Capital One founder and CEO Richard Fairbank got passionate about digital in the bank’s earnings call yesterday. The subject came up repeatedly during the call.
We are also making significant investments in digital and technology, banking inherently is a digital product and digital will transform banking over time. The momentum around digital is building across financial services. Consumers increasingly expect elegant and robust digital experiences from all companies, including banks. Software is a predominant way consumers interact with their banks even today and that engagement will only go up. Activity in the payment space from financial services companies and non-banks is accelerating.
The ability to efficiently store and use vast amounts of data will unlock new opportunities. Capital One is well positioned to succeed in a digital world and we are investing in the foundational infrastructure and capabilities to be a digital leader. We are continuing to expand Capital One 360 as a national digital banking platform. We are bringing in significant native digital talent, engineers, product developers, designers and data scientists. We are very active in mobile and in payment. For example we are one of only a handful of banks, included in Apples launch of Apple pay in September and shortly thereafter launched our Capital One digital wallet.
He later referred to the above as his “spit-flying, little passionate speech” about digital. Fairbank has spoken passionately about digital before, saying last December that “digital is who we are and how we do business.” He elaborated on his comments more in yesterday’s call:
At Capital One, we’re embedding technology, data and software development deeply into our business model and how we work. For example we’re focused on building reusable plug and play middleware using RESTful APIs, modern software development and design, integrating our platforms and making them scalable in real time and building a powerful and flexible data infrastructure.
He also touted the cost-savings benefit of digital, saying the marginal cost of a digital transaction is “virtually zero.” But beyond cost savings, Fairbank said, is “being able to be faster, more efficient, a better customer experience, better controlled in an intense regulatory environment, much more able to innovate a better associate experience.”
An analyst asked about P2P lending as a potential disruptor and Fairbank agreed, saying that at Capital One, they “pretty obsessively study” financial startups, including lending startups. One way they do this is to invite entrepreneurs to do guest stints at Capital One Labs.
Fairbank wrapped up the digital discussion, which took up a large proportion of the call, with an intriguing comment about digital going beyond just mobile banking:
One thing I want to say is the way digital is transforming banking goes far beyond what I think the thing people mostly think about, which is, today there are branches and tomorrow there is a branch in people’s pocket. And look, that is [a] very important component of that whole thing.
And by having bought ING Direct, by having before that already built a digital bank of our own, and having a big commitment to digital innovation and having a heritage of 20-some years being a direct marketing company, I’m very interested in the opportunities there. But the bulk of our digital investment itself and capabilities is really for things that kind of extend beyond some of the narrowest view about just moving to a bank in your pocket kind of thing.
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