Episode 5: The Importance of a Partner Ecosystem

Thank you very much, Dianne, and it is truly my pleasure to join you on this platform and share some thoughts and insights and hopefully have a great conversation about some really emerging and important areas within the financial services domain. I think you’ve captured our history well, and our future will l probably get into the conversation. So maybe just a little on my personal background. I did join Peoples back in late 2018, and since then, we’ve been on an exciting journey of adopting and investing in core technology platforms to expand our capabilities, both internally and externally, so we can better service our customers and clients in more efficient and effective ways. So this is an exciting juncture in our journey, and we look forward to continued success along this pathway.

Dianne Cupples:

That’s great. That’s great. Well, I am very excited for the conversation. You and I have talked many times throughout the years, and I thought today, a great way to start the conversation would be based on a recent discussion that you and I had. We were talking about how banking has changed. So gone are the days of having to go to the bank to perform every type of financial transactions, from accessing cash, paying bills, applying for mortgages. By leveraging technology, banking has advanced at a really fast pace. I remember when the skepticism was around of using your phone to do banking, but now it’s expected and a digital channel for everybody to have access to be able to perform banking transactions. So the bankers of today really need to be technologists, or at least comfortable with technology, or have knowledgeable technologists as part of their team. So the corporate culture, I would think, in the banks and financial services space is really changing as a result of that shift. So I know Peoples have gone through quite a bit of cultural change, and I was wondering if you could share some of your thoughts on what you’re seeing taking place from a cultural shift in the world of banking.

Bruce Duthie:

Absolutely. Dianne, I think you’ve hit it on the head as it relates to the kind of starting point in the impetus for real transformative change. Whether it be technological, whether it be strategic, whether it be economically-driven change, it all starts with culture. And at Peoples, we put people and culture at the heart of our strategic planning. And let me just kind of unpack that a little bit, because in general, the topic of people can be interpreted in very different ways. So when we look at people strategically, we kind of look at two dimensions of a person, and that’s the core kind of competency, and capabilities, and skillsets that they bring, and equally important is the character that they bring to the equation each and every day. Are they open-minded? Do they operate with integrity? Do they have discipline? Do they have a personality that connects well with others in team situations, in stressful situations? So it’s that balance between competency, capability, and character that really drives the essence of the formation of a sound culture. Once that cultural fabric is put in place, then it’s up to the people to honor that and live by that day-in-day, whether it’s pushing the envelope as it relates to new markets, new developments, new products, investments in technology, or simply how do we have conversations in productive fashions around interesting and important areas. So that cultural foundation allows an organization to tackle and confront new situations with the courage and the commitment to actually bring it from an idea all the way to fruition. Thinking about your point around the integration of, call it the social expectations, and the emerging expectations of financial institutions, whether it be banks, or non-banks, or anybody that plays in that ecosystem, you’re absolutely correct in saying that banking is no longer, and this has been an idea that’s been discussed for several years now. Banking is no longer somewhere where you go. It is something that you do that’s integrated into your life, and how individuals bank is different. How people bank is different because by definition, their lives are different. So when you look at being in this space servicing people, taking a tailored way and having an adaptable way to develop products and solutions that truly meet their personal needs is at the forefront of our strategic thinking, because otherwise, you just become a commodity. You just offer a different type of product, a different type of service under a different banner. What we’re trying to do is build an experience that’s unique, that is truly tailored to the needs of our customers.

Dianne Cupples:

And I think that’s a great lead in to where I’d like us to explore a little bit more, because we’re hearing terms in the industry like embedded finance, frictionless banking, and it all is building from that open banking, open finance terminology that gets floated around on a regular basis. And you used the term of it just being part of our lives, being there. Last year, I actually moderated a panel with Open Banking Expo, and in that panel, we focused the discussion around banking, and electricity, and comparing the two. So as a society, we understand, or I should say we expect, that when we turn on a light, we flick a switch, a light turns on. We expect the systems are in place that are work, that are dependable. They’re safe and based on everything that’s being provided, we can use them. We don’t think about the infrastructure behind it when we touch that switch. We expect it. When we think of terms like open finance, embedded finance, we are thinking about banking in a way to access money or payments. It’s very similar. It’s part of my life. It’s available to me where, when, and how I need it. I don’t really think about the infrastructure that’s required to deliver it. I think all we care about is having access to the financial systems that are easy to use. They’re safe. They’re secure, and they focus on creating that financial well-being for consumers in today’s world. So you’ve kind of started to touch on that, so maybe can you share your views on how open finance, or open banking, whichever term, or embedded finance, whichever term you’re comfortable with, can you share your views on how you think that will increase access to financial systems and products? Because you’re tying it now to culture and culture being creative, and offering new products, and being accountable to bring it forward. Well, what does that enable for you to bring forward from the financial systems and access to products? And if open banking and open finance, once it becomes more commonplace across Canada, what opportunities do you see for Peoples then to bring new products and services to your customers?

Bruce Duthie:

Yeah, that’s a very relevant topic, Dianne, in this current industry because a lot of definitions, a lot of new terms, are coming to the forefront on the headlines, and the papers, and the websites. And it’s very important that we adopt a common understanding of what exactly these emerging technologies mean. And I’ll start by answering your question by just thinking about the fundamentals of banking first, and then I’ll move into how that construct is actually preserved, well preserved, but just being manifested in a different fashion through the constructs of open banking and open finance, which are different. And I’ll highlight on the key distinctions between the two. Starting with banking as a core and mentioned this in your earlier statements, is that it really involves three fundamental aspects. One is to have a mechanism for retaining a store of value. The second is offering some form of a credit solution, and then the third is the ability and capabilities to move money. Now each one of those, if you like, dimensions of the banking construct, storing, credit, and movement of money, then expand in kind of multi-dimensional ways as you look at industries it serves, the people that it serves, the purpose it serves for economics and society. And then when the aspect of an open banking concept enters into this fold, it takes barriers down between existing financial institutions, meaning that the data that’s stored in one bank now becomes open to other banks to share and use. Which has inherent benefits to consumers because their data isn’t only protected and utilized by a single entity, but the consumer has more power and influence on their utilization within the financial services ecosystem. Open finance takes that construct and expands it into new industries. So for example, your financial data, your financial capabilities for integrating between industries like, call it banking and healthcare, like banking and education, banking and “X” industry. It starts to build a lattice framework between banking and other industries, which you can imagine truly embraces this notion that banking is part of our lives. It’s not a place that you go, and it should be found and embedded into these various constructs within our lives, regardless of which industry. So I think there’s a lot of potential associated with that thinking. Now with that said, and we can appreciate this, there’s regulatory constraints. There’s data privacy, there’s personal information, data ownership. There are an abundance of constructs and regulatory requirements that must be thought of very carefully before these floodgates start to open. The potential is huge. The risks are also noteworthy because it becomes a new way effectively on how people and organizations function in society. At Peoples, we are definitely investing into technology capabilities that would give us the potential to operate in such an environment. Now, without getting into the details, I think we can appreciate that foundation architecture can be built rigid, or can be built in ways that are flexible and adaptable. We’re taking the notion of taking these models into more of an adaptive culture going forward.

Dianne Cupples:

So it’s going to open up more opportunity for banking to, to your point, not be something that we do, but part of our whole lives. So as part of our whole lives, I see that we’ve always talked we need financial planners and various other things. We need to have a plan for ourselves individually as a consumer. I think there’s another aspect that doesn’t always get talked about, and I’d be interested in your thoughts on that too, is from a small business and commercial side. So I see opportunity for it to have our small businesses make better informed decisions, because from what I’m hearing you say is it becomes part of their lives and enables them access to everything. So instead of waiting to close their books five days after a month ends, they could push a button at any point in time and have a complete picture of their financial services. There’s an opportunity for them potentially to test market products and see the results of that market uptake really quickly by being able, again, to have access real-time to all the financial data, the transactions, and the sales. So if we focus on it from a small business point of view, do you see that that will help us better improve the economy from enabling small businesses to be more successful, quicker, or faster, or just more informed?

Bruce Duthie:

Yes, small businesses are truly at the heart of many aspects of a strong economy, and being able to provide sound, secure, reliable, efficient, scalable, simple solutions for our small businesses out there provides an opportunity for these organizations to have strong working capital, to have capabilities for investing into the growth and the protection of their business from a sustainability standpoint. And having the banking backbone services available to small businesses in such a way that makes it seamless almost, and also protects them for the current and future economic conditions, is a very important aspect for financial institutions to architect these solutions for our small businesses. Each small business, as you can imagine, has an ownership behind it, so that ownership represents the individual banking needs. So you can see the natural opportunities and synergies between providing very sound banking services for small businesses cascades into the opportunities for providing personal banking services for the ownership group.

Dianne Cupples:

That’s great. I think you’ve expressed the synergies that I see from both sides, for movement for both, to your point, small businesses as well as consumers. I think there’s great opportunity there as we continue to leverage technology. One of the things that you briefly mentioned on is regulatory change and data privacy, and I know that open banking has progressed in other regions across the world more quickly than some would feel that it is moving in Canada. There’s concerns being voiced that we are behind and that we need more focus and momentum behind it. So one of the questions that’s being asked is, should open banking be mandated or regulated to enable faster adoption across the financial services space? Now, in your role as a Chief Risk Officer, you’re well aware of impacts regulatory change can have on financial institutions, both from a reporting but also from a technology point of view. So given all the benefits that we’ve highlighted and talked about, is regulation a way to increase momentum, or is it really about educating consumers and small businesses so they can put more pressure on our government to move quickly? I’d be very interested in your thoughts.

Bruce Duthie:

Yeah, that’s a great question, Dianne. And I think it’s absolutely, there’s a balance between the importance of regulatory movement on this space. Equally, the importance of people, and consumers, and general society to have a strong understanding of what this opportunity means to them personally, either as a company, as a family, or as an individual. We have and continue to have excellent relationships with our regulators. We value their contribution to what we do from a value protection standpoint, and we would work with our regulators to create that balance between adoption, opportunity, and capabilities to open this framework up to our customers, and I think broader society. The interesting aspect of this is you can go too far or not far enough, so it really is striking that balance between the right degree of regulatory involvement and the adoption rate for consumers. I think playing that middle-of-the-lane road in this situation would be the best opportunity for a healthy outcome for all stakeholders.

Dianne Cupples:

That’s great. I think there is, to your point, a balanced approach that we could take to this. What that is, I don’t know, but I think it’s important, as you said, that everybody come together and work together to resolve what is needed and collaborate on the outcomes so that we can get the momentum going just because of the value that it will give to consumers and small businesses. Especially as we are going into challenging times with different inflation rates and various challenges that we’re seeing in today’s economy, the more we can empower and enable people to manage their finances, the better off we will be as a country, I believe.

Bruce Duthie:

Yeah, well said, and I agree with that.

Dianne Cupples:

So one of the other aspects of this, we’ve talked about leveraging changes in technology and the marketplace as things continue to evolve, and part of that means bringing and working with partners. I know from a Portfolio+ point of view, we always look to bring partners to the table that we can work with, both from a customer, and other fintechs, or other technology partners in this space. We all have to work together. We have to have very close relationships, in my mind, I feel, in order for everybody to be successful. And Peoples and Portfolio+ have been working together for many years now, and at Portfolio+, our approach to our customers has always been to work with them as partners focused on a joint success. So if you and your customers are successful, then we at Portfolio+, we’ve done our job to support you. And so as things continue to change with such a fast pace that’s happening, what would you recommend? Because we’ve had a great long working relationship together, what would you recommend that Portfolio+ continue to do to support our customers moving forward?

Bruce Duthie:

Yes, we have. We’ve had a long and successful partnership, Dianne. And I think that’s important to highlight because when we’re competing in this space, and when you’re trying to make a difference in this space, taking a protectionist view that it must be built here, I think is very limited. We look at our partner ecosystem as an extension of our core value proposition, so really finding the right partners that align both culturally, strategically, and technologically is a key differentiator that we continue to invest in. As it relates to how, I’ll call it technology companies evolve, and I’ll start with that deliberately because I think it’s the importance for technology companies to recognize that they are evolving just like the rest of society’s evolving. So limiting yourself to being categorized as strictly a technology company, I think is a thing of the past. It’s looking at the services, and the capabilities, and the value proposition that an organization is bringing to society needs to be factored into the overall strategic roadmap. What does this mean? Well, it means looking at the solutions, and products, and capabilities that can be adopted by organizations and by individuals that actually make a meaningful difference in their day-to-day lives. This is not an easy problem to solve. Cranking out commodity-type banking products and services, I think is no longer sufficient to meet the expectations of the emerging expectations of people, the emergence of new types and shapes of risks that we’re getting into, the new types of competitive expectations that are being put upon us by various other actors in the ecosystem. Therefore, our business models of the past of saying we’re just a technology company, and we just make products, or we’re just a bank, and we just develop product and services, is going to be a thing of the past. So what does that mean? Looking at the utilization of data, looking at the multiple sources of data that’s available, and using that to harness clearer insights into this future world that we’re getting into is very important. So we have an ability to adapt to these circumstances more strategically through analytics. The investment in people, culture, and competencies, to embrace the setting, the right tone from leadership is so important in this, meaning that leaders aren’t just there to set the agenda and walk away, but they’re part of the equation to drive the organization to that next level, to establish trust, to build a framework of integrity, to walk the talk, to recognize the importance of inclusion, diversity, in multiple aspects of what this future world looks like. That is the future of leadership, and if organizations do not embrace that, in my opinion, it doesn’t matter what industry they’re in, they’re not going to survive. So constant and rapid evolution on those aspects outside of just the core competencies are equally important, and therefore, leveraging that partnership network and having that same construct for thinking about the future is very important.

Dianne Cupples:

That’s great, and I do believe a lot comes from the leadership, the example that that leaders set, and I fully support the inclusion and diversity. I think coming together with your culture, for example, as well as your partner’s culture, you can actually achieve greater things when you do come together, and you’re all into what it is that you’re trying to achieve and what the outputs actually are.

Bruce Duthie:

That’s exactly it, Dianne. And if I was to hone in a little bit more on the technological expectations that I think people, organizations, and partnerships are seeing, is a pattern of three, I’d call it, time-constrained requirements. And these are the three items that I would want to highlight. One is the capabilities for technology to be simple and easy to interact with. Two is the depth and breadth and scope of information that’s within the ecosystem that can be transformed into integration and intelligent purposes. Insights need to be derived from this data, need to be derived from this information, need to be accessible so organizations and people can make sound decisions. And whether this is a decision made by a person, or decision made by a machine, it doesn’t really matter, but sound decision making is fundamental to the future, which also supports the strategic and risk management objectives. And the third layer, and this is where it gets really exciting, is the advances that technology are making on the computational aspect. The speed and the volume of data that can be processed in mere nanoseconds is radically different even from where it was five years ago. So this abundance of computational power will unlock and unleash new capabilities that we’ve never seen before. So these aspects need to be really embedded into the technological planning for organizations, whether you be a pure tech company, or an organization that leverages technology. Embracing these three dimensions in conjunction with the cultural aspects, in conjunction with societal expectations, in conjunction with regulatory expectations, that creates this multidimensional construct that organizations must be equipped to deal with. If you strictly rely on a vertical and linear aspect to this thinking, I question the sustainability of that type of thinking in today’s world.

Dianne Cupples:

I like the way you’ve outlined those three items because it does speak to really the next stages of where things are going. If we have access to huge amounts of transaction data and processing data as we’ve talked about, by looking at that data, everybody can make better and more informed decisions. So product we’re producing, services people are providing are more efficient. They’re more informed, and you can actually be more successful by making those data-driven decisions. That was mouthful for some reason.

Bruce Duthie:

And that’s exactly it, and one of the things that gets me very tuned into the conversation is when organizations are sitting around the table and saying, “We need more data.” And I question that, do we need more data? We have so much data. So much data, more than they can probably wrap their heads around. So it’s the utilization and the datafication of everything that is out there and translating that into information and insights that can be leveraged into real time decision making, strategic planning, risk mitigation, risk management. This aspect of truly transforming an organization from a linear mode of thinking to a non-linear mode of thinking, which is far more aligned with how life operates.

Dianne Cupples:

And the way you’ve described it, I know some people think of machine learning as potentially impacting other people’s, I’ll say jobs loosely. But the way I’m hearing you describe it is it’s to augment, it’s to enhance, it’s to improve. It’s not something we should see as a threat.

Bruce Duthie:

Yeah, that’s exactly it, Dianne, and I think I’ve been around long enough to remember the fear that the introduction of email, and the introduction of ERP systems, and the introduction of workflow engines and databases was going to result in a massive loss of jobs and abundance of spare time for people. Now, I think what technology does when embraced properly… And I haven’t seen any of those by the way. I’ve seen more time being utilized more efficiently, but not necessarily an abundance of spare time. So the aspect of the adoption and the utilization of capabilities, like machine learning, as a tool set as opposed to a competing force, again, goes back to the mindset and the cultural adaptation required for organizations to have a sustainable future. So open-minded to these types of capabilities is, I think, very important for organizations to not overlook.

Dianne Cupples:

And I think that the conversation today has been great. While it all started talking about banking, it actually has applications across many different verticals, not just the financial services space. I think that’s an amazing statement to connect it all together with what you’ve just said. It’s not just any one vertical or another. This can be applied across multiple verticals to help everybody be more successful.

Bruce Duthie:

That’s what we believe, is that we have a higher probability of competing if we have that open thinking, as opposed to pretending that historical artifacts and historical scenarios are going to just manifest again in the future. I think we’re looking at the future from the emergence of this new construct of integration as a way that we have to adapt and be prepared for opportunities and risks that we haven’t seen before.

Dianne Cupples:

That’s great. Well, Bruce, I really appreciate you taking time out of your busy schedule to speak with me today. I’m sure our audience has been able to take away something from this conversation. I appreciate you sharing all your thoughts and giving some insights to our listeners on Peoples and yourself. Did you have any last pieces of information based on our discussion that you’d like to share before we wrap up for that?

Bruce Duthie:

It’s been my pleasure, Diane, always a pleasure to connect with you. And thank you for the continued support, and I don’t have anything further to add. I think it’s been a great conversation. I’ve enjoyed your perspectives and sure hope the audience has taken a few nuggets away as well.

Dianne Cupples: 

Great. Thanks, Bruce. Thank you for listening to our conversation with Bruce Duthie from Peoples Group. For more information, please visit our website PortfolioPlus.com/podcast. If you have any feedback, you can reach us or follow us on LinkedIn or Twitter @PortfolioPlus19. You can subscribe to our podcast series wherever you listen to your podcast. You can also add yourself to our mailing list, and we will notify you when our next podcast is available. Until next time, all the best.