Embrace change, take risks, and disrupt yourself

Hosted by top 5 banking and fintech influencer, Jim Marous, Banking Transformed highlights the challenges facing the banking industry. Featuring some of the top minds in business, this podcast explores how financial institutions can prepare for the future of banking.

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How Sofi Intends to Become the Center of the Financial Universe

SoFi is on a mission to move beyond its roots as a direct-to-consumer fintech organization, to become a financial services platform that will enable banks and fintech firms to build best-of-breed financial solutions.

The recent acquisition of the Technisys’ platform, combined with their banking-as-a-service division, Galileo, will provide an end-to-end vertically integrated technology stack using industry-leading APIs.

To put this significant acquisition into the perspective of the future direction of the banking industry, we have Derek White, CEO at Galileo Financial Technologies on the Banking Transformed podcast.

This episode of Banking Transformed is sponsored by Microsoft:

See how Microsoft can help to unlock new opportunities at speed through innovative business models, deliver differentiated customer experiences across channels, products and services, and redefine new ways of working.

More at Microsoft.com/financialservices

Jim Marous:
Hello, and welcome to Banking Transformed. I'm your host, Jim Marous, owner and CEO of the Digital Banking Report and co-publisher of the Financial Brand.

Jim Marous:
SoFi is on a mission to become more than just a traditional direct-to-consumer FinTech organization. They want to become a financial services platform that will enable banks and FinTech firms to build best of breed financial services.

Jim Marous:
The recent acquisition of Technisys platform combined with their banking as a service division Galileo, will provide an end to end vertically integrated technology stack using industry leading APIs.

Jim Marous:
To put this significant acquisition in a perspective of the future direction of banking, we have none other than Derek White, CEO of the Galileo Financial Technologies unit of SoFi on today's podcast.

Jim Marous:
So welcome to the show, Derek. As you know, you were one of the first people I asked to be on the Banking Transformed podcast more than two years ago. And even before that to do interviews for the Financial Brand, I think I first connected with you when you were with BBVA. For those on the listening audience that may not know who you are, can you provide a brief synopsis of your long career progression?

Derek White:
Yeah. Thank you, Jim. It is so great to see you again and to be on your podcast. Thanks for the invitation. So my background is, I've been an entrepreneur, helped start businesses from the time I was a kid, helped start two of the first internet banks since including Wingspan and a business called Juniper Financial Services. It was eventually sold to a British bank that wanted to enter the United States.

Derek White:
And then I told my wife it would be six months to celebrate that and move across the pond. We then spent 14 years overseas in London, in Dubai and Madrid, with great financial institutions, expanding businesses into new markets, growing and scaling those businesses, as well as introducing new technologies from the first mobile money service in the UK, to the first FinTech accelerator based out of London, to early crypto work. And then eventually running the revenue line and the creation of the future for BBVA based out of Spain. And then returned back to the states after 20 years, back to my home State of Utah. And now I have the privilege of being CEO of Galileo Financial Services, part of the SoFi group.

Jim Marous:
It's interesting, three years ago, I did have an opportunity to interview you on the FinTech stage of Money20/20 in front of 7,000 people. Boy, those were the days. Your insights were spot on that day, but neither of us foresaw that on the rise in early 2020 would be the pandemic. What is the biggest change that you've seen in the industry as a whole, with the worlds shutting down in 2020?

Derek White:
Across the industry it's probably difficult to pick one. If you'll give me liberties to pick maybe three, I'd suggest-

Jim Marous:
That's great.

Derek White:
... traditional industry. For the traditional industry, it's the true mainstream adoption of digital. Instead of talking about it for a decade, and talking about investing, and how to go about doing, it's actual the adoption of mainstream digital and mobile first is real. It's DIY-able banking now through our devices, that's real.

Derek White:
The second is just the remote aspect of work, and shifting a hundred thousand employees to be able to work from home within two weeks. And as part of COVID, I recall as we shifted employees to be able to work from home, part of the corporate banking world and asset management world, the number one request coming into the technology team was, yes, of course, to get their PCs and everything home, but it was printers. Printers, Jim.

Derek White:
That no longer is the case. We're essentially a hundred percent digital. The remote working is still pervasive and it's changed the way we all interact.

Derek White:
The third I would have to say is the mainstream of crypto. And we can get into that a little bit more. But just the option and the attention of crypto, not just crypto, but broader blockchain. And then we'll get into Web3. And it's more about the actual mainstream adoption instead of technology chasing a problem. It's real.

Jim Marous:
Yeah. It's amazing when you think about it. You say the mainstream adoption to digital, but it was also the awareness of financial institutions to how far behind they were from the standpoint of real digital. We were all doing things like we did ATMs, which is, we provided the customers use it everything's okay.

Jim Marous:
But all of a sudden when FinTech firms came into play, all of a sudden it started get into new ways of segmenting customers based on usage, or based on how much they use different financial services, and the ability and the need to all of a sudden have everything work digitally smoothly, which men, they were complete rethinking of the back office as well.

Jim Marous:
It goes without saying that the impact of FinTech firms on the banking industry has been pervasive. One of the fastest growing FinTech firms is SoFi, your firm. Originally operating as a direct-to-consumer platform with Galileo division that you had being added in 2020, how does a recent acquisition of Technisys change the direction of SoFi as most know it?

Derek White:
It's no change. It actually accelerates the vision that's been publicly communicated. And an easy way to think about this, Jim, and we've talked about this in our past discussions, is this concept of above the glass and below the glass. We use that terminology to bring business and technology and people across industries together, because it carries beyond financial services and banking.

Derek White:
The above the book glass brand or the B2C brand in our company is SoFi. Three and a half million members, a one-stop shop that is the most robust product offering offered by any digital on the planet. Impressive one-stop shop, that's SoFi. The below the glass business, technology business is a true open banking platform that provides services to over a hundred million users across 150 brands, that end users can interact their money through the Galileo platform. And we can talk a little bit more about Galileo.

Derek White:
The vision that we've communicated to the market is this AWS of FinTech. Galileo enables the SoFis of the world, Anthony Noto who leads SoFi and others that are founding and creating businesses, it enables them to create those business and take them to market.

Derek White:
Technisys accelerates the AWS of FinTech vision by allowing us to help create the end user interface, provide professional services and human capital capabilities, as well as to provide a modern core banking platform that the industry is in so need of. And we have this thesis that a lot of the innovation above the glass is slowing in many organizations because they haven't invested and fixed that back office, or the below the glass technology.

Derek White:
80% of financial institutions operate on platforms that were written in languages that are 25 to 40 years old. Have you ever heard of the language months, Jim? Months?

Jim Marous:
Yeah. And it's crazy. I mean, I go back 40 years into the banking world, and knowing that the core behind the scenes was built then, it was frightening then when we added ATMs, and it's only gotten more involved.

Derek White:
Absolutely. We absolutely see that. And so much of it is creating... Banking was built by product, and by P&L, and/or tied to branches. What has changed dramatically, especially as a result of COVID, is increased focus on the end human user, and how those humans are interacting, and then what is needed in order to bring together a unified experience in that digital layer.

Derek White:
And in order to do that, you can do surface level, but to truly get to the game changing business outcomes and the end user experience, an investment below the glass is required in technology platforms and systems to bring the data back to the point of interaction, to make it more intelligent and smart for the end user.

Jim Marous:
It's interesting, you mentioned mission of SoFi is to become the Amazon web services of FinTechs. It's certainly a lofty ambition. But the ability to serve other financial institutions, which you already do, while also being a major direct player or direct competitor offering financial services could be viewed as a problem.

Jim Marous:
Certainly Amazon and Google have tried to walk that tight rope before without much success. In fact, Google had to actually scale back their ambition to be both the provider as well as a competitor. How will SoFi deal with this challenge?

Derek White:
Well, we're doing it today. As I mentioned, we have over a hundred million end users on our platform operating across 150 brands. SoFi is one of those brands, and that's a direct-to-consumer business.

Derek White:
We've lost no major customers in the two years that SoFi has owned Galileo. If that isn't validation of the opportunity. Not only that, but we're adding 40 to 50 new clients, new businesses, new businesses like SoFi, like Chime, like Robinhood and others that operate on the Galileo platform. They look to Galileo and now Technisys, as an opportunity to leverage best in class world class technology, instead of building it themselves.

Derek White:
Because these businesses are not easy to build, Jim. That integration into the infrastructure of money as to how money moves across markets and between individuals on the payment processing piece that Galileo does, or in the core banking platform that is an extensible platform that Technisys has built. Those businesses are not easy to build. And many have attempted and tried and failed. And they keep coming back to us because of the world class technology and the capability to build it.

Derek White:
And we also see that the likes of Google and Amazon and others have been very successful in building their web services divisions. So each business and each one of our clients calls on us for different services, whether it's the financial products, the technology, or services that we offer.

Jim Marous:
So was the Technisys deal more about not only their customer base, but the fact that they really expanded the services that you could offer to all of your clients?

Derek White:
Yeah, it's a beautiful trifecta now, Jim. It's the combination of SoFi having a banking license, and having the ability for us to offer products through SoFi. And being able to leverage the SoFi banking license to be a sponsor bank for our clients. But then it's also the payment processing business that Galileo has, and the core banking platform that Technisys has.

Derek White:
The bringing together all three of those in a unified full stack for our clients, they could literally come to us, and Jim, if you come to us and say you want to create the Financial Brand bank, right? If you come, and turnkey, we can offer you the end user interface, the payment processing, the connection into the infrastructure of how money moves, as well as the core banking system and ledger, all in one full stack, customizable, differentiated by you and DIY-able by you.

Jim Marous:
Well, it's interesting because SoFi they were a small FinTech not too long ago, and you've grown extraordinarily fast. Your entire career has been around fast moving innovative players from way back at Wingspan, and what's it?

Derek White:
First USA.

Jim Marous:
Yeah. First USA. That the bank won and all these other things that were, and most people don't even remember. But how does SoFi compare from a perspective of innovation and digital transformation to some of the other players you've been involved with?

Derek White:
It's incredible. Again, I'd use the above the glass and below glass analogy. If you take SoFi is above the glass business, and what the team has built over the last decade having started as a lending business, and then expanded off of a single product offering into the most robust product offering from lending and multiple lending products, from mortgages, to personal loans, to student loans, to money in credit card, to investment products, enabling that full suite of products is incredibly...

Derek White:
I mean, Jim, you cover enough digital banks to know that is pretty unique in a neo-digital bank. And to be able to offer that just as an end value proposition to end consumers as a one-stop shop to have their full financial life encompassed in the end user experience with SoFi, is incredible. But that extends also to a business below the glass, that offers open, banking as a service that is entirely unique.

Derek White:
And the pace at which that above the glass capabilities have been built is remarkable. But the pace at which we're introducing new capabilities, launching new partners, launching new clients in our Galileo business and the growth rates that we've seen that we publicly to communicate, are incredibly impressive and outstrips anything that I've ever worked in.

Jim Marous:
So, one of the biggest challenges in the banking industry is the need for fast innovation at scale. Something that certainly doesn't come very easily for legacy banking organizations, but even for FinTech firms, you can get caught in your own PR releases. Having worked with a challenger mindset over your career, and it's not given for any FinTech firm, how do firms avoid complacency? How have you seen firms avoid complacency?

Derek White:
So much of it focuses on the leading indicators of where the markets and where human behavior and where businesses are headed. And having a focus on the leading indicators versus just the lagging indicators that are financials and what can be reported on a quarterly basis.

Derek White:
And so much attention in our business is focused on interpreting what those leading indicators are. And from a business model standpoint, we look at, how are humans interacting with money? And in SoFi, so much of our ambition is to help people get their money right. And within Galileo, it's helping founders and builders of businesses get money right for their end customers and tailoring solutions for them. It's looking at how the end humans are interacting with money, and then how that's monetized.

Derek White:
And that's a model that we believe extends across multiple industries, to understand how people interact, how the humans, not the financial products. We're not talking just about checking account, savings account, but looking at how the end human user is interacting with money, and/or value, and how that changes over time, and then how that monetization happens. And monetization is shifting in the financial services space. From what was just traditionally through the financial products themselves, but into additional revenue lines and services.

Jim Marous:
We've seen that with some firms overseas where they've built what I call youth banking services. And it's not really built around banking. It's built around the open banking concept. So you have technology, you have sales of games, you have music, you have concerts, you have all these other elements where the firms want to reach the audience that they have, and what happens, that becomes the funding mechanism as opposed to the financial accounts.

Jim Marous:
We're not even close to that in the US right now. And part of the problem also, I believe, is that I am under the impression after interviewing a lot of firms, that most firms still are trying to digitize old process in the back office, as opposed to completely rebuilding a digital bank in the background. Because if you don't get the back office right, it's really hard to get the speed necessary in the front end.

Jim Marous:
What is the biggest challenge that you see potentially with traditional financial institutions, but even some of the older FinTechs out there, as far as where their focus has to be in the back office, how do they get that right?

Derek White:
Yeah. So Jim, you're so right on that description of taking kind of existing processes and just projecting them in a new interaction model, through a mobile interface.

Derek White:
In one business traditional bank, one of the ways in which we drove transformation was to simply look at the top 50 reasons why a human would walk into a physical office. Simply measuring the top 10, 15, 20, 50 reasons, why on earth would a human walk into a physical office? Whether it's in corporate banking, asset management, wealth management, retail banking, why would they physically leave their office, leave their chair, leave their home, get in the car, drive to a physical, why do they do that, because they want to, or is it because they need to? Because it's not available to be able to do DIY digital.

Derek White:
And corporate and institutional banking is a little bit laggered behind consumer banking because it's all here. It's all here, right? But that simple principle of looking at what can be done DIY-able as you describe it, and not just taking the processes that are there today, that are on paper, that are monetized through a physical signature and projecting that into a digital interface, but reimagining what that experience is and why does the human want to engage with you whatever the business line may be? That is really from the human experience.

Derek White:
I think I feel like the industry's much more advanced on that than on the technology revolution below the glass that is required. A big part of the reason why we acquired Technisys was a recognition. Like I said, 80% of the financial institutions around the world are considered first generation or maybe second generation core banking platforms. And those platforms are architected around products, not around humans.

Derek White:
They're architected in a way that each product can be run as a separate P&L, not designed to be connected in a user experience that comes back for the end customer. Our business now Technisys is architected in that way, that enables an experience that is brought together for the end user that's entirely transformational.

Derek White:
And over the next seven to 10 years, Jim, there's going to be a massive migration from these traditional core banking platforms to the modern core banking platforms. I'll give you just one example. And I won't name the company.

Derek White:
There's a company that in the United States three of the top 10 banks operate on this one core banking platform. That core banking platform has informed their customers that it has a terminal life. It will end. They will end support of that core banking platform. These are three of the top 10 banks in the United States, and that core banking platform's going to end.

Derek White:
So it has to move, those three institutions as well as many others have to move to a new system, a migration to a new system. Either that, or they forth the code and they try and manage it themselves.

Derek White:
And so, over the next seven to 10 years, while there's been a lot of investment in that end user experience, there's going to be a lot more investment in the below the glass, the systems that fix that below the glass experience.

Derek White:
But the beauty of it, Jim, part of the beauty of this by fixing that, it will enable smarter and more intelligent interactions in the glass with the end customer, because we'll be able to bring together a more holistic view of the customer, we'll be able to access data in a way that many aren't doing today.

Jim Marous:
It's interesting. Everything you're talking about, is things we talk about often on this podcast, involves massive, massive amounts of change. Even more than the massive investment to see. In other words, the dynamics of the impact on the human is greater than the needs right checks to buy new technology.

Jim Marous:
And one thing that's been interesting, we talked about it before we got in the air today, is that you've worked for organizations that had leadership that had foresight, that did not rest on the laurels, did not look and say, "Geez! We're doing really well. We don't have to change."

Jim Marous:
You've been very fortunate in working for, as you said, the First USAs, the BBVAs, and Google, other firms that really always had their step ahead, as opposed to holding onto legacy thoughts.

Jim Marous:
How important is it that you now have a platform, that not only are you the teacher in a way of a lot of your clients, but a lot of your clients are on the forefront also, and they're teaching you some of the things that can be done. I would imagine that dynamic is interesting because it continues to process moving forward. Doesn't it?

Derek White:
It is. One of the most rewarding things is to work with the best people in the world, and to work with the visionaries that can see into the future. They see the future and they see where the world is heading. And then to be able to partner with them and to be able to translate that vision, in Spanish they say [foreign language 00:22:18]. In the hands of the customer.

Derek White:
How do you translate a vision? And that's where coming back to the question about how do companies not become complacent? It's understanding how long does it take to translate a vision into the hands of the end user, into the end customer? And that's one of the most rewarding things about working with these brilliant people over a career, and just in the ecosystem to be able to connect with the most brilliant people and help translate their ideas into execution, their ideas into value for the end human user, and into tangible, scalable businesses that employ more brilliant people. That's a compounding effect and just so energizing to be able to learn from these people. And to be able to take learnings from clients and build it into our platform, to be able to take our platform.

Derek White:
I'll give you an example, Jim. At one point in my career, I had the privilege of working in the United Kingdom, London, for a couple years. And it was shortly after the crisis. And there were zero companies in the European IPO pipeline, zero companies looking to go public. It was dead, dead. And there was a feeling that maybe innovate was dead in Europe. And in London, and there was almost this inferiority complex of, how do we reinvent? What are we going to do?

Derek White:
And so, as part of a number of people working in the London ecosystem at the time, we created the first FinTech accelerator. And those accelerators, the Techstars, the Y Combinators of the world, they accelerate human capital and accelerate business models. What was lacking was the technology platform that really accelerates it. And that's what we have at Galileo. We have the technology platform that takes this human capital and business model acceleration, and actually builds it and lands it in the hands of customers at scale with over a hundred million users. And now with Technisys, we have 200 million users across over 200 brands operating around the world from mature banks to early stage startups.

Derek White:
One of the most rewarding stories I can tell you, Jim, one of the most rewarding things is when a founder walks into your office, and you've had lots of these stories on this podcast, and you've personal experienced a lot of these. One of the most rewarding things is when a founder comes in and says, "Listen, I've got an idea. I have zero funding, but I can solve a really big problem. Can you help me design that business? Can you help me launch that business?"

Derek White:
And then to be able to partner with them and not just draw it out on paper, but actually build it into the technology, leveraging reusable platform technology that accelerates and brings innovation to the market, whether it's parent, teen, child authorizations at a level that we do at scale across a number of players, or it's two or three day early paycheck capabilities, to be able to translate an entrepreneur's dream and bring it to life, is absolutely rewarding. We've done that for the largest neobank in the United States.

Jim Marous:
It's an amazing environment because I think, as I said, as much as you want to innovate, you have clients that are also innovating. And you would go back to the legacy core providers, and you have legacy core providers serving legacy core financial institutions, and exhale, Jesus! It's hard to get that energy going to the level that obviously it's going on in SoFi.

Jim Marous:
While legacy organizations are still trying to figure out how to make digital banking work. As you mentioned, concepts like blockchain, crypto NFTs, Web 3.0 and the metaverse are changing the rules daily, or at least changing the vision of what is possible. What is the area of most dramatic change from your perspective that we can see on the horizon?

Derek White:
Well, many of these will converge into an end user experience that will be transformational. And when brought together, when Web 3.0, the metaverse and crypto, or blockchain are brought together, is going to be pretty remarkable.

Derek White:
An interesting stat, talking to 20,000 university students around the world on a webcast just a couple of months ago, pulled the 20,000 students and ask the question, "How many of you hold crypto today?" 57%. 57% of university students were in this forum, and a pretty sizable forum indicated that they're holding crypto.

Derek White:
Now, there are risks associated with that. And everybody needs to be cautious on crypto. But the excitement around Web 3.0, around the metaverse, are interesting and unique, and Web 3.0 is an evolution of where we are today. Whereas the metaverse is a creation of an entirely new space, an entirely new real estate, an entirely new virtual experience that simulates reality.

Derek White:
And there's the real estate that's being created through that. And I've got my son's Oculus just sitting here behind me, and watching him battle in the Oculus world, how much of that new metaverse is going to be occupied by legacy players establishing real estate within that new world? We'll see. And so much of it will depend on the technology, the adoption of the technology that enables that end user experience, as well as the providers and the players that shape industry establishing a presence there.

Jim Marous:
It's interesting. And it's happening so quickly. I went on a little gallery hop with my wife and brother three days ago. I went into what looked like a real traditional gallery. In fact, it was over the top gallery in that Salvador Dalí sculpture, which I didn't know Salvador Dalí did sculpture, but it was in front of it. And I walk in, and three different places in the aisle there were like these video things playing in a frame, all of a sudden I realized I was watching Eminem NFTs in action, and you go, "Oh my God, I'm in a traditional gallery. I got this other thing going on."

Jim Marous:
And it is almost hard for the mind to comprehend what is possible, and what's going to stick or not stick. But what's interesting, that plays out very quickly now. We used to dream, and the dreams would take forever if they even happened. Now, you can dream about what's possible, and it's going to become a reality in certain ways, almost immediately.

Jim Marous:
How is your organization, how is SoFi and Galileo dealing with scenario planning around these potentially massive shifts in the marketplace?

Derek White:
Again, so much of it comes back to looking at the leaning indicators that shape industry, and those leading indicators can be macroeconomic, and looking at macroeconomic factors and the various scenarios that could play out there, but so much of it then translates those macroeconomic factors into the key three factors I mentioned before, on human behavior is interacting, and then how that is monetized, and how that is monetized over time. Monetization and financial services has traditionally been through financial products.

Jim Marous:
And fees.

Derek White:
And fees, checking accounts, savings accounts, financial instruments, right? In Galileo, we are monetizing human interactions in a federally regulated bank, not through necessarily financial products. We enable payment processing, but we also are a platform that enables the creation of business. It's an entirely different revenue capability.

Derek White:
And then the third is services that allow people to run their businesses. So the evolution of those monetization models is shifting, and now with the addition of Technisys, we have the ability to offer the end user interface, core banking platform that is fully primitive space, assembled into microservices, and allows for the construction of new products at speed in a way, that no other platform can enable.

Jim Marous:
Some of the concepts are often discussed and more often misdefined, are the concepts of, you've already talked about it, platforms in embedded finance. What is the impact of this shift from really what I would call transactional banking to engagement or experiential banking?

Derek White:
Jim, I love the analogy from the automotive industry. And as we talk about the evolution of experience, looking at, if you talk to the team at Mercedes-Benz, or BMW, I've done a lot of work in corporate banking working with automotive industry for over a period of time. There are five levels of autonomy in the automotive industry, to define levels of autonomy on moving a human from one place to another, through this machine or through this vehicle.

Derek White:
Those five levels of autonomy go everything from taking, it can be compared to feed on, hands on, or mind on. You take your foot off of the gas, that's the first step in autonomy. Then taking the hands off of the wheel, but then having your mind on and concentrating on it.

Derek White:
If you've ever gone 150 miles an hour on the Autobon and a level three automobile with your hands off, but your mind on after an hour and a half, your mind is shattered.

Jim Marous:
Yeah.

Derek White:
But those levels of autonomy of how a human interacts on their journey with a vehicle is very similar and a parallel can be drawn as to how a human interacts with money and levels of autonomy.

Derek White:
You talk about the experience. So much of this above the glass and below the glass comes back to the glass itself and the experience that the human has with their money, and how intelligent or autonomous that experience can be. At a very basic level, do they have to do everything themselves? Do they want to do something with someone in a financial institution, or do they ultimately just want us to do it for them?

Derek White:
And when you get into that level of autonomy, and defining level of autonomy, you have to get into the levels of data. You got to have to get into levels of intelligence. And all of this, the beauty of this Jim, is this all is measurable. So anybody running a large organization can look at these data elements, and understand where they are on data intelligence, on how intelligent their end user interaction is, on intelligent and autonomous their organization is, how DIY-able it is. Where do people actually want to interact with them?

Derek White:
But then Jim, that naturally then bridges into trust, because for you to sit in a vehicle and trust that your Tesla is going to drive you, that it's going to pull around and actually pick you up when you walk out of that restaurant, or that it's going to take you to that destination, you have to trust that vehicle so deeply. Do you trust your financial institution the same way to make decisions on your behalf?

Jim Marous:
Derek, another concept that is often talked about far more than it has been put into action. It's the use of data and advanced analytics, and the insights to drive interactions. Even the biggest banks I've had on the podcasts have admitted that this is really the holy grail banking in the future, the ability to take data and analytics and really make it so you're helping the consumer having embedded experience, but one that is autonomous in many ways. How big of a problem is this for both legacy banks and FinTech organizations that you work with?

Derek White:
Wow, Jim, I love this. And we could spend the next hour on this. But let's make it really tangible, because so many people talk about data lakes, you talk about data, you're talking about ML and AI. But that can be very conceptual and it can waste a lot of time, a lot of money, a lot of consultants, and a lot of technology.

Derek White:
I have found measuring data against five key things. And this is very measurable for any institution, whether it's in banking, mature organizations, or emerging. And that's looking at data on the five Cs. The first is capturing data.

Derek White:
Historical financial institution's legacy industry has been really good at capturing the same information over and over and over and over and over again. Because we go back to the technology below the glass and the way the infrastructure was set up, it was set up by product. And so each product captured the same 30 fields for every product. And you had to free-form enter into everything, right? So that was the first one, capturing data.

Derek White:
The second one, we'll use a markets data, one of the world's largest market data companies, cleaning data. Refinitiv, now a division of loan and stock exchange has publicly stated that they spend $8 cleaning data for every $1 capturing data. So these guys are really good at capturing ecosystem data, markets data to bring back to the exchanges, but they spend $8 cleaning for every $1 capturing.

Derek White:
Again, it's easy to measure, what do you capture? How clean is it? How is it cataloged? But then the third data, and this is where there's been over a decade of churn on this concept, what I call caching, or data lakes. Because you have to have a C, so you call it caching, right?

Derek White:
And so, caching is, you capture the data, you clean it up, and then you find this great, pristine, beautiful place that's regulatory compliant, that you can park the data. You can store the data in a nice reservoir of data or a lake. And financial institutions have been fairly good at doing that, because regulatory they have to demonstrate where their data relies. They're really good at demonstrating that.

Derek White:
But the magic for me in these four Cs is number one and number four.

Derek White:
Number four is calling the data, because once you put it in this pristine, beautiful lake, do you ever let anybody into that lake? What's the cost of entry into that lake? What parts of the lake are you allowed to get into? But then, are you able to call that data to the fifth C, actually calling it, accessing it, calling it out of the lake, and then the fifth C is connecting it back to that end user experience you just talked so much about.

Derek White:
Calling it back to that end user experience, where we just touched on intelligence and autonomy of data, in order to have those intelligent experiences and interactions, you have to be able to call the data. But if you're still capturing the information over and over and over again from a customer, in a digital world, you're losing trust. If you ask for the same piece of information you already had, you've lost my trust.

Derek White:
So anyway, that's how I see data. And then you start to bring in ML and AI on top of that. But if you don't have those five basic Cs that are very measurable, then you're already losing.

Jim Marous:
Well, it's very interesting because it's very uncomfortable for legacy finance since, I mean, I had a financial institution a couple weeks ago and they talked about a fast digital experience to open a new account. But many things they asked for were legacy questions. And all they did was digitize a process like, can you give me the number on your driver's license? Well, there's many more ways to capture that information about know your customer than a driver's license number, but that's the legacy.

Jim Marous:
And what's even more important is then, at the end, and it's the last step of your thing is, how do you deploy that across the organization, so that everybody can be an innovator, everybody can be looking out for the customer, everybody can be looking at how to make better business plan based on that data? And that's a real foreign concept. Opening that door outside of the data groups.

Jim Marous:
I mean, I remember, I was working in digital and direct marketing for years, and the problem was, somebody else owned the data that we had never had access to. So you can do the what is in all this.

Jim Marous:
You could [inaudible 00:39:14] and see how WeBank works. And you realize everybody's got access to the data. They've got four clouds working parallel, some of their testing different things. And you look at the way data's used. And we're talking about both internal and external data, and that's the power. That's where we're really looking at the opportunity to go to the next level from an experience level. Because you can't do it otherwise. It's all based on, we talk about data analytics so well, but the problem is unless you deploy it, unless you make it so it's tangible to the consumer.

Jim Marous:
We've done really well on risk and fraud. We've done a terrible job making it, so I know that you know me. Yes, you've protected me. Thank you. But the differentiation is not going to be in how well you've protected me, it's going to be in how well you've served me on my behalf before I even know you need to. So it's interesting. What technologies do you believe have to become more user friendly to enable a better user experience?

Derek White:
Before I answer that, Jim, can I just build on what you were just riffing on there for a minute?

Jim Marous:
Love it.

Derek White:
If you go back to that fourth C I talked about, calling data. Two data points to validate the importance of data here. PWC published a report, I think it is now 12 to 14 months ago. Maybe a little bit more than that. Measuring across thousands of financial institutions. What percent of the data they capture clean cache do they actually call it. Do they use different terms?

Jim Marous:
Yeah.

Derek White:
But it's getting back to that point that you just said, of actually using the data, calling it back to that end user experience. They said 50 basis points. Now, I've measured this personally across three scale organizations, domestic and multinational on billions of interactions, over 10 billion human interactions per year, as to how intelligent, the levels of intelligence described before. What percentage of those interactions are actually intelligent? Where data is actually being used at that point of interaction?

Derek White:
Again, it's a metric, it's a measurement. Bankers, CEOs, CFOs love to be able to measure things. So this is something that anybody can measure. How intelligence is, where are you actually using data you actually have? And on average, it's somewhere between 10 to 20%.

Jim Marous:
And that by the way, is making better reports so that people can see what they've done. It still doesn't touch the customer. So the way they're using it is still an internal function.

Derek White:
Absolutely. And so, just imagine the value to anybody in the organization. I am going to come back to your other question there,, Jim. We'll come back to it.

Jim Marous:
I'm loving this one.

Derek White:
But just imagine the impact to the end human user, and to the corporate institution, the company, on if you can move the intelligence of every interaction that you have, if you can increase that from 10 to 12%, from 10 to 20%, from 10 to 40%. I mean, this is how ecosystems are built.

Derek White:
In China and Google, they start with billions of humans, trillions of interactions, and then they monetize. Google monetizes through ads, Facebook monetizes through ads, Amazon monetizes through selling product. Some ecosystems monetize through gaining, but it all starts with the end human user getting billions and trillions of interactions on that platform, and then finding ways to monetize off of it. And that thinking is not pervasive in financial services.

Derek White:
But if your currency of the future is interactions, not financial products, but if the real currency and leading indicator is interactions, then understanding the value of those interactions, understanding how intelligent those interactions are, how those interactions are monetized, that's the future of every industry of every business, of every financial institution. So, can we come back to your question? I totally forgot because I wanted to rip up what you asked me.

Jim Marous:
And we'll do a lightning round now. We'll make it really short. What technologies do you think have to become more user friendly, to enable a better user experience?

Derek White:
And I'd look across user of technologies for end users that are employees within the organization. That to me is a massive opportunity that is underserved today to make technologies to access data and bring data back to the point of interaction, to me, for a legacy organization on that, that's an area that is missed by almost everyone.

Jim Marous:
So then, I'm going to put you in a scenario where, and not that you would do it, but let's say you go to work and be in charge of a legacy financial institution. What is the first thing that you knew you have to work on to make it so that you'd be prepared for the future of banking?

Derek White:
Pre COVID I would've said measured DIY-ability. And for many, I'd probably still start with that, to understand how DIY... I'd understand how many humans do we have? How do we monetize those humans? Where are the interactions happening, and how are those interactions happening? And I'd look at it. What's DIY-able? What's do it with me? And what's do it for me? Because a DIY experience is a 20% cost income ratio speaking to bankers, versus a 60% cost income ratio business that is do it with me.

Jim Marous:
Interesting. Finally, you're an excitable person. But what excites you right now about what's going on in the marketplace? And are there any deployments of ideas at relative scale that are catching your eye because they are unique and monetizable?

Derek White:
Jim, I got to tell you what I'm most excited about is genuinely what we are doing here in the combination of SoFi, Galileo and Technisys. I don't think anybody has it. Anything close to what we can offer to help humans, help people with the greatest stress in their life, which is money, and how do we help them get their money right, is through the SoFi brand and the consumer brand. But then also through the platform that we have in Galileo, to be able to help founders, and builders, and creators, translate their ideas into end human user impact at scale, with Galileo and with Technisys, with over 200 million users. That above the glass and below the glass coming together in a business, that's what's truly exciting for me.

Derek White:
Now, the evolution of the combination as mentioned earlier of Web 3.0, the metaverse and broader blockchain capabilities, the technology that is the blockchain defy from a value and organizational dynamics that from looking at decentralized organization, decentralized finance, all of that converging in the future is incredibly exciting. And all of those are just ingredients.

Derek White:
And every organization's looking at those ingredients on how to craft their recipe for the future, that's what's so fun about my job, is I get to talk to the biggest bankers in the world, the biggest retailers in the world, the biggest brands in the world, as well as the emerging startups and see how those ingredients are all coming together in different recipes that ultimately are served up to the end customer. And that's magical.

Jim Marous:
Kind of [inaudible 00:46:54], what is exciting is so undefined. There's no parameters. You kind of know what AI and things like that will come out to be, because it was a around a defined universe. But it's kind of like a Wild Wild West, you can't really figure out what it can become.

Jim Marous:
And I use some of the more recent examples just technology-wise, that you go backways too, but who would've thought you'd be able to shoot a rock in the air and then have the boosters land on something not much bigger than the room you're in, and have the rock come back to earth in a normal way. And you go, man, I can go back to the days when the capsule was the only thing that came back and came back in the ocean with a parachute.

Jim Marous:
And you go, when you see the speed at which this stuff happens, it just opens the door, and in every industry, but especially in financial services.

Jim Marous:
Derek, thank you so much. You are a breath of fresh air. You're always optimistic. I enjoy my time with you all the time. And it's interesting because it is a reworld right now. We're in an industry that ran slow for a long time, but you were always on a fast curve on some of those slow paths, but right now it is all exciting. And so far is doing some exciting things. It's fun to look at your sales. PayPal, some of the other really large FinTechs and even the tech companies and what they're doing, because the strategies are somewhat still undefined, because where it can go can shift daily based on the needs of the marketplace. So thank you again for being on the show.

Derek White:
Thank you, Jim. Always a pleasure. And look forward to when we're doing this again in person.

Jim Marous:
I love it. Thank you for listening to Banking Transformed, rated as the top five banking podcast and the winner three international awards for podcast excellence. I appreciate the support you've provided since we started this endeavor.

Jim Marous:
If you enjoy our show, please be sure to provide a review on your favorite podcast platform. Finally, be sure to catch my recent articles in the Financial Brand, and check out the research we're doing for the Digital Bank Report.

Jim Marous:
This been a production of Evergreen Podcasts, a special thank you to our producer Leah Longbrake, audio engineer Sean Rule-Hoffman, and digital producer Will Pritts. I'm your host, Jim Marous. Until next time, remember, the greatest danger in times of turbulence is not the turbulence, it is acting with yesterday's logic.

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