Elena Christopher — Chief Research Officer, HFS Research[00:05]
Hello and welcome to HFS Unfiltered. I’m Elena Christopher, the Chief Research Officer, and I am delighted to be talking with Chinmay Patel today. Chinmay is the CIO for Commercial Banking Technology at Citizens Bank. Today, we’re going to be talking about how to drive change and impact in the face of challenging macroeconomic headwinds, and maybe with a side of the emerging role of partnership ecosystems. We’ll see if ChatGPT comes up naturally or not. But welcome, Chinmay.
Chinmay Patel — CIO, Commercial Banking Technology, Citizens Bank[00:36]
Thank you so much, Elena. Thanks for inviting me, and I’m really looking forward to this conversation.
Elena Christopher — Chief Research Officer, HFS Research[00:36]
Fantastic. Well, let’s start with you and Citizens Bank, and honestly, 2023 has been an interesting time for US regional banks, but tell us a little bit about Citizens and your role, please.
Chinmay Patel — CIO, Commercial Banking Technology, Citizens Bank[00:36]
Sure. So Citizens Bank is one of the nation’s oldest and largest financial institutions, with the AUM or the total assets around $223 billion, with the deposits around $170 billion plus. We have branches in 1,100 places, and the ATMs around 3,400. We also have a national bank which is completely digital, called Citizens Access, and it really offers the best rate for high-yield savings as well as deposits in the marketplace. I joined Citizens Bank in September of 2009. It’s been an interesting journey, and every day has been fun and I really look forward to it, as new challenges, market trends, and the evolving commercial and consumer marketplace changes take place.
Elena Christopher — Chief Research Officer, HFS Research[01:44]
Excellent. Thank you for that detail, Chinmay. Probably worth noting, you joined Citizens after a long and storied career with Citi, so a very interesting transition from a large global bank to an increasingly super-regional financial institution. But let’s talk about that a little bit. Where I think I’d love to start our conversation today is at HFS, and supported by some research that we’ve recently done in partnership with Infosys, we’ve been using this description of the market as we have a tale of two cities on our hands. And so, yes, I’m waxing literary, but where I’m going with this is that on one hand, we’ve had significant macroeconomic headwinds. I alluded to some of the bank failures in the US in Q1. Now, as you and I have talked about, it’s maybe a bit more of a focus on the deposits now, and just with the rising interest rates, the potential threat of recession, global conflicts, things of that, there’s definitely a significant bucket of macroeconomic headwinds. But on the other side, and I love saying this, and I’ll say it today, and I’ll say it tomorrow and the next day: today, technology and innovation potential is the best it’s ever been. So there’s so much really just amazing innovation and emerging tech potential. So we call it the tale of two cities scenario, but I’d love to understand a bit more about how you’re balancing this at Citizens Bank. And really, I guess the question is, how are you striking a balance between these two realities, and really what gets prioritized in this tale of two cities market?
Chinmay Patel — CIO, Commercial Banking Technology, Citizens Bank[03:17]
It’s a great question, right? And if I really go back to September of 2023 when I joined, I think the waters were very calm, and we’d been focused more towards completing our integration with Investors Bank. Come fast forward to February of 2023, it was very interesting, because as we were finishing up our integration with Investors Bank, we started seeing the troubles in the marketplace where it was almost a crisis, and it turned out to be a crisis on the regional banking side. There were a couple of bank failures. There was a lot of movement of the deposits from one bank to another bank, or people were rushing to move the deposits to the larger banks. And as we settled down on the deposit front, now we are seeing the crisis around credit, right? And even though we are focused on the credit side of things, we already started hearing another term, CRE, commercial real estate, right? So if we really look at it, we continue to have these evolving market trends as well as some of the market opportunities that are out there. Now, when you look at it both from the technology front, most of the time, when we look at the banking sector, we’ve always been offering the product as a whole, right? So when we talk about the deposits, we were offering the deposits, and it’s OK, this is the rate and this is the deposit we offer. But when you really look at this crisis, it’s almost like every cloud has a silver lining. There’s definitely an opportunity out there, that how do we actually deconstruct our product offering to the clients, so it allows us to have more flexibility to bring the different product sets together and cater it specifically to the clients, right? So what it means essentially is designing a product or designing the solutions for the clients based on their needs, as opposed to just selling the generic vanilla products saying, hey, this is what we offer, right? Now when we look at Citizens Bank, we completed our Investors conversion, and now we are more focused around how do we basically take advantage of this entire breadth and depth of our presence in the various New England states. We are in the 14 states, but also with our national bank, how do we do this outreach to these different clientele and also offer them a niche product set based on their need, right? So our opportunities are also there. There are also challenges, and we are actually trying to balance it, saying let’s focus on what our immediate needs are from a technology standpoint, but also start thinking about how we are going to make ourselves more nimble, more flexible, and allow us to have those constructions of the products in a dynamic way. And that has been the technology focus for the past few months.
Elena Christopher — Chief Research Officer, HFS Research[06:20]
Fantastic, I appreciate that detail, Chinmay. Baked into your response there, at its essence, it’s the mantra of you can’t just stop. Progress cannot stop. And just even that simple description of no one wants plain vanilla products, your ability to customize and personalize increasingly is really what leads to a successful future bank. It can’t stop, but I appreciate your point about how it’s a bit of the now value and what can we prioritize now, but also taking good care not to miss the longer-term outlook. All right. Well, let’s talk a little bit more about innovation focus, because you’re a technology leader. I want to refer back to that study I mentioned in my intro comments. One of the things that we found is that, within this tale of two cities, financial services enterprises are really trying to drive innovation across three different horizons. And so we say Horizon 1 is digital optimization at a functional or piecemeal level. Horizon 2 is more of end-to-end modernization; in a banking context, and you alluded to this, it often is a lot of going across lines of business, powering data in such a way that you get that coveted 360 view of customers, for example. And then Horizon 3, I tend to think of it as, once you have your internal shop in order, it frees you, enables you to go look externally to create new forms of value. And so we think of Horizon 3 as the creation of ecosystems to drive new forms of value. So what I’d love to hear from you is, does this horizons model resonate with you? And if yes, how is Citizens managing and prioritizing across your own horizons model?
Chinmay Patel — CIO, Commercial Banking Technology, Citizens Bank[08:12]
It’s a great point, right? If I look at the past 20-plus years, and across the place, when you look at the banking sector, there always has been a large amount of investment in the consumer sector. So whenever you look at the different banking, you would see that, OK, there’s a lot of investment going into the consumer capabilities, consumer feature set. However, when you really look at the revenue pool, the revenue pool comes from the commercial, but the commercial side has always been the least invested. So I do remember, in December of 2022, there was an interesting article that came out, and it clearly stated that from the fintech standpoint, the commercial is like the next frontier, and I wholeheartedly agree. There’s so much opportunity out there in the commercial banking sector. And the way we are structuring our technology, our resources, and our projects at Citizens is also in the same alignment. So I think the first thing we started looking at is working in partnership with the business, defining the product-level three-to-five-year roadmap. And in addition to that, we also started strengthening our three pillars around data, APIs, as well as cloud. On the cloud journey, today we have almost migrated like 60 to 70% of our platforms into AWS and Azure. We are closely working with our enterprise data teams to try to drive the data strategy, where we are actually moving aggressively on the AI ladder, which is like collecting, organizing, analyzing, and infusing the data to create value out of it. And then last but not least is creating the ecosystem that is API-driven. Now, we can’t just expect that this journey is going to complete overnight. So what we’re doing right now is we have laid out the foundation, we are pressure testing, we are going through each and every scenario and basically creating smaller POCs to prove the point that the thought process, the architecture, the foundation we are laying out is actually going to take us where we want to be. But our goal is that if we basically take a certain set of curated deliveries or curated projects or curated platforms, then it also allows us to touch and partner with third parties, whether we look at some of the market solutions like Varana, or looking at fintech partners or embedded financing. So to connect all the horizons, there’s definitely progress towards making our shop in order through digitization, zero ops, or service optimizations. We are also building the tools and capabilities that are driven or centered around data, APIs, and cloud, and we have also identified the use cases which are already being produced as an output, that we can start working with the third parties or even the fintechs, or as embedded finance capabilities within our own platforms. So that’s how I look at it, that we’ve been on the journey on the commercial front. It’s going to take a couple of years before we can come out and say, OK, now we have reached a point where we feel that we have achieved this entire ecosystem revamping. But I think the way I look at it is that we are actually taking a lot of steps forward, and I think we are well ahead in the journey compared to the marketplace.
Elena Christopher — Chief Research Officer, HFS Research[11:32]
So very insightful, and you and the team there have been busy at Citizens. Within your answer, I think what you did was articulate, and we hear this from many financial institutions, you’re not just at Horizon 1 or 2 or 3. In many ways, based on the initiatives across data, cloud, and APIs that you mentioned, you’re perhaps concurrently at all of them, but always working towards the end-to-end modernization to really appropriately enable those ecosystems. So I love the details. Within all of this work that you’re doing, Chinmay, at Citizens, maybe you’ve got a success story that you could share with us?
Chinmay Patel — CIO, Commercial Banking Technology, Citizens Bank[12:24]
Yeah, sure. I think one of the best outputs we had, which basically combines, I know you mentioned GPT also, but I think one of the best outputs we had is providing the clients a self-service mechanism, or almost like a concierge service, through a platform called the digital butler. Now, when we look at the digital butler, it allows clients to basically go into a platform, look at their service tickets, converse with the AI tool which we offer, and in addition to that, it continues to learn from the client requests, client inputs and outputs. So it’s almost like creating a new way of how we can provide better functionality or capabilities and a self-service model to the clients. Since the rollout of the digital butler, I think we are seeing less and less of the interaction in terms of direct service calls. Clients are getting more familiar with it and they really love it, and there’s great feedback that’s coming about on the overall digital butler capabilities. But that also provided us an insight into how we can take some of the capabilities we offer in the form of an AI and take it to a different frontier on the almost like large language models, where we can build to provide client advice, client insights, some of the advisories, and for our internal user base, self-service capabilities, but also cross-product sale capabilities. So I think there is an entire focus now on how do we use the data we have and provide a value output that can be infused as part of the client conversations or revenue generation, and that is what the focus has been for the past few weeks now.
Elena Christopher — Chief Research Officer, HFS Research[14:16]
Fantastic. So a couple of themes I hear there. To your earlier point of commercial banking not having had the same level of investment as the retail side of the house, I love this concept of the digital butler for your commercial clients. I also appreciate we can perhaps invoke the name of ChatGPT, but behind the scenes it’s perhaps an array of artificial intelligence, and starting to explore and do more with some of the generative AI and large language learning models. So some very exciting progress there. We talked about ecosystems just briefly a moment ago, but I’d love any additional thoughts about how Citizens Bank is going about building ecosystems. You’d mentioned them in the context of APIs, and that’s obviously a simple way to drive that connectivity, but we’d love maybe some thoughts there and an example if you have one.
Chinmay Patel — CIO, Commercial Banking Technology, Citizens Bank[15:16]
Yeah, so I think when we talk about the connected ecosystems, I think microservices, when it came out, was the greatest invention in a way, right? Because coming from the monolithic service to modular development to going into microservices, it was a great leap forward. But as you look at today’s marketplace, where in an organization you have a lot of capabilities out there, how do we basically bring all these capabilities together, right? So the way we started looking at this problem statement is that we do have data, and we have a journey where we are going to create an output out of the data. We have a mechanism where we are going to have all our platforms running out of the cloud, and then the next frontier would be going into becoming cloud native. But the APIs are the one which is going to act as a glue to connect these various pieces which are out there, right? So we’ve been heavily focusing on the APIs. Now the APIs can be considered as point-to-point for internal connectivity, or external-focused APIs where the clients can come in and pull the data or submit the data, or you’re looking at the experience APIs. So now what we’re doing is that we’re building these three different sets of APIs and also the micro front ends that allow us to bring all this content together and make it visible on the screens. So we’ve been partnering and doing the POCs around the micro front end with one of our vendor partners, Infosys. We’re also looking at the various technologies which are available, like Flutter, Dart, and trying to see how do we bring this different content and make it available that is not only accessible through one unified experience, but is also accessible through the APIs, so that it allows us to have the best of both worlds. Not only can we provide this benefit to the clients to have this unified experience, but it also allows the fintechs as well as the other companies, if they want to connect directly with Citizens, to use our external set of APIs. So that’s how we are looking at our connected ecosystem: let the functionalities continue to grow the way they’re growing, but having a common set of APIs that allows us to basically glue together all these various capabilities as one common offering to the clients.
Elena Christopher — Chief Research Officer, HFS Research[17:34]
Love it, and I appreciate it, because you don’t often hear APIs talked about in terms of the underlying functionality or focus, and so I think that brings some additional richness to the conversation. I’d like to close this out on an actionable note. And by that I mean I’d love some recommendations for success. Given this tale of two cities reality that we’ve been talking about throughout the conversation, what recommendation would you make to your peers across financial services, or really across all sectors, about how to make progress and impact with innovation in challenging times? What do you think?
Chinmay Patel — CIO, Commercial Banking Technology, Citizens Bank[18:11]
I would love to quote what Elon Musk has said, that is, focus on the signal over noise. Market trends, market situations, market conditions, macroeconomic environment, they’ll continue to happen. That has happened in the past, they will continue to happen in the present and the future. But that in a way is a noise that will continue to come about. What we, as technologists, we as the leaders driving the technology forums for the banks, my recommendation is very simple: continue to focus on the signal. And the signal, for me personally and for the marketplace, is that let’s continue to focus on our data so that we can provide the value. Let’s look at our platform availability and resiliency through cloud. And last but not least is to connect these two pieces as a glue through an API. If we can basically conquer these things, we can really have a great stride in terms of achieving success.
Elena Christopher — Chief Research Officer, HFS Research[19:10]
Yes, well, not only for the banking sector, but also for the overall technology evolution on the connected offerings. Chinmay, thank you so much. I really enjoyed the conversation today. And thank you, everyone, for listening to this edition of HFS Unfiltered.
Chinmay Patel — CIO, Commercial Banking Technology, Citizens Bank[19:10]
Oh, thank you so much.
