Cap One CEO: Digital Is the Centerpiece of Our Agenda

It’s become a quarterly ritual: Capital One CEO Richard Fairbank eloquently speaking to the importance of digital banking.

We’re not complaining — Fairbank is right, and other bankers should be listening. On yesterday’s earnings call for the McLean, Va.-based bank, Fairbank called digital “a centerpiece of that entire strategic agenda.”

Banking, he said, is an inherently digital business and as such, “ripe for transformation.” Technology is changing banking, Fairbank said, and Capital One is working backward from a future that is almost entirely digital:

Technology and information will fundamentally change how banking works and unlock new capabilities and the ability to deliver entirely new experiences. To fully capture these benefits, we’re deeply embedding digital into our businesses. We’re becoming a destination for great digital talent; product managers, designers, engineers and data scientists. We’re simplifying and modernizing our infrastructure to drive agility across the company. We’re building foundational capabilities around software development, design and information and we’re transforming the way we work to unleash the power of modern technology and great talent to drive innovation.

We are making significant investments in our digital future. We don’t build technology for technologies sake. We are working backwards from a future where the vast majority of interactions with our customers will be digital.

To wit, earlier this week, Don Kingsborough, joined Capital One from PayPal to head the bank’s group making strategic investments in startups. Kingsborough said he joined Cap One because “[t]hey are going to make a bold move to be a tech company at the same time as a bank.”

Still, overall costs are being cut at Cap One — including human resources — in order to offset the cost of digital investments, Fairbank said yesterday. He elaborated on this during the Q&A session, saying that while digital delivers some cost-savings, overall it is likely to cost the company money, a point he has made in the past:

And the investment in digital – a lot of banks are talking about digital in the language of whether the expenditure – how the investment in digital compares to the cost saves.

We are not primarily motivated by cost saving with digital because I think that’s about fourth on the list of things that the power that digital provides. Right now, it is still a net negative and probably for an extended period of time measured purely by cost, digital will probably be a net negative.

Digital is all-encompassing, Fairbank said, and it is increasingly hard to put a price tag on it. But most banks don’t see that yet, he said, and still think of digital as customer-facing:

So often I think banks when they think about digital, they think I’ve got to go build apps, we’ve got to get customer-facing or associate-facing apps. Most of the leverage is really in infrastructure in terms of things like rationalized and simplified core infrastructure, increasingly we’re focusing on cloud computing and building the underlying capabilities such that product development will be faster and faster and more effective over time.

In the end, he said, Capital One doesn’t do digital because it’s cool or to save money. It’s just that it’s the future, and Capital One wants to get there first.

Fairbank’s final words on the call were, “Digital is who we are, and it’s where the leverage is.”