Opening Keynote Address with Ben Walter What I've Learned

Transcription:

Ben Walter (00:08):

Good afternoon everyone. It's afternoon. It's great to be here in Nashville. I do want to start by echoing something that Chana just said, which is you should all be really proud of yourselves. Small businesses really are the engine that run America's economy and the dynamism that we have in the entrepreneurial sector here is a big part of what differentiates us from other economies around the world and makes this economy more dynamic, makes it grow faster. It's almost half of every new job in America is created by a small business. We hold it on a high pedestal and we should. So you should be really proud of what you do because the work that you do is the work that builds the economy here in America. When they called and asked me to give this talk, I sort of paused for a second and I said, this is going to be interesting because not only do I have to give a talk that's obviously compliant from an antitrust perspective with a whole bunch of competitors in the room, but I'm also probably the least experienced banker in the house.

(01:06):

So anybody been a banker for more than five years? More than 10, more than 20. I'm going to stop before I get in trouble. So I've only been a banker for two. So I started to think, well, what the hell am I going to talk to everyone about who's been doing this their whole career? So what am I going to do? And at last, I'm the one up here with the microphone, so I got to figure out what to say rather than talk about how AI is going to change the industry and it will or what the latest trends in digitization are or regulation, and there are plenty. I'm going to leave that for the end if you have questions. So anybody's welcome to ask me anything you want at the end. We left 15 minutes at the end for questions. Instead, what I thought I would do is share some of the broad lessons that I have learned from a pretty unusual career that's led me to this point.

(01:52):

I've worked with small businesses for 12 years. I've worked in financial services for 20, I've worked in general for over 25, so I've learned a lot along the way and I think a lot of the things that I've learned can be extrapolated and applied to a lot of situations. So I thought rather than share a specific direction for the industry, I would talk about some of those lessons, how I apply them in general to the work that I do, and I hope you can take away a couple that might be interesting for you. So what I'm going to do is I'm going to share a little bit about my journey. I've worked in six different industries. You don't meet a lot of people who have done that. There are other advantages to staying in one thing your whole career. It's just not the path that I've followed.

(02:30):

So let me give you just a little bit of a sense of some of the things that I've done. I started my career in the airline business, which couldn't be more different, although we did have a relationship with Chase back then and I worked with people from way old Chase from before the whole merger with Bank One and all that stuff, but I learned a lot when I was there. I learned all about customer experience, but the most important thing I learned was about staying in touch with the frontline. I'll never forget Gordon Bethune was the CEO of Continental when I joined, and he had turned the airline around from worst to first, and I remember the first time I took a trip with him, I was 22 years old. My job was literally to carry the files on the plane and we show up at the airport, it's oh, dark 30 and he says, let's go down and see the guys.

(03:14):

I don't know what that means, but I think he should do what he says because he's the CEO. So I follow him and he takes me out this little back. You know that back door when you go down the jetway and there's that little back door where they take your back? Yeah, we go down there and the next thing I know we are throwing bags with the guys downstairs putting the luggage on the plane and he's swearing like a sailor. The guy's, he was a sailor. He was in the Navy, but well, he was, but the guys love it and we are learning so much about what's going well and what's not and it was a real lesson for me. So that was sort of my trial by fire at Continental After business school. I went and worked at BCG, which was a totally different experience, but a great skillset in terms of problem solving and dealing with ambiguity that I took into my first real commercial role.

(03:56):

There's no screen on that side, which is when I ran the credit card business for the Gap at Banana Republic. I learned a lot about running a financial product operationally. I also learned that I didn't care whether people wore white or blue shirts in the morning. I just didn't care. So I was like the financial services guy and a retailer that wasn't going to work. And then I went to work for what is now BlackRock. At the time it was Barclays Global Investors. They were the largest asset manager in the world. I learned all about scale and how important scale is, so they ran trillions of dollars worth of money and I learned about how to operate in a truly regulated environment. They were regulated by both the OCC and the SEC at the same time. That was great fun. I then spent the last 10 years of my career at HISCOX.

(04:39):

If you haven't heard of HISCOX, it's a large global specialty insurer based in London. I ran the US and then I ran retail for them globally. 75% of what we did in the retail business was small business insurance. So that's where I learned small business and then I was lucky enough to take all of that and put it together when I came over to Chase in 2021. Okay, so that's enough of my resume. Let me talk about some of the lessons from along the way that come up. Yeah. Okay. First of all, being a small, let's start with small business. Let's start with 12 years in small business. What have I learned? The first is being a small business owner is incredibly lonely and we forget that at our own peril, we talk about CEOs being the loneliest job in the world. It's not being a small business owner is way more lonely.

(05:27):

At least CEOs have big staffs that they can ask for help. They have budgets, they have all this stuff not true for small business owners. They're incredibly lonely and when we think they're looking for a specific solution or a specific angle, they're looking for help and they're looking for someone to talk to. They need to rely on all of their advisors in their broader network in a way that commercial clients don't have to. And it's really important to them that they have someone who listens even more than regular clients. Regular clients tell you what they want. Small businesses want to talk to you to find out what they need, and it's a really different angle on financial services in particular. It is a lonely job. Even acknowledging that loneliness goes a long way and I think we fall short of that sometimes. Okay, the second one, this is the best word I've come up with for this small business, is messy.

(06:21):

It's just the best word for it. Small business lives in this weird space. Many of you, you do this, you know it. We live in this weird space between consumer and commercial. Consumers really straightforward. You have a social security number, it never changes. Maybe you get married, maybe you change your name, you might have a trust. That's about it. There's a unique key for everyone in this country. It's called a social security number that businesses they kind of have but they don't really have. And small businesses starts to have the complexity of commercial but not the discipline and structure of commercial. So it doesn't have a CFO who's putting the accounts in all the right places and designating what they want to do with each pool. They don't have that. They live right in between. In the messy space, this is how I always describe to my wife what working with small businesses is like, oh, this is a cool business.

(07:06):

What do you do? Oh, I got an auto repair shop and I got a detailing center. Oh, that's great. Do you own the business? Oh yeah. This is my business. Yeah, it's my business. Well, I guess my uncle gave me some money when I first started it. Well, if you asked him, he'd probably say he owns some. Is he on the paperwork? Well, no, but we've been saying we should do that for years. Maybe I should give him a call and see if he wants to. Well, is he on your account? Well, no, but I wonder if he, that's small business. You're laughing. You have clients like this that is small business and I'm here to tell you it's never going to get neater. I hear all the time from people working in fintech's who are trying to take this whole thing and boil it down to a simpler boiler plate.

(07:45):

And I applaud the effort and I applaud a lot, by the way, a lot of what the fintech's are doing in terms of pushing us on customer service, but you will never get rid of that messiness. You have to embrace it. And when you embrace that messiness and you build for that messiness, you distinguish yourself with your clients. Okay, next one. Product versus passion. What do I mean by product versus passion? All of us in the financial services industry, we love products. We love all of, we love our checking accounts and our lending accounts and our money movement products and our treasury service. We love to talk about those products. It is the most exciting thing that we do. They don't care.

(08:30):

I'm serious. They don't. By the way, only people who work in financial services call what we do a product. Nobody else does that. My wife works in actual physical products. She sells skincare. She's always like, you don't have any products. A product is something you hold. She can't even wrap her head around this and she's got a fair point, okay, she's got a fair point and my point about this is we love to talk about products. The way we frame our business. It is not the way small business owners frame what they do. It's not why they started their business. They started their business because of what they are passionate about. And you know what? They're not passionate about how their banking runs. They're not, they're passionate about the product that they deliver in a different way than a bigger company. A bigger company has a bunch of professionals. They work there, they might be invested in it, they might like it, but it's not their driving passion the way it is for small business. So I'm constantly telling my team, and I'll share with all of you, stop talking about our products as if it's some kind of Nirvana for our clients. They don't speak that language. They don't want to speak their language. All they want to hear is about how you can make their business cheaper, faster, better for their customers. That's it. That's their passion, not banking. Live with it.

(09:49):

Okay, last one on small. Actually you know what? I'm going to give you a bonus. I thought of it on the plane this morning and I don't have a slide for it. So after this one I'm going to give you a free bonus. This one, small business is always personal. It's important that we remember that we bank a human and when we try to make small businesses feel like a commercial enterprise, only we lose because that small business is that person or that set of people, it's their business, it's their passion, it's their generational wealth transfer to their kids. It is everything in between. It is their life's work. And so if we don't acknowledge the fact that this is personal for them, we sell short every time we have to treat small businesses as if everything that we do for them is personal, even though it's not consumer banking. Alright, here's my bonus for you.

(10:42):

I want to talk a minute about regulation and share some of my experience from around the world. The last three years that I was at HISCOX, I ran retail globally, which was 10 countries in the US, in the UK and across continental Europe. And so I dealt with regulators across the world. We also had some experience in Asia and if I've seen this once, I've seen it many times and it's a really good lesson for me because Europe tends to be sort of five to 10 years ahead of the us, particularly on the regulatory front. If you want to know what's coming here, look there five years ago and you'll see what we're about to experience and I've seen that across a number of sectors. What is happening now in America is what happened in the UK and Europe five years ago with respect to small business, and that is regulators are waking up to small business and realizing that it looks a lot more like retail than commercial and they're expecting the standards to look a lot more like retail than commercial.

(11:37):

I watched it happen with the FCA in the UK seven years ago. I literally watched it happen and make no mistake, the trigger for that for all of us was PPP and all the good and all the bad that came with PPP and there was way more good than bad, but there were both That brought a lens onto the small business industry in a way it never existed before with the regulators. I don't blame them for that. And it does mean that we all need to up our game. So look for that to continue in the years to come. Alright, that was your bonus. Let's, that didn't work. There we go. Let's talk about some of the lessons. These are broader lessons that I've learned from 20 years working in financial services and they're more strategic things that I take with me to think about how I think the business will evolve.

(12:26):

Okay, first you automate transactions, not trust. So the story of the last 20 plus years, really more than that in financial services, has been rapid digitization and automation of transactions, moving money, placing an insurance policy, doesn't matter what it is, buying a stock, those are all transactions I've been hearing for years. People are just going to be gone and it's all going to be digital. I don't believe it, but I do believe that people will do something very different and you're starting to see that already. So as millions and millions and now trillions of transactions that used to be manual, become automated, that's a good thing. We need to be happy about that. It drives our costs down, it lowers costs for consumers. It makes the world more frictionless. That's all great, that's all great and you can automate those things, but you cannot automate trust.

(13:21):

There is no such thing. So the nature of people's jobs is going to change and their primary, when people ask me, what do your bankers do, I have one answer. They build trust. That doesn't mean they don't occasionally do a transaction, it doesn't mean they don't open accounts. It doesn't mean they don't fix fraud or fix something, fix problems. That's happened to a, they do all of those things, but their job is to build trust with their clients and that will continue to be the case. Maybe someday the AI will be that good that it can impersonate a human and build trust. I'm not betting my career on it, seriously, I'm not. So I think people's roles, as those transactions continue to automate and continue to come out of the workflow of the people who work for us, you're going to see more and more and more us relying on those people to build trust.

(14:10):

And frankly, I hope they can build trust with more people because more of their time has been freed up. But that trend is not going to stop anytime soon. Alright, what's next? The margin compression does not end. So I've watched this movie now for years across the industry, just about every financial product I can think of had wider margins when I started 20 years ago, just about every financial product will have narrower margins in 20 years than they do today. That never, ever, ever stops. If you're thinking you got a wall to put, the wall will break. This happens forever. If you need a case in point, I worked in asset management. Anybody remember what it used to cost to trade a stock 25 years ago? It was like maybe $25 online, probably $200 if you used a broker. What does that cost today?

(15:05):

A big fat zero. That's what happens over time. Think about anything in our industry. Think about what's happened to money transaction costs over time. The margin always, always comes down over time and it comes down for really good reasons that show the dynamism of our economy. It comes down because people get more efficient because the automation that I talked about because they get smarter about how they do things and it's great and most of those costs, most of those cost reductions get passed on to the consumer. So you have to keep up because the margin's going away. Okay, what do you do about it? How do you deal with that? There's really three things. The first is you have to remember that you should always be focused on your costs because those margins will always get squeezed. You have to do your part to keep up and you don't have to run faster than any sort of abstract thing, but you have to run faster than the person next to you.

(16:00):

The second is to safeguard your brand and be really cautious about your brand because your brand cannot stop the margin compression, but it can slow it down and it can give you time to do the third thing on the list, which is to always have a pipeline of innovation of the next thing that can generate margin. So as margin gets eroded, as products mature and they become more commoditized, you have to have a pipeline of what's coming next that can generate margin. Someone out there is thinking of the next thing they're going to make money with and someone at the same time is thinking about where you're making money and how to take it from you. Jeff Bezos said it really well, your margin is my opportunity. That's a direct quote by the way. So he's coming and so is everyone else. And by the way, so are you. See the guy next door with fat margins? You want some of that margin, so never think it's going away and make sure you're investing to protect it.

(16:57):

Okay? This is a big trend in financial services, scale and excellence. There is no question that scale and the importance of scale has only gone in one direction. Now I would say that I work for Chase, so it's easy for me to say that, but it is objectively true across every sector of financial services I can think of. Whether it's banking, sales and trading insurance, investment management across the board, scaled players are driving costs down. They do have a cost advantage over time because they have scale. However, I'm not here to tell you that there is only room in the world for people who can achieve the best scale. It's not true. There's room for lots of other angles, but you better know what it is because if you're not going to have scale and you're not going to be the lowest cost, you better know what you are going to be excellent at it and you better be stone cold sober about what that thing is.

(17:56):

I always tell my team, if we're not going to be low cost at something, we're going to know why we're the best at it. And you can cut best along a number of axes. You can be the best in a geography. You can be the best with a customer segment or an industry or a certain psychographic segment. It doesn't matter. But know what you're awesome at. If you're not going to play the scale game, it's obviously best to have both. But if you can't have both and you're not going to be the scale player, be an excellence player and know what you're going to be excellent in. And I can think across the entire spectrum. I worked for one when I worked for HISCOX, we were not the cheapest and we knew we weren't the cheapest because we weren't the biggest and we didn't have the lowest cost.

(18:35):

And so we didn't go after every segment, we went after certain segments, we went after professional liability specifically, we didn't do the general stuff. Why? Because we could do it better and we knew more about it and we could have experts and we could have experts the generalists couldn't have. So even as Chase as we get bigger, as we get more scale, we will create opportunities for lots of other players to fill in other niches that are important. So I don't view this as a bad thing, I think it's a good thing, but it is inevitable.

(19:05):

Finally, I want to talk a bit about disintermediation Over time, everything. Disintermediates Capital wants to be closer to customers. Let me say it again and let me put it in context. Just like in the news, business information wants to be free and financial services capital wants to be closer to customers. It always does. Couple examples. The best one is actually insurance. When I started working in 1996, you can do the math in your, if you're trying to figure out how old I am. When I started working in 1996, about 60 to 70% of every auto policy was sold through a broker.

(19:49):

Today, about 80% is sold direct. Why? Because the capital wants to be close to the customer. Every layer that comes in between the capital and the customer is a margin erosion opportunity and people are coming for it. So what does that mean for our business? Banking's mostly a direct business. So we're pretty safe, right? I doubt that because there are plenty of you in this room who are selling your products through other people's platforms. There are plenty of you in this room who are sourcing other products to be sold through your platform and that has its place. It's good, but it might be temporary because that capital, wherever you're sourcing it or that capital, wherever you're sending it, wants to be closer to the customer, wants that extra layer to come out. It's like gravity over time. You can't fight it. So watch this, play out in any space you're in and make sure you have a plan for what will happen when everything disintermediates.

(20:44):

Okay, so that's a little bit about small business, a little bit about financial services. Let me talk now just for a few minutes about some of the lessons that I have learned as a leader, and these are more generic. These are just a couple of brief things that guide the way I think about leading the business and leading the team, and hopefully some things you can take away. So some of these might seem obvious, some of them might be the things you already do, but maybe it'll give you a new lens and a new frame on it.

(21:11):

Okay? The first is to embrace your inner no. We in corporate America, I think have a problem. We are trained from a very young age to say, yes, you move up by being someone who can get to yes, who can get it done, who can find a way. Can you do that? Yes, I can find a way, I can get it done. And junior employees move up when they say yes. And the more senior you get and the more responsibility you have, the more your job actually becomes to say no. And I don't mean that in you're a wet blanket who just can't find a way to sort of see the wood for the trees. That is not what I mean. What I mean is prioritizing and making sure that what you say yes to is a yes because of what you say no to.

(21:58):

It's easy to say yes. It's always easier to say yes. So how do I practice this? Every year in July, I take my team away and we plan the five priorities for the year. And I tell them, you get five, you don't get six, you don't get seven, you get five. And it's gut wrenching every time trying to get to the five. And if it's easy then make it four. And if four is easy, then make it three. I really mean that You should have to make hard choices in a business because if you're not making hard choices in a business, you're not doing the things that you say yes to. Well, and I have made that mistake so many times. That's how I learned this is by doing it wrong. When you have a set number of things and you've said no to a lot of things, it focuses your team, it keeps them motivated, it keeps the goals clear. It's easy and concise to measure it. So really think about are you saying no enough?

(22:52):

My next one has a weird title. Be the blue pencil person. This one takes a little bit longer. So bear with me. This. When I got my first CEO job 12 years ago, I went in and I presented our strategy and how it was all going to lay out and our deliverables for the year. And I thought it was a really damn good presentation. And maybe it was, maybe it wasn't terrible. But I went in there and I said it once and then I didn't understand why everyone didn't remember. No one remembered. And then I realized something over time, in today's world, particularly in today's world where we are just bombarded with information constantly from every angle, just your phone's going off and your kids got a problem and your work is pinging you and teams is going off or slack. If you use that and you're just bombarded with information constantly, nobody remembers anything anymore.

(23:48):

I'm not kidding. You can't because by the time you've even processed, you're onto the next thing. And so as a leader, I came up with this idea of the blue. I actually have no idea where the blue pencil came from, but suppose you sell blue pencils. And I walk into the room and I come up, I meant to bring a blue pencil and I for forgot, I said, hi everybody. I sell blue pencils and they're the best blue pencils. You should see this color of blue. It's amazing. By the time I'm off the stage, you've forgotten what I do. And then I come back next week and say, hi, I'm Ben. I sell blue pencils. Oh, you kind of look familiar. I remember you sold something. What was it? And then you come back a week later you say, hi, I sell blue pencils. Well, I knew you sell pencils, but I didn't know they were blue.

(24:25):

You don't have them until you walk in the room and someone goes, oh, it's the blue pencil guy. I just can't. I can't even with the blue pencils as my daughter would say, right? And until you get to that point, you haven't broken through. So what I always tell my team is you cannot stop saying it over until you are bored. When you're bored, someone's finally maybe starting to get it. And I know that seems crazy, but in today's world with the amount of information, if you want to lead and you want to get a team behind you doing what you need them to do, you need to say it over and over and over again until you hear them saying it, without you there. And only then have you actually broken through the crust.

(25:08):

Okay, anybody old enough to remember war games? Okay, few. Every time I do this, there's fewer and fewer hands that go up. But 1983, I think it was War games, Matthew Broderick, they talk a lot about the Defcon level. Defcon stands for defense condition. And if you remember the movie, Defcon five is complete peace and Defcon one is like World War III. And I've worked with a lot of leaders over the years and part of what distinguishes really good leaders from really not good leaders is people who can maintain the Defcon level through crises and through ups and downs. It is very rare in business to have a Defcon one moment. You know that person you worked for that one time who was at Defcon one every time an email hit their inbox and it's contagious in a really bad way, they freak out. Everyone else freaks out soon the whole place is freaking out and then you run your entire business in a state of chaos all the time.

(26:09):

That doesn't mean there's never something that requires all hands on deck. Of course it does, but managing that Defcon level is your job. It is your job and remembering that most things are like a four or a five and dealing with them like they're a four or a five, even if people are sort of acting like it's a two is how you bring the temperature down. So watch the Defcon level all the time. I'm super conscious of it. I fall guilty. I'm guilty of breaching that sometimes, but I try really hard to manage the Defcon level and then finally to end on a bit of an up note, if you don't have fun, no one else will. No one is on the operating table. We should take our obligation to our clients. Seriously. This is their money, this is their livelihood. It is a serious job, but you can do a serious job and have fun.

(26:56):

And when I say have fun, no, I'm not talking about happy hours and team building exercises and all that stuff, which you're welcome to do and have their place. I'm talking about making the work environment a place where people enjoy what they do, enjoy each other, have a good time, have a laugh, appreciate each other, motivate each other, build each other up, and if the people at the top aren't having fun, if you take yourself so seriously that you're not having fun, I promise everyone who works for you is having a miserable time. It's true every time. So I actually ask myself when I get home sometimes, did I have fun today? Did I have fun today? Sometimes the answer's no. If the answer's no more than very occasionally I know I have a problem and I start thinking about what I'm going to do differently to make sure I'm having fun at work.

(27:45):

I know if I'm having days that aren't that fun a lot, that my team is suffering and I have to find my way back to the fun. Okay, I think I did pretty well on time. That's about it. That's all I had from sort of lessons through. We have about 15 minutes for questions. I'm happy to answer anything and everything like Reddit style, AMA for whatever you have. You can ask me about the industry, about regulation, about competition, about whatever you want and within the bounds of antitrust. I will try to answer your question and maybe I'll get there's one, so it's not going to be crickets. Okay.

Audience Member 1 (28:20):

Hi. Thank you for everything. First of all, it was really interesting. First question was cash closer or capital closer to customers? But then right there, bankers or I'm an insurance world, insurance agents, which are still super critical to the business and I feel like they're the ones building the trust. So often if you go D2C or online purchase experiences, those agents are still the ones or the bankers who are able to build that trust. So how do you get capital closer to customer while still I guess replicating

Ben Walter (28:57):

That trend? Well, it's about the number of layers. So I mean, I can think of business, I mean insurance is a great example. There's still wholesalers where there's two levels of disintermediation between customers. It's always going to be true at the simple end. There's a simple grid in life. I used to work for someone's from BCGs in the room. I know there's one. There you are. So you have to do life in a two by two or they fire you. That's just the law when you work for BCG. And so think of a simple two by two. There are things that are simple and things that are complicated and there are things that you do a lot and things you don't do so often, if there's three of those boxes, you're going to do it yourself. So auto insurance actually follows into the, I don't do that often, but it's pretty simple and there's other things that fall into the travel's.

(29:47):

A great example of this, some people travel all the time and personal travel, like booking a flight's pretty simple. So they do it themselves. Some people don't travel that often, but it's still pretty simple, so they do it themselves. Then there's other things that you do all the time, but they're complicated. Well, you learn how to do it because you do it all the time. It's the stuff in the upper right box. I don't do it very often and it's really complicated. That's the stuff where you need advice. So think of it along those axes. So the things that are really simple and banking has plenty of them and insurance has plenty of them that are simple. You're going to take those tasks on yourself and the intermediation is going to come out where it's complex and I don't do it very often. That's where there's more room for advice and trust.

Audience Member 2 (30:32):

With regard to scale, how do you think about small business retail on one side, retail on one side, commercial on the other? Where does it fit in and how to get resources allocated to just small business?

Ben Walter (30:43):

I think it's more on the scale side is my honest answer and it's scale with the asterisk of the messiness. So you can't quite get the scale that you have in consumer. But I do think it lends itself much more to scale than a commercial business does. Commercial just has too many requirements for bespoke product, too many requirements. Think about a true commercial loan, a true commercial loan. They're going to want to negotiate the terms of their loan. They're going to want, they're going to want custom covenants. Small business doesn't need that for most of the space. So the products can be relatively standardized. They can't be quite as standardized as consumer mostly because of the messiness issue, but they can be much more standardized than any commercial product. So I see more ramp, more runway for scale than otherwise. One in the back.

Audience Member 3 (31:38):

Thanks for your comments around the margin compression. Just given that backdrop, where do you think the ultimate value of small business banking goes to? Is it in the products that are getting deployed or is it ultimately just the relationship itself, view the customer as a funding source for the other parts of the bank, etcetera?

Ben Walter (31:53):

I think it's a combination of things. It's like anything else. Some people will emphasize one piece of this or another. So I'm not going to say that there's one sort of peanut butter across all of these, but I think it'll be a few things. One, it's going to be institutional trust, and we learned that in March. So for those of you who were around in March, that so there is a security element to it for sure. Part of that is actually going to be fraud prevention and that's going to be an increasing part of it over the next five years. I mean, we've already seen what's happened with the ramped up pressure and fraud. So the players that do the better job protecting their customer, their customer's assets are going to keep that trust. There's always going to be a customer experience and advisory angle to it. So the ones who can provide the best advice in the context of what they're doing doing. And then the fourth is going to be ease of doing business. So how easy can you make the things that I don't care about, just fade into the background and you can play up and dial up and down those dials in relative importance depending on what your particular capabilities are as a competitor, depending on what a particular client is looking for. But I think it's going to go along those four axes.

(33:02):

Yeah.

Audience Member 4 (33:04):

Thanks for the discussion today. Very insightful. Just a quick question, building on scale, wondering about the flavor of the Azure maybe being embedded technologies and how that plays into scale with some of the larger institutions, banks, what are your views on that and how can it help you achieve some of those different inflection?

Ben Walter (33:24):

I think it's great for smaller players so we can build our own because we have so much scale and that's fine. There's a place for that, but by the way, even we don't always do that because there's still people who know a specific technology better or has built a particular widget and it's not worth our time to build it. Make no mistake though, in an API driven world, leveraging external technology is a skill unto itself and we need to think about, there's a skill in building technology, there's a skill in deploying technology and there is a skill in integrating technology. And those are all related but different. And I've been around long enough to see it go from a, let me give you an example across financial services writ large, we have gone from just 20 years ago, I'm going to blank on the, don't quote me on the exact number, it's been a while, but 20 years ago I think there were about seven industry standard APIs.

(34:21):

Most of them were actually driven by Yodlee and a few other players who were the sort of first out with that. There's now something like 30,000, and that's not even counting the, you're probably building internally based on API driven technology. So by the way, there could be 150,000. I don't know where the number's gone to now. I haven't looked at it in a while. So you can imagine in a world where there's so many microservices to consume, the ability to consume those services efficiently, to protect data in both directions when you do it and to scale it efficiently into your own internal environment, that is a skill that anybody who's not building themselves should be investing in. And even the biggest players need to invest in because it's not an easy thing to do. Well, it's an easy thing to talk about, and I'm sure there's a lot of vendors in the room who really do have great products, but those products are only as good as how well your clients can embed them and deploy them alongside the other products and services they offer. And that's a skill that I think is, let's just say it still needs some development across the industry.

Audience Member 5 (35:34):

Thank you for your comments. I want to go back to your leadership discussion. I'm curious what you've done differently than others have done before you in terms of hiring and managing your direct reports and their direct reports. How have you driven culture change through the organization?

Ben Walter (35:50):

I mean, look, I'm still relatively new and I think we have a pretty great culture at Chase and it's part of why I joined the organization. What I would say is I hire for culture. So I usually tell people if I'm hiring someone, I have a bar, you have to be this smart after that, I don't care. I don't care if you're a little bit over the bar or twice the bar, it doesn't matter to me. What matters to me now is after a really long day, slogging it out, trying to get it done, would I still be interested in having a beer with you if we're on the road?

(36:23):

And it was a little bit of a joke, but not really having people can be culture carriers who value, who share your values and who put the needs of the client first, the company second and themselves third is something that I always think about when I hire someone. So what have I done? I've gone and gotten some skills that I didn't have before. So I've gotten some product skills and some tech skills that we didn't have. I didn't need an external perspective. I came with that, but I needed some people from around the bank who came with other skills that business banking was short on. So I've tried to round out the skillset and I try really hard to hire for diversity. And when I say diversity, I don't mean the color of your skin or the length of your hair, I mean the diversity of thought and having different perspectives around the table.

(37:16):

So I'm always looking for people who will challenge what I have to say, challenge what their colleagues have to say. And then the third is, if you haven't read this book, I highly recommend it. It's called The Five Dysfunctions of a Team. It's by a guy named Patrick Lencioni. It's the best manage a team book I've ever read by a country mile. You can read it on your flight home. I don't care where you live. You can live in Memphis and you can read it on your flight home. It's that easy to read. I would really suggest that you take a look at it because I hire people who I think can work well in that environment and then try to foster it. I'm not going to go into the details of it. It's a long thing. I'm just going to encourage you to read the book.

Audience Member 6 (37:55):

I'm going to echo what everyone else said. Thank you so much. It was very insightful. In this economic climate, we have bankers who want deposits and we have businesses who want loans. How would you recommend banks go about addressing that dichotomy?

Ben Walter (38:11):

Well, I am not sure that it's such a dichotomy because if you gather more deposits, you can make more loans. So I'm not sure it's a complete dichotomy if you're saying deposits are getting scarce and people want more loans, that's for sure true. But as I keep telling people, everybody's complaining about what's happening because of what the fed's doing, I'm like, that's what they meant to do. That is what they meant to do. They meant to constrain lending. And I know that's a painful thing to hear as a financial institution, as a bank, but the whole point of raising rates is to slow down the economy in order to slow down inflation. And that means they have to raise the price of money, and the price of money is going to pinch the cost of lending. That's all. Everybody's like, but why is that happening? I'm like, they meant to do that. In the words of Peewee Herman, they meant to do that. So I am not sure if you are adequately capitalized. That shouldn't be an issue if you have an asset liability mismatch. It could be, and that's part of good balance sheet management.

(39:17):

But I think my view would be attracting deposits is a function of the quality of your products and services. Making loans is a function of your ability to generate demand for that service. And they are related, but pretty independent. We try to tie them together for obvious reasons. The client doesn't really care. So the things that we choose to do strategically as a business are ultimately to drive the top and bottom line. We're a for-profit business. We're not a not-for-profit. That said, we break that down into the building blocks. So we don't just have a one year plan. We have a five-year plan, and when we think about what we build for the next year, it's about what ultimately gets us to that five-year thing. So how do we measure profitability? I don't think we do anything innovative in that way. I think we're pretty good about having accounting discipline and allocating costs.

(40:05):

I think we're really good at doing robust financial analysis and making sure that our MPVs are well guarded and well thought out and well tested, and all the methodologies we use to measure whether something makes money or not is vetted thoroughly through the finance organization and others. So we have all that discipline in place, but ultimately it's my judgment as the CEO of the business. What will drive those things in five years? And then I work backwards from that as to what building blocks we need for next year or the year after. I wish I could say it was fancier than that, but it's not. We have two minutes.

Audience Member 7 (40:47):

Ben. Just out of curiosity, could you describe what your vertical looks like? So how does your reporting structure look and how is that deployed on the ground at the end user level?

Ben Walter (40:57):

So what's my organization? Yeah, yeah. So I have a head of deposits and a head of lending. Go figure. I have a head of product who handles all the digital stuff and what we do, what the digital experience and the tech experience that supports the bankers. All of that looks like I have a CAO who does all my policies and procedures, and I'm not telling you anything you can't look up on LinkedIn. So there's no secrets. I have a Chief Marketing Officer go figure. And then I have a whole bunch of partners that I work with across the firm who do I have a legal, I have legal, I have compliance, I have HR. I have all the typical functions that you would find in any who typically report up through their functions, but they sit around my leadership table so that we're making decisions together. We also bring together, I get to bring together the woman who runs our small business credit card and the gentleman who runs small business merchant services. We do it all in house so that we have one approach to small businesses across the bank, which I think is frankly, I think that's a chase superpower that I'm proud to be able to wield.

(42:00):

Any last one? We have one minute and then I'll get out of your way.

Audience Member 8 (42:05):

So talk about embed finance. So when you look at banks versus FinTech does, and you can see a lot of fin that startup embedding banks into their product eco extent. Do you see there is a battle between banks and fintech's and who will be the winner?

Ben Walter (42:26):

I think that's a false choice. I think that's a false choice. I think there will be winning banks and losing banks, and I think there will be winning fintech's and losing fintech's. My gut says that what you will see is what I have seen time and again in this cycle, which is typically there will be one to three, I'm going to call it customer owning fintech's that really scale. So I love to play this game. Think about 1996, I started working. The internet was like this cool new thing. How many 1.0 internet companies can you name that still exist under their original brand? Let's go someone shout them out. I'll give you a half for that one. Amazon, Amazon, eBay, PayPal, who else?

(43:26):

Come on work with me here. You see my point though, right? Not a lot, but the ones that did Amazon changed the whole economy. So I think there will be a couple of fintech's that will hook into something really powerful that will both grow to scale and force the entire industry to change along with them. If I knew which ones they were, I'd be a venture capitalist and make a lot more money. I also think there will be a number of players, and this is what you saw coming out of the both web 102 oh, and now you're seeing it in 3.0. You'll see this in AI, who they don't scale with customers but their technology works. And so the entire industry adopts their technology and you see them all pivot to become technology suppliers to the industry. So we saw that I came from insurance.

(44:16):

There was a huge InsureTech bubble. Everyone was getting gazillions of dollars and they were all going to change everything. And then they found out it was really expensive to attract customers. Really expensive. So what did they do? They said, but we do have a neat piece of tech here and we could sell tech. And by the way, if you have a choice to sell banking services or tech sell tech, it's better margins. And they figured that out really fast and that's what they do now. So I think, I don't want to give you a false choice. I don't think it is one. I think there will be a couple of big winners in every cycle because not all the money is dumb. There's some really, and people back some good ideas. I think the ones that don't make it will still persist. They'll just persist in the form of technology that's implemented by other players in the industry. My time is counting up now, which means I'm over time. So thank you very much. Have a great conference. I hope you enjoy it.