be the topic for Sibos 2016?
This year, there has been a shift and banks are beginning to lead the discussions around change and innovation, not leaving these discussions exclusively to the fintechs. Banks seem to have more confidence in looking outwards and showcasing their investments in innovation teams and projects. I think this year in Geneva, you’re going to have the banks coming in and saying, ‘this is what we’re driving because we understand our business, and now that we understand the technology, let’s shift the conversation away from fintechs to show you how we are deploying new offerings to help our customers’. So it’s not just the fintechs going out on their own leading the innovation story, hence a shift in attitude from the previous years. Fintechs may have the technology prowess and agile structures, but long-term trust and relationships are key attributes clients look for from their bank providers. By merging new excitement around technology and client relationships, banks will continue to be relevant long-term.