Exclusive: ‘The Greenhouse effect’ – Lisa Frazier, Wells Fargo in “The Fintech Magazine”

Wells Fargo was known for taming financial services in the Wild West. Now, it’s driving a coach (this time without the horses) through retail banking, using AI to help customers manage money better, says Head of Innovation Lisa Frazier.

Artificial intelligence (AI) will revolutionise banking by helping people to improve their financial health. Not only will AI democratise financial services by providing them at a lower cost than traditional banking methods, it will also enable providers to offer realtime advice to customers in a way not previously possible. 

So says Lisa Frazier, head of innovation at the American bank Wells Fargo, who believes that data-driven experiences built on top of legacy systems will be core to the future of banking. But this change is driven not so much by innovation in itself, she believes. Instead, it is due to consumers demanding more from their banking providers. 

“It’s about digitisation, real time, ‘give me information that helps me manage my money and achieve my goals’,” she says. “The innovation has been coming a long time, through digitisation, and now we’re seeing new and even more exciting technologies that are bringing more information to customers – in their hands, on their mobile phones.” 

As to what’s triggered this change in customer demand, Frazier says it’s down to the world of money becoming more fragmented. This, in turn, has highlighted the limitations of traditional banking methods and consumers have noticed. In an increasingly connected and stressful world, they want to be able to carry out their financial business instantly. 

“Two-thirds of people say they’re either extremely stressed or somewhat stressed about money – it’s getting harder to manage it, and yet we have realtime access with our phone; so why can’t the phone help me?” she adds.

That was the premise behind the Greenhouse app, which Wells Fargo describes as a mobile bank in the palm of your hand, particularly aimed at gig economy workers with no regular pay cheques to rely on. It offers customers two accounts – a Set Aside Account for bills and a Spending Account for day-to-day outgoings, linked to a debit card. By encouraging them to put money aside in ‘digital envelopes’, analysing user behaviour and offering customers insights into what disposable cash they have ‘in the moment’, the app, as one banking executive described it, helps customers ‘put the guard rails on themselves’. 

Greenhouse was built from the ground up after the bank’s research showed that many customers, particularly millennials, use various hacks to manage their money, such as alerts and notes on other mobile apps.

“We are very passionate about financial health powered by AI and this is really going to be the next generation of the way banking goes forward,” says Frazier. 

“So, traditionally, banking has been about transactions, how you took the branch experience to online, then mobile,” she explains. “Now, we’re going to be using data and information to make it relevant to you; so, at a specific time, in a specific channel, asking your need is and using AI  to help you make the best decision.” 

She believes that AI will be key to building the banking products of the future, with a particular focus on improving customers’ financial health. In addition to helping a bank’s customers to manage their money effectively, it could have wider ramifications for the industry. 

“The cost of providing financial services has historically been higher than it is today, and that is a result of computing power and availability of data,” she explains.  “We can provide real services to customers today at lower cost, so that’s one factor in the democratisation of financial services. Another example is advice, which used to only be available for people who had major assets, and is now available online for more people than ever before.” 

And by that she means realtime, behavioural advice, as opposed to just transaction-based budget analysis. 

“Traditionally, banking has been about setting a budget and then asking ‘did
you meet the budget or not?’, and then expecting behaviours to change. But that’s not the way we work, or think, as people. So, AI in the future will be about realtime coaching, encouraging you to think about setting goals as you spend,” says Frazier. “If you come home on a Friday night and you don’t want to cook, you could potentially ask Wells Fargo ‘can I take the kids out for something to eat?’.” 

The bank will then be able to offer the customer some informed, albeit neutral, AI-generated advice.

“We won’t judge, but we will potentially be looking at ways to give you more information to make that decision, real time,” says Frazier.

Bridging the gap

Having been established amid the Gold Rush of 1852 and going on to famously operate the largest stagecoach company in the world to deliver customers’ business, what become the fourth biggest bank in the US, got through the 2007 financial crisis comparatively unscathed. But it‘s been under pressure recently, having been hit by record fines by the US Consumer Financial Protection Bureau, which also led to cost-cutting and staff changes at the highest level. This October it installed a new CEO in Charles W Scharf, who recently announced the appointment of former Bank of New York Mellon colleague and ex-Obama administration White House official, Bill Daley, as head of public affairs. 

Throughout the recent turbulence, however, Wells Fargo did not fail in its determination to keep innovating. Indeed, innovation could prove to be a vital part of its technological and reputational transformation. 

“Modernising our technology is very important to us; it enables us to be more nimble, achieve speed to market for customer experiences and reduce our cost to operate the bank,” says Frazier. “So, we use things like application programming interfaces (APIs), microservices… layered across the legacy technologies that we have today.” 

Wells Fargo is committed to working with external fintech providers and startups, too. Indeed, Frazier stresses the importance of collaboration for the benefit of both the bank and its partners – having been in the business for more than 160 years, it feels it can offer a lot to a fintech looking to build its own products. 

“Wells Fargo has a lot of information and data about customers’ current financial transactions and needs. Our scale in partnership with technology and fintech companies, that’s an amazing opportunity for the future,” adds Frazier. “We don’t believe any one of us has the single answer; it will be a partnership.” 

Wells Fargo seeks to build these partnerships through its own startup accelerator programme, which currently has 25 companies in its portfolio, all of which are actively creating proof of concepts and leveraging their solutions for the bank’s customers.

“We invest up to a $1million in a startup,” explains Frazier. “They tend to be very early stage, so pre-series A venture capital companies, and they’ve been identified because of the teams and the solutions they have that meet a need that we have at Wells Fargo, either around a customer problem or a business problem.”

The bank then works with the selected startups through a virtual six-month programme, helping them to develop a proof of concept and go on to pilot it with Wells Fargo customers. Throughout this incubation period, the bank acts as a bridge between the early-stage company and the large-scale financial services industry. 

“The startup companies themselves are trying to learn a lot about financial services, their requirements, and what it means to operate in a big company,” says Frazier. “My team, the Wells Fargo Startup Accelerator team, is that bridge, talking two languages – the startup language and the big company language. The startups  learn a lot about what is required to interact with a big company, and also a lot around the financial information and knowledge we have, whether it’s regulatory, security, or whatever,” she adds. 

The result is a win-win for both parties, because it‘s ‘bringing the best of two worlds together’ to address the most pressing problems for the bank and its customers today – and tomorrow.