Digital Transformation Priorities in the CxO Suite

In today’s fast-paced environment, organizations must be able to execute against their core strategies, while also identifying new sources of competitive advantage and pivoting quickly.

First Foundation Institute’s EVP and Chief Operating Officer Lindsay Lawrence and Bank of the West’s Chief Information Officer Jacob Sorenson join Delphix’s President of Worldwide Field Operations Steven Chung to examine how to tackle and win the digital transformation race in the banking industry. Watch the video or read the full transcript below.

Steven Chung: Hello. My name is Steven Chung, President of Field Operations at Delphix. I will be your host today to discuss the impact of digital technology in the banking industry. Jamie Dimon, the CEO of JP Morgan Chase, has recently stated, and I quote: "Banks are facing extensive competition from Silicon Valley, both in the form of FinTechs and big companies, such as Amazon, Apple, Facebook, Google, and Walmart. Fintech's ability to merge social media, use data smartly and integrate with platforms rapidly, often without the disadvantages of being an actual bank with branches will help these companies gain significant market share."

Mr. Dimon's sediments serve as a good proxy for traditional banks and why they're investing so heavily in technology. To discuss these trends, we're delighted to welcome two industry experts from the banking industry who will share their insights with us. First, we have Lindsay Lawrence who serves as the Executive Vice President and COO of First Foundation Bank, a publicly traded business headquartered in Irvine, California. Ms. Lawrence is a 15-year veteran of the financial services industry who has been nationally recognized by the American Banker on The Most Powerful Women in Banking: Next List. She is responsible for all deposit and treasury operations, including the digital bank, which she spearheaded and developed and is now offering such innovative products such as Bitcoin and other services for their clients.

We're also joined by Jacob Sorensen, who is the Chief Information Officer for Bank of the West, a $100 billion division of BNP Paribas, one of the largest banks in the world. With over 20 years of experience in the financial services industry, Mr. Sorenson leads a 1,400 person technology organization, responsible for strategy, application development and technical operations across the enterprise.

Lindsay Lawrence: Thank you for having us, Steven. It's exciting.

Steven Chung: Lindsey, my first question is to you, how did you get started in banking?

Lindsay Lawrence: It's kind of funny, Steven, I think you've put me in the category of an accidental banker. I never wanted to be a banker when I was a kid, unless I was playing Monopoly. True story. So, I actually graduated from Northwestern University. I came home, was trying to figure out what I wanted to be when I grew up, and was interested in the apartment lending world. I was babysitting for a family whose husband was actually the CEO of a local bank. He knew I was good at numbers and gave me a shot. I started working on the apartment lending side, spreading deals. What was really funny was at that time, this bank, and it was a smaller bank in Southern California that actually got gobbled up by Washington Mutual back in the early 2000s, like many banks down here.

But I was joking around, because so many people that wrote good faith deposit checks to do their loan were writing them from banks that weren't from our bank. I said, "Well, gosh, don't they know that we actually have deposits too?" The CEO said, "Well then, why don't you go get their deposits?" From there, I just fell in love with the deposit side and then figured out it wasn't working fast enough. I started tinkering with the operational side, and I was the 22-year old that had big ideas and couldn't figure out why they still wanted to use paper all the time. I got tasked with all the tech stuff, and before I knew it, 15 plus years later, I'm still in banking and I actually just love it.

Steven Chung: That's awesome. Thank you for sharing that. That is the awesome, accidental banker. I think you have a new name.

Lindsay Lawrence: It's true. It's true.

Steven Chung: So, Jacobs, similarly, how did you get into the industry?

Jacob Sorensen: It's a long story, but I'll try to keep it brief here. During let's call it the dot com era here in San Francisco, I was a young developer and through a college friend I found out about a company called Next Card, which was one of the first fintechs, right there along PayPal. We were issuing credit cards online. So, that got me into let's call it the financial services world. We were doing great. We went public, and then as the economy turned after 9/11, the FDIC woke up and said, "Wait a minute, we have an online bank?" We were actually a chartered bank. We were taking deposits, and this was 20 years ago. From there, I went to another credit card company called Providian, which was acquired by Washington Mutual. Then I spent some time with JPMorgan Chase.

Steven Chung: Awesome. Great stories. Great stories. How has the rise of digital technology changed the way consumers want to engage with traditional brick and mortar banks?

Lindsay Lawrence: I think that's a great question, Steven. It's completely changed. Back before, we were so focused on our online banking platform, they were very PC focused first, and the reality is the majority of our clients, I mean, just for starters, they don't want to talk to us on a PC anymore. They're on a mobile device, whether it's an iPad, an iPhone, you name it. The irony is that we've had to shift our development to be mobile first now, rather than PC. That's to keep up with all the apps. It's that app technology, it's the user experience that has become so much more critical than it ever was before. I think some of the conflict that we have in our old traditional way of thinking is that that wasn't always that initial driver, but now it is paramount.

We've had to become device agnostic. It was a big push to get people who didn't want to go to the branch to make their deposit. So we got them those cool little remote deposit capture machines that they could put on there next to their computer in their office and scan checks, and that was so great. But the reality is that's fine, but let's be real, they want to take a picture of their iPhone. Limits need to be the same, regardless of whether they walk into a branch, take a picture on their iPhone or use an RDC machine. The reality is that's the way the consumers want to behave. The fintech world has really driven that change for us, and we need to adapt and we need to be agile. We need to be nimble.

Steven Chung: Great. That's awesome. You're the incumbent, but there's this rise of additional disruption that's happening from fintech companies that don't have the cost structures of a traditional bank where they're weaponizing the platform for the battles for customers, which is the mobile app. Let's switch over now. Jacob, as the technology executive, what are some of the challenges that you face, particularly, coming from the traditional brick and mortar enterprise?

Jacob Sorensen: Yeah. Now, that's really a big crux of the problem for us. Being a regional bank as you point out, we have decades of technical debt. We still have a mainframe that our core banking system sits on as do many banks, including regionals. But we're competing against the likes of JPMorgan Chase. We're competing against the fintechs, who were essentially born in the cloud, and we're competing for the same exact customers. That's really been the challenge. I think the way we look at paying down our technical debt is how we can do it in a very strategic way. That's where our IT strategy comes into play. No new banks today are built to be brick-and-mortar only. Every new bank today that starts today is a digital bank.

We've been able to see our digital strategy probably accelerate about five years just in the last 12 months.

The amount of customers who no longer want to come into a branch, the number of customers who now need to learn how to deposit a check on their phone who had never done that before. So, there's just been an acceleration. We've eliminated all wet signatures across the bank. Even in our back office where we still had a number of paper processes. We've essentially declared war on paper. Anywhere that there's paper in a process, we're trying to rip that out and re-imagine it. But, one thing I will say where I do think we can't forget is there's still value in the human plus digital.

I don't think we've completely gotten to a place where a 100% digital will completely win. We're even seeing that with millennials. We've seen an uptake of millennials wanting to come in, wanting to talk to someone, a person about financial advice. I think how we can marry digital and human is really front and center with our strategy.

Lindsay Lawrence: I totally agree. Our philosophy is not either/or. It's really both. I think it was highlighted during the PPP process during the pandemic because what we found was we too, same thing, it drove those traditionalist clients that wanted to come in. They wanted the cookie and the cup of coffee, and they wanted to talk to a human but they were afraid to go into the branches. That forced, I'm with you, five years of change in months, which was fantastic. A lot of these fintech companies, a lot of these digital only banks, the Marcus' of the world all of a sudden weren't offering PPP loans, yet that's where everybody was banking.

They were at a lot of these business institutions, so when they tried to get that help, they couldn't talk to a human being over there. There wasn't a relationship, and I think that really helped the community banks, the regional banks, the actual brick-and-mortar banks had a place to play in there. It really highlighted exactly what you said, that the relationships and that human interaction matters, in those moments that matter most. Sometimes you need to pick up the phone and talk to a human being, and I think that's important to remember.

Steven Chung: That's fascinating. It's interesting as I look at this as a technologist, and I see some of the parallels between what's happened with retail and Amazon and digital commerce versus the Walmarts and the Macy's of the world. If you ask retail CEOs, they would say the same thing. People still want to shop physically. It's great to get your groceries online, but there's still this shopping, physical experience of the stores are actually an asset for us. Yes they're expensive, but there's still an element of the human experience of shopping that we can't do.

I think about millennials. There's a lot of trepidation. “Oh my gosh, I got to get a mortgage? What does this mean? Or I just got married, I'm opening up my first 401k." You want to talk with humans. There's some comfort level of sitting down with somebody and having a banking relationship. So, on that note, I'd love to understand what's the future of banking? There's this mortal combat between the pure-play fintech companies and traditional brick-and-mortar banks that are building more of an omni-channel digital consumer experience. Who wins the race ultimately?

Lindsay Lawrence: I think what we're learning, Steven, is that the reality is there's a place for banks. There's a place for that traditional infrastructure.

I don't think the banks will go away. I think what we're starting to see is more of that marriage between fintech and banks. That's where the secret sauce is because we need one another to get to that next spot.

The more strategic partnerships that you're seeing in these industries are really going to help get what we need. Consolidation and aggregation of the wallet is important. We all have how many different apps that have pieces of our pie together? And being able to see it in a better user experience it's part of where Mint really came in.

But having some of those pieces aggregate great can actually transact on the business, not just see but actually make changes. Those kinds of things are going to be important as we go on. I think for our company, that's why we talked about the crypto space, and that's what brought us into the Bitcoin realm. What we're trying to do is bring Bitcoin into banking because I think it's two fold. One, there's a huge amount of the people out there that are interested in that crypto world, but they're afraid to do it. They'd have a lot more confidence to do it if they were doing it through their traditional bank, because the bank has that trust that not all these fintechs have yet. So, our idea was if we can partner with the company, and we're talking to a group called, NYDIG right now, to be able to be the front end of that and allow our clients to buy, hold and sell Bitcoin, custody over with NYDIG.

We can allow them that security in that sense of support there to allow them to transact. Where does that go in the future? Who knows. Could that be payments one day? Maybe. Could that be lending? Maybe. For now, let's just give them that access. I also think there's a lot of interesting opportunities on the back-end with potentially the blockchain side of things. I think we all need to be thinking about parts of this, or else we might not be able to stay relevant down the road regardless of how that world takes off.

Steven Chung: That's great. Jacob, how about yourself on the same topic?

Jacob Sorensen: A number of thoughts come to mind. I agree with Lindsay's comments. When I think of a bank, banks can be complicated. When we think about consumer banking, yes, there is a lot of fintech pressure happening, maybe also on some of the SME space. But when you get into complicated wealth management, certainly when you get into corporate banking, investment banking, these are complicated things that I think will be around and not be disrupted too much. I do think some on the consumer side are ripe for disruption. It's already happening, whether it's smaller fintech picking apart pieces of our income statement. Or the platforms who create this ecosystem play or this open banking play, which could turn banks into these phantom balance sheets where they don't really know their customer anymore. They just exist to facilitate the regulatory side of things.

I think there's a lot that we have to do to continue to accelerate and compete in that digital space. Data is a key aspect of that.

One area that I do think we need to continue to do better is knowing the customer. Unlike a fintech, you're getting your mortgage from us. You're getting a car loan. You might be doing some wealth management with us. We see where you're paying your bills. We know about your payments. How are we using that information to understand more about you and to understand where you might want to go? And that's where that banker side, that human side, can also help. If we're giving this information, giving this advice to bankers who can be better informed about their clients, I think will go a long way.

Steven Chung: One of the things I think continues to be the challenges with the proliferation of all these mobile applications and the proliferation of digital is this data. In a regulated industry like banking, there's data privacy. There's CCPA in California, in Europe, there's GDPR, there's all these regulations. Jacob, maybe starting with you as a technologist, how are you managing data privacy? The continuous pressure of regulation, knowing that again, the demand for innovation around your digital footprint just grows exponentially?

Jacob Sorensen: Well job number one is to be safe and secure, period. If we fail at that, that erodes a bank's number one asset, which is trust. I mean, banks are built on trust for millennials. That's just what it's about. It's a very complex topic. The bar's continuously raised, whether it's from cyber criminals, regulators, even our customers and what they expect from us. Certainly the COVID situation only accelerated these concerns with so many people working from home, and it was a completely different set up. At the bank we consider cyber and regulatory requirements non-negotiables. These are activities, when we look at our investment portfolio, as much as we love investing in our mobile banking, these non-negotiable items, they go first. They're the first priority.

You don't really get to be a bank without tending to your regulatory, your compliance, and your data security, data privacy, and cybersecurity concerns.

Lindsay Lawrence: The regulatory piece is absolutely a hurdle. It's funny to me because that's where I go back to the partnerships with the fintechs. To be able to work together, the reality is that a lot of them don't understand those hurdles that we have to go through. We're first and foremost in the risk business, so I don't care how cool the idea is. If we can't get it past them, if our security is not where it needs to be, game over. I think we've had a lot of success in the open kimono approach, where we say, "Look. Let me show you what we have to go through. This is why a SOC 2 matters for us to work with you. This is why these components are critical." We're also educating them, which is allowing us to have great partnerships and then deliver a better client experience to our customers.

I think our biggest partnership is truly with our regulators in order to help us get there and stay competitive.

Steven Chung: Jacob, when you look across the enterprise and look at your top technology projects or strategic initiatives, what are they at the moment? Can you share some of those with us please?

Jacob Sorensen: As Lindsay mentioned early, everything is mobile for us. We have some very big mobile aspirations. Movement to public cloud in a very bold way over the next three years is a big initiative for us. Data on all fronts, whether it's data management practices, whether it's analytics and beefing up in AI and ML, those are key. I also mentioned APIs and open banking, partnerships, that's key to our future as well. We've had a couple key partnerships in the last year with the economy and 1% for the Planet, which we see ourselves as the leading sustainable bank in the United States. Being able to make those types of partnerships is key for us.

Steven Chung: Great. Lindsay, how about for First Foundation?

Lindsay Lawrence: Well, I'm actually feeling quite good about ourselves because we're focusing on a lot of what Jacob's focusing on, which makes me feel like we're going in the right direction. We were a $7 billion institution. So, I feel good about that so far. I think the mobile piece, it sounds silly because it feels like mobile banking has been around, but it's just moving and changing so quickly that we have a lot of initiatives on that front to continue that delivery. When you look at the commercial business side, a lot of that is still a little old school, especially when it comes to technology. But what's been fascinating is, it's also leveraging the APIs. We've recently upgraded our commercial banking system to be better equipped to handle the APIs.

We're doing the same thing on our consumer side, but what's fascinating is client requests from our very sophisticated commercial clients that only seemed like specialty requests, are now being driven down to your mom and pop client. The reality is that these softwares are getting more savvy for Joe Banker, or for Joe Pizzeria, to come over here. It's not just the big commercial businesses. We need to make sure we can help accommodate that regardless of the size of business, or consumer, or how big that wallet is. It's going to be a must have, and that's what we're focused on.

Steven Chung: Great. That's awesome. Lindsay, what do you think is the greatest market opportunity that your business has at the moment?

Lindsay Lawrence: That's an interesting question. I think it's the next generation. I don't know if millennials is the right term for it, but I think it's really focusing on that group of individuals because they're watching their parents retire, or they're starting to plan for the future. They're also from a tech perspective, a lot more technologically savvy than their parents are. That boomer generation. What's interesting is they're in the process of taking over, whether they're taking over the family business, whether they're starting to help out, whether their parents are getting sick and they're needing to step in. The reality is that's our opportunity to keep that client and keep that relationship, because if not, and we don't stay relevant on the tech side, they are going to go where they can do things quicker, easier, faster, mobile-based, etc.If we don't pay attention to that demographic of client, I think we're really missing an opportunity. And unfortunately, some groups missed the boat because they may not have as big of wallets today, but I think we're being maybe penny-wise and pound-foolish, if we don't give them new attention.

Steven Chung: That's a great answer. It's like the customer of the future is not necessarily the customer of today and it's this massive transfer of generational wealth. You want to be able to capture that as well as new people entering the workforce and becoming customers. Jacob, how about yourself?

Jacob Sorensen: We are a leading sustainable bank, that is really important to us. That's basically our brand promise. Most people don't actually realize that when they deposit money in a bank that their money gets put to work, and we're starting to find out that people do care. They do care how their money is put to work. Is it going into fossil fuel industries, or is it going to support women entrepreneurs? As a bank, we don't fund, we don't give loans to anyone in the fossil fuel industry. We don't do anything with tobacco. That's a big part of our go-to-market right now from the consumer side all the way up to large corporations. I think you're going to see some pretty big organizations publicly break up with their banks today in favor of a bank like ours. That’s really meaningful. I'd also add, when we think about what's gone on over the last 12 months, as Lindsay mentioned, the PPP lending, you really start to understand the impact that a bank can have on a community. And what are you doing about that as an institution?

With our PPP work alone, we issued over 3 billion in loans over a few weeks that we think saved 300,000 jobs in the community.

It's things like this that are really important to who we are and the type of clients we're going to attract.

Steven Chung: That's awesome. My final question, and then we'll wrap up. Clearly, you are technology executives, you're leaders, you have a vision, however, in large enterprises, you have some people that will share your vision, that will embrace it, and then others that just are a little bit more reluctant to change. How do you manage change?

Lindsay Lawrence: Change is hard. I mean, I think we all know about that part for sure. The one thing that has been helpful is the story. I think bringing it down to a personal level for our board members, for our executive team. My biggest asset when it comes to trying to help create change in our company is relying on their children. Because the reality is that I have a lot of guys in that boardroom that are not sure about all this whizzbang tech stuff. Then all of a sudden their kid wants money, and they don't want $20 in cash. They want $20 through Venmo, or whatever it might be, and that forced them to go download an app. What I've noticed is that’s probably been one of the best ways to get success. But if they're not sure, I tell them to go ask their kids depending on their kid's age. What are they using? What's cool? They come back and that's actually helped a little bit with the narrative because all of a sudden they're seeing some of these needs that are changing. It's a little different, but it's been helpful.

Steven Chung: Definitely. Jacob, how about for yourself?

Jacob Sorensen: Communication is huge, just being open, transparent, having a vision, being able to show steps along the way and having progress. Those are really key. When people don't see a vision, but they see a lot of change, then that feels uncomfortable. I know we're in the game of technology or the business of technology, but this is all about people and we need to really think about people. What makes them tick? What's motivating them? And try to get them pumped up about what we're doing. I'll be honest, that's been a challenge during the pandemic for me. I spent half of my life on the road, visiting the teams in different offices, including going to India twice a year and just really trying to connect with people. We're doing it, but it's just not the same. You don't get to take people out to dinner or have a happy hour and things like that. There was a book by Thomas Friedman, “Thank You For Being Late,” where he talked about change is not only constant, but it's actually accelerating. And so, I think we all feel that and just remember to take care of our people.

Steven Chung: Thank you. I wanted to just summarize some of these findings. First of all, I think it's inspiring how the two of you as leaders of businesses have been around for decades, if not centuries have been able to just continue to innovate. I think that you've really weaponized both digital and physical assets together to create what I think people really want, which is the best of both worlds. Lindsey, the way you said, it's not either/or it's really a hybrid of both. Congratulations on your leadership. Would love to see what you all are doing in the future, thanks again for spending some time with us to discuss this very interesting topic.