Leading digital transformation at Arvest Bank

Laura Merling, Chief Transformation and Operations Officer at Arvest Bank and one of American Banker's Innovators of the Year, did a live interview at the Digital Banking conference.

Transcription:

Miriam Cross (00:10):
Hi, I'm Miriam Cross and I'm a technology reporter at American Banker. Welcome to Digital Banking 2023. Today I am speaking with Laura Merling, the Chief Transformation and Operations Officer at Arvest Bank. Laura, thanks for being here.

Laura Merling (00:24):
Thank you for the invitation.

Miriam Cross (00:26):
So what was your background in banking before you got to Arvest?

Laura Merling (00:30):
I have no background in banking before I got to Arvest, so it's a great question. No, my background, I spent about 15 years in technology and then shifted from technology to say, okay, I want to take this technology that I'm working on and I want to help somebody actually launch it, enable it, make things happen. And so I've been in telecom, automotive, aerospace, went back to tech for a little while, and then I was like, I haven't done banking yet. So here I am.

Miriam Cross (00:57):
What was the transition like?

Laura Merling (00:59):
The transition's actually been great. I think part of it is picking the right bank or the right place to go, and Arvest has just been very welcoming and impressive in terms of embracing someone with a diverse background in terms of what their knowledge is. And so even as of yesterday, I was asking our executive committee a couple of questions about where some of our different funds come from and how we think about those funds. So that part's been great. I'd say one of my biggest learnings is I've been in highly regulated businesses or industries, so telecom regulated automotive. I was working in autonomous vehicles, so different kind of regulation that was being defined while it was going or while we were working on it, it still is, but then coming here, right, I'd say the biggest difference is the regulatory environment here versus those other industries. It's just a lot more to learn and it's a lot more in the middle of the day to day of everything you do, whereas the others, yes, you had to know about them and yes, pay attention to them, but it wasn't in your face every day.

Miriam Cross (02:06):
So you have the title of Chief Transformation and Operations Officer, and I feel like Chief Transformation Officer is kind of an emerging role at banks. How would you define it and how is it different from being a chief technology officer, chief digital officer, or chief information officer?

Laura Merling (02:24):
That is a great question. So we had this big debate when I joined Arvest about what the title would be. They were very adamant that they wanted me to be a transformation officer because it was about a full business transformation. So my role kind of extends beyond, and this goes back to what's the role. So I look at my role as a run, transform and grow the bank, and all of that is part of transformation. So Run is a CIO and my COO. So the CIO really focuses on the internal systems that we use to run and operate the bank from an associate facing perspective. So think everything from finance to HR, those types of systems. On the flip side of it, then you've got my head of operations who kind of also runs the bank. So he's in there running all the back office, running our fraud prevention, all of that kind of stuff. And then you've got the CTO. So I've transformed the bank as the CTO and my chief product officer. And what they're actually doing is standing us up for the future, redesigning the bank, building software. Instead of doing just integration, we're actually building our own software stack. And then the last piece, which is grow the bank is really around what we're doing to create new revenue streams. And so that's that what you might call a growth strategy person.

Miriam Cross (03:47):
Okay. And when you were at AT&T, you came up with a five pillar framework for transformation. How is that coming into play at Arvest?

Laura Merling (03:56):
Yeah, so the five pillars are interesting. So part of that was as we were going through the process at AT&T, there were different things that we would try and were working or weren't working. And what was interesting is I looked back at my days at AT&T and I thought, wow, when I was there, I thought, well, gosh, they're really behind. Come on, everybody is already doing this, aren't they? And then when I left AT&T, I realized they weren't. So we were actually more ahead than I thought we were. But really the way the five pillars came along was, you know, you didn't know what you were going to transform and you couldn't measure it unless you had a target. You had to know where you were going to then be able to measure your success. And a key part of what we would do to get investment at AT&T, very financially run organization. So what we had to do is say, this is the business problem we're trying to solve. Here's how we would measure that outcome. Now we can go build that solution or go target how we would transform that part of the business.

Miriam Cross (04:50):
And what are the five pillars?

Laura Merling (04:51):
Oh my gosh. So the first one of it is what is your business strategy? So where are you headed? The second piece of it is, do you really know your customer? So I'd say everybody here, if I ask them if they know their customer, they would say, of course I know my customer. I'm going to ask again, do you really know your customer? And where this came from was, and there's actually a great example of it that we used at Ford Motor Company. It was, if you want a package delivered and you are a company that does transportation, so you're going to deliver the package, you look at it and you go, so is it like, does it need refrigeration or is it a durable good? And then you go, okay, from there, am I going long haul or am I going local? And so you think that if I'm the person that's receiving it, I'm the customer.

(05:35)

The way that I think about my world as a customer is I want to know, am I going to be home or am I going to be away? Do I want it today? Do I want it tomorrow? Do I want it next week? Do I care about the time that is, do I know my customer now? It's not the normal KYC that you still need to do that, but it was a different thinking about it from a customer's point of view versus from how you serve the customer. What does the customer need from you? And so that's number two. So the number three piece is a technology assessment, which is really when I think back to where we were when I joined in September of '21, we started with a technology assessment, which is where are we? What's the baseline of everything that we have?

(06:17)

Because if you don't know what your technology stack is, you don't know where your pain points are, and while you're transforming the business, things have to be up and running. So we did technology assessment to say, what's the foundation and where are the pain points that we have to start with first? And what do we transform first? And then the next piece of it is metrics and measure. So again, what's the business problem you're solving? How are you going to measure it? And then the last piece really is around governance. And governance to me, really 90% of governance is actually communication. And it seems strange, but the way that you get success and support of the project is through communication. And that's why I look at governance is how are you going to do prioritization? But how you do prioritization is all about communication. So why are you choosing the things that you've chosen? What's the five levers that you're using for priority? How often do you communicate the progress you've made? Where are you, what changes have been made? So it goes back to, I think earlier in a session we were talking about radical transparency. That governance piece is really the radical transparency piece.

Miriam Cross (07:20):
And speaking of our session earlier, the title was Thriving During Uncertainty. How does that resonate with you as a leader?

Laura Merling (07:27):
Of course, of course. So I have a favorite quote that hopefully you'll appreciate as a Canadian. So Justin Trudeau, back in 2018 at Davos had this quote and he said, the pace of change has never been this fast yet it will never be this slow again. If you think about that, it's never been this fast and it'll never be this slow again. So there's a perfect example of it. There's a recent stat, it was probably a couple months ago, but there was a stat that came out that said, who's using ChatGPT? Anybody? I think there's been quite a few sessions on ChatGPT and people are talking about it today, trying to figure out how they're going to use it. So one of the things that's super interesting is ChatGPT went from zero to a hundred million users in two months. The next closest one was actually TikTok. TikTok went from zero to a hundred million users in nine months, and before that it was Instagram, and that was two and a half years to go from zero to a hundred million users. When you think about that pace of change, that's an exact model of it's fast, but it'll never be this slow again. So I think it's spot on because we are going through constant change, whether it's technology or we've talked regulatory, right? There's a lot of stuff happening in the market

Miriam Cross (08:47):
Is Arvest exploring ChatGPT capabilities?

Laura Merling (08:51):
So yes, we're exploring it like everybody else. It's figuring out what are the right set of use cases for it. I think there's going to be a right set and a wrong set. And a way to think about ChatGPT is it's giving you, it doesn't give you truth. And there's a whole series of research on this. ChatGPT gives you probabilities, it gives you possibilities, it gives you, here's your options. It could give you an answer, but it isn't giving you the exact truth. And so I think that's what people have to be cautious of is when you're thinking about using it in your business, you got to remember it's not giving you the truth, it's giving you possibilities and that will help you shape the use cases.

Miriam Cross (09:29):
Okay. One of the first things you did at Arvest was to conduct a vulnerability study. Why was that important?

Laura Merling (09:36):
Oh, the vulnerability study, it goes back to, there's a couple pieces of it. One was where do you want to be when you grow up, right? Because you got to have a business destination where you're going. The second piece of it is, do you know your customer? And so we had to figure out, well, what do our customers really think of us? What do we really need to change about ourselves? And so the vulnerability study was to say, how at risk are we of losing our customer base? And when we did that, we actually were, even though we're a, we'll call it mass market retail or known for that, traditionally, when we looked at the results, we actually had much more positive sway for small business customers and commercial customers than we had on our retail side, which was interesting. And then when you looked at the retail side of it, it was like, where are the pain points or what we call the rocks in the shoes, what's the rocks in the shoes that are going to make the customers walk away from us?

(10:27)

And they're just simple things. I mean, some of them were just, there was quite frequently we got, your processes are complicated. And what was interesting about that is, well, we knew our processes were complicated internally in some cases, but we never thought about the downstream impact on the customer. So usually wherever there's efficiency gains, there's opportunity for customer experience gains. So that vulnerability study set the guidepost for us for how we might identify what we call quick wins. How do we go solve the rock in the shoe, because that is going to be the leading indicator of they're showing us the lagging indicator, which is they walk out the door, they show us with their feet.

Miriam Cross (11:08):
I love the phrase rocks in their shoes. And I love the phrase 90-day quick win. So you said one of their rocks in their shoes was about processes being too complicated. What's an example?

Laura Merling (11:21):
So there's quite a few of those processes that were complicated. Some of them were, if you wanted debit card limits increased. What was the process that you had to go through to do that? Some of it was if you wanted to do password resets, I mean easy things that we thought should be easy to go do a password reset, we made it overly complicated for the customer. So, and then some of them were actually processes for how we do loan origination as well. So we had on both sides, both on the retail and the commercial side. And so we've actually, we've been in the process of redoing our entire loan origination system. We're building an entire loan origination system based on a series of interviews we've been doing with customers. So there's a lot of processes that they were designed when we didn't have technology, and we've never then adjusted those processes. So they're still designed around a lot of human manual handoffs. And so why are people emailing me documents? Why are we not automatically pulling in tax records? Why are we not automatically pulling in business data and business records. There's ways for us to actually automate all of that.

Miriam Cross (12:28):
And what's an example of a 90 day quick win that you put in place to solve some of these?

Laura Merling (12:33):
Yeah. So there's a couple 90 day quick wins that were pretty beneficial. So one of them, a lot of 'em had to do around contact center. That's where you'll find a lot of initial quick wins. So the contact center ones, there were a couple of them that were great. One was how do we automate self-service for password reset? We were very old school, you had to actually call in and do a password reset with the contact center. We just automated that in 90 days. We turned around automated. Why we never did it before. I don't think anybody ever looked at it and went, that's a problem. But when you looked at the calls that were coming into the call center, that was a high volume one. Another one was actually call wait times, so or how long somebody was talking to an agent. And so one of the things that we did was we actually automated authenticating you.

(13:19)

When you call into the contact center, we do pre authentication. And so when you talk to the agent, by the time you get there, guess what? You're just having the conversation with the agent because we've already authenticated you. That's taken out 200 hours of call time from the contact center. So think about the impact on the contact center. So there's an internal impact in terms of reducing the number of associates needed for contact center. But for a customer, it reduces the time you're waiting on hold for somebody to then talk to you because they've got some of that data ahead of time.

Miriam Cross (13:48):
And what's been the impact on vulnerability?

Laura Merling (13:52):
So we ran the vulnerability study in the fall of '21. The next vulnerability study is run this fall. So we don't have that, what the impact is. So then we'll find out what the impact is. We have some things that have taken us longer to do than we expected, but some things were easy. A lot of it was the mobile experience was also, in some cases it seemed like it was less inadequate or broken or you couldn't do things on mobile that you had to call into the contact center for. So for us, you can actually now do start a new CD or you can update a CD, do a renewal online so you can renew and upgrade your CD online. Why not? Why did we not do that before? Why do I have to go into the branch? Or why do I have to call the contact center to do that or call my relationship banker to do that? Other ones were a couple other ones that are taking a little bit longer are some of the adjustments that we want. Sorry, some of the adjustments that we want to make to, we'll call it fraud prevention things. Some of those are taking a little bit longer. Obviously there's a lot more work to do to take different data sources, integrate it and prevent an account takeover that takes a little bit longer time horizon.

Miriam Cross (15:07):
One more question. Can you tell me about Me@Arvest and why you started that program?

Laura Merling (15:13):
You are a fan of Me@Arvest, aren't you? I knew it.

Miriam Cross (15:16):
It's a catchy name.

Laura Merling (15:16):
It is a catchy name. So Me@Arvest, actually, the program was designed for upskilling and re-skilling. But the reason that that started is when I first arrived at Arvest, we were like, we want to move to the cloud, we need to be more nimble. How are we going to do this? But in order to move to the cloud, we didn't have anybody at the bank that actually knew cloud computing. So I needed everybody to get trained up-skilled immediately. I didn't want to just bring in a whole new crew from outside. I wanted to be able to take people along for the ride. And so what we did was we started this program with creating role profiles that were needed for cloud computing. And then from those role profiles, we had learning journeys. And then what we did is we launched Me@Arvest and people had to start taking training courses or their learning journey for their new cloud engineer role or whatever it might be.

(16:06)

And so we started that with the cloud team and we kicked it off. And now we have over a thousand of my associates across the technology organization, operations organization that have gone through. We have 63 profiles. We have each one of those have learning journeys. We have over a thousand associates that have gone through their entire learning journey for phase one. And so it's super exciting and now we're bringing that out to the rest of the bank. So the next team that's going to do the Me@Arvest program is actually our marketing organization and we're working with them now. And that will launch in August.

Miriam Cross (16:43):
Cool. That covers what I wanted to know. Is there anything else you'd like to add about how you view leadership and transformation?

Laura Merling (16:49):
Yeah, sure. There's so much, I think part of leadership with transformation it's interesting, so as we've been going through the transformation, we set a couple of what I'll call principles. So one of the principles is simplification, one is standardization, and the other one is scale. We added a fourth S. My team makes fun of me. And we actually just use the fourth S as our annual planning theme. And the fourth S is sunshine. And it sounds a little crazy, but transformation's really hard. And so how do you bring sunshine everywhere that you go? So you know, you might be having a difficult conversation, but you have to have a smile on your face and you have to be talking about how you solve the problem, not about the fact that there's a problem, it's we're all here together, we're all going to solve it together. And I think that's super important is to always think about how do you have that sunshine.

Miriam Cross (17:40):
Well, thank you very much.

Laura Merling (17:42):
Thank you.