BNY Mellon, one of New York's oldest banks, is taking a different path toward its digital transformation, according to Roman Regelman, its head of digital.
He argues that most institutions follow one of two models — creating an innovation center that builds new products or forming a digital bank that runs parallel to the old one.
In one, "maybe drones are flying, but you fundamentally don't change the organization," he said. In the other, "you have one bank, it's old, the processes are old, the technology is legacy. Why don't we build a new and exciting bank right next to it?"
But BNY Mellon is pushing a third model, which Regelman calls “digitizing this bank.”
“Every process, every product, every employee and client interaction needs to become digital,” he said. “Is it harder? Yes. But that’s the only way you’re going to fix it.”
The bank is trying to eliminate paper and manual processes to save costs and improve client experience. It’s also striving to rethink end-to-end client journeys (such as client onboarding, funds accounting, collateral management and wealth management) and develop new digital businesses.
To accomplish these objectives, BNY Mellon is using machine learning, artificial intelligence, partnerships and innovation centers where it co-creates with clients.
Digitizing processes
The bank has experts rethinking processes, client experiences and how robotic process automation should be applied.
“Robotics is not an end. It’s a means to an end and quite often, not the best means to an end,” Regelman said.
For instance, robotics could be used to scan a document. But maybe there’s a better way to capture the data and skip the scanning altogether. BNY Mellon receives 12,000 faxes a day from clients that contain trading instructions, pricing information and more. It’s creating digital application programming interfaces and portals through which customers can send that information instead of faxing. But when a fax does arrive, it will use robotics to scan it.
In another example, the bank has 1 million active contracts with clients and vendors. Some are old; the oldest was signed 100 years ago.
“How can we go through this enormous database of contracts and understand what’s in place?” Regelman said. “We could have contradictory contracts. Robotics allows you to scan these contracts in a way that would take a lot of lawyers. Then AI can detect patterns and can see inconsistencies.”
BNY has begun scanning and analyzing the contracts and finding ways to help clients — for instance, by finding a clause in a contract that requires a counterparty to do something it's not currently doing. It’s also spotting contracts that need to be reviewed for compliance purposes.
“Instead of going back to a human and saying 'What was this contract about?' you go to the archives and we have the data,” Regelman said.
BNY Mellon has bots go through industry claims forms and identify and take care of any clear instructions, and highlight in yellow elements humans should take care of.
In wealth management, the bank puts robo advisers at the disposal of human advisers.
“They in essence outsource for very cheap the bottom of the stack, calculating the difference between my performance and the market performance,” Regelman said. “A robo adviser might suggest an allocation; now the human adviser can use that. The human adviser empowered by a robo adviser has become superpowerful.”
Customer journeys
Most people think of the term “customer journey” as referring to the end-to-end experience of a particular transaction. Regelman sees it as more about an overall experience, such as funds accounting.
“The client has a mutual fund and they want to know at the end of the day what that mutual fund is worth, so they can publish a net asset value,” he said. “That’s the journey. We’re reimagining this whole process of getting to that number.”
BNY Mellon bought a data management company called Eagle 15 years ago. It’s building that out into a vault for all client data with a set of tools to create insights. It plans to offer this as a service that will let clients store all their data at the bank.
It could help the bank offer services like net asset value calculation. If it stored data related to all of a clients’ custodians, it could normalize the data and help the client calculate NAV in a consistent way.
Team structure
The management structure Regelman has set up for this digital transformation has at its center a core digital team — “thinkers and shapers and influencers that drive the strategy and execution,” he said.
Each business unit has a leader who is responsible for digital strategy in that business. The digital business leader for wealth management, for instance, was hired a month ago from E-Trade.
“He has the right attributes,” Regelman said.
Generally, though, Regelman prefers to appoint people inside the bank to the digital business leadership spots. And there’s a digital council that includes leaders in areas like tech, ops, risk management and compliance.
To bring in in top talent, BNY Mellon also partners with startups, including Vestwell, a startup in the 401(k) field.
“They built something good, but it’s hard for a startup to go sell to New York State,” Regelman said. “We embed the system in our offering.”
Regelman acknowledges that it's hard for an older bank to attract leading AI scientists.
"But I don’t need to hire that person,” he said. “I can work with a startup that has five of those, and they’ll be really happy in this data environment. I’m not afraid of competitors and I’m not afraid of fintechs. We need to attract people that know our business and can think differently.”
