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Fintechs have raised the stakes for big banks: Alison Rose, CEO of Natwest


“The rise of fintech is really exciting. You’re seeing new innovation, new technology, a much more customer-focused way of dealing with customers. It has made big banks and the industry really raise their game,” says Alison Rose, who became the CEO of Natwest Group in November 2019 and has since had to steer the bank through Brexit, the Covid 19 crisis and now the Russia-Ukraine war and high inflation. 

In an interview with Mint Editor-in-Chief Sruthijith KK for the Mint podcast ‘The Sketch’, she talks about helming a major banking institution through covid and macroeconomic headwinds and delivering a strong financial performance through it all, the banks’ more than 14,000 employees in India that is its “technology and innovation hub”, leading with purpose, what organizations can do to foster and support women leaders, whether the Queen has ever called her with customer service complaints (The Queen’s bank—Coutts—is part of Natwest). Edited excerpts:

 

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Your organization doesn’t anymore have a customer-facing business in India, but you employ more than 14,000 people here in your global capability centers to support your customers around the world and particularly in the UK. Tell us more about this operation.

It’s the first time I’ve been able to get here since the pandemic. So, it’s fantastic to catch up with all of my colleagues. And, it’s a huge presence we have here. This is really the hub for our technology and innovation. We have 14,000 colleagues, over 50% of them are in technology, supporting what is a significant transformation we’re running across NatWest group. We’re two years into a £3 billion investment program, and 80% of that is being spent on data, digital and technology. And so, our hub here is really driving innovation, transformation, support of our customer journeys and making sure we are really using technology and data to drive the future of banking.

What are your future plans for this market? Do you hope to ever return to India with a consumer-facing presence?

No. I think our focus here is very much on creating this hub for technology and data. It’s a core part of our business. Actually, last year we celebrated our hundred-year anniversary of being in India. . As part of RBS, we acquired ABN and they always had a presence here. So, as a bank, we have a long history. And I told the team: here’s to the next hundred years. It’s a core part of our investment in continuing to drive technology and data, but very much supporting the whole group.

Tell us about the scope of your operations, all your various different brands and what all exactly does your company do?

NatWest group is one of the largest retail and commercial banks in the UK supporting business customers from entrepreneurs up to global multinationals. We are the third largest retail bank in the UK, and we have operations in New York, Singapore, Japan. And in Europe, we have a number of brands __NatWest group, Royal Bank of Scotland, Ulster Bank in Ireland and Coutts bank, which is one of the best private banks in the world focusing on wealth management. It’s quite a diverse group, one that is really focused on supporting our customers

You just announced your results for the latest quarter. Could you take us through the highlights of your financial performance?

We registered a very strong financial performance. We announced £2.8 billion of operating profits. We’re a safe, stable bank. We’re a growing bank, growing in lots of areas, seeing good improvements in customer performance and making sure that we’re a critical part of supporting the economy and our customers through whatever the times are ahead. But we were really pleased with the results. They continue to show strong momentum as we continue our transformation.

You became the CEO of the bank in 2019, and then soon after, the world sort of plunged into an unprecedented crisis. Can you tell us a little bit about the experience of leading this major institution through an unprecedented crisis that nobody had a playbook for?

It was certainly not in our plan. I stood up on 14 February 2020 and announced our new purpose-led strategy and vision for the bank. And, two weeks later was putting the whole bank into lockdown and asking 50,000 to 60,000 colleagues to work from home.

I think it was a really unprecedented crisis. The global health pandemic obviously had devastating effects around the world. And so, getting the organization to pivot, to working remotely, to continue to support our customers, to make sure that we could continue to support the economy during that time was clearly challenging.

And I think it’s often in those crisis moments that the true culture of an organization comes to the fore. And what I saw was an amazing response from all of my colleagues who really focused on supporting customers, whether it was, you know, colleagues of mine in Edinburgh or the incredible support for our colleagues here in India.

What you saw was people really working together, supporting each other, supporting colleagues, supporting customers and continuing to make sure that they really delivered on what we set out to do.

So, it was a very challenging time for lots of people. But I think it also brought people really close together as well. Everybody’s experience during that period was very different, for some people were working remotely. It was a really life affirming moment. And for others, it was terribly isolating. People face devastating impacts on their personal life and yet were still committed to their professional lives, helping customers.

It was not something I would’ve chosen, but I am really proud of all my colleagues for how they rallied during that really difficult time.

Did you then have to get involved in operational aspects of the bank more than you might have expected to when you took over as CEO?

The priority was keeping the bank safe and secure; protecting our customers during that time. So, I was very, very heavily involved in the operational side. And that’s where plans around incident management come into place. Our security team worked really closely to make sure technology was deployed to everyone so that we could work effectively from home, but still securely. There were lots of decisions being made on a very rapid basis in order to make sure that we could protect people and continue to serve people and work in a very different way. So, it was a very, very intense period. And, certainly running a bank from your office at home, or as it was in my case my dining room table, was a different experience…

Tell us a little bit about the role that your technology backbone based out of India might have played in that transition.

Colleagues in India played an enormous role. We would not have been able to run the bank, or support all of our colleagues to be able to work remotely. So, there was a great effort to make sure that technology was delivered to people at home that they could access the right support to make sure that the infrastructure could operate globally.

That we were able to prioritize and put in place security very quickly for remote working. And, you know, what we saw was also a rapid adoption and acceleration by our customers of digitization and technology in order to support them. The data and scanning that we had really enabled us to continue to serve our customers.

And, you know, 10 years ago, you could never have imagined you could deliver that scale of change. But it was really phenomenal from our technology team, which really came to the fore in order to support customers and colleagues, and obviously the stability and the global security of the bank.

Your support functions that are run out of India probably play a significant role in both being cost effective and a very competent operation. But in many parts of the West, especially in the US, and also in the UK, there is some pushback that CEOs are facing against outsourcing and against offshoring of these jobs. Do you face such pushback? Is that a political issue in the UK?

No, it hasn’t been. And, certainly because the India team is such an integrated part of our operation and our business, it’s been a huge part of what we do and the talent that we have here in technology and data engineers and data scientists is really a core part of our strategy. We have an international hub strategy. So, what we have here is real high value work and contributions. So, we face no challenges of that. It’s always been an integrated part of our firm.

The UK economy is going through a very interesting moment. Inflation is high. It is expected that by the end of the year, your interest rates could hit 2.5%. What is your outlook for the UK economy?

We are definitely entering a different economic cycle and high inflation, high interest rates. The impact of some of the global political issues with the war in Ukraine has clearly affected energy prices. With interest rates going up, that’s a challenge for lots of households and families and businesses in the UK who’ve been operating really for the last 10 to 15 years in a low inflation, low interest rate environment. However, you’ve also got the dynamic that we’ve got full employment and a high level of vacancies as well. So, it’s an interesting dynamic that’s happening at the moment. Our outlook is, it presents a challenge for growth. Our GDP figures were positive and continue to be, but I think that high inflation, high energy prices and high cost of living is going to affect disposable income, potentially business confidence. Going into a lower growth environment and seeing what that fiscal policy will be, certainly we expect inflation to persist and that presents for me challenges for our customers. So, what we are trying to do is make sure we reach out to customers and help them deal with problems they haven’t had to deal with for a long time. For a lot of small businesses, they’ve never run a business in an inflationary environment. So, my job and the job of all my bankers is to give people help and support, to manage through what is a different economic cycle that we’re moving into.

Brexit also happened during your time. What is that like and how did it impact your business and what kind of adjustments did you have to make in your operation subsequently?

Yeah, it’s definitely been a full agenda for me as the CEO, Brexit was something that was voted on in a referendum. My focus and what that meant for my business was we actually had to prepare for what we described as a hard Brexit and there was a real challenge to get people to think about what impact that potentially had for trade volumes. You know, we, as banks, had to make sure we were prepared for the loss of licenses, if that happened; we have European operations as well, and making sure we could still operate. So a lot of planning and making sure we could support customers through that transition. And then, you know, Brexit, once it was finally implemented, which really made people think about supply chain and what they would do was very closely followed by the pandemic. So, there’s been quite a run of things that we’ve had to deal with.

The US economy, the largest in the world, is already in a technical recession. Is the global economy staring at a recession?

We are definitely looking at lower growth and I think clearly the geopolitical issues are having an impact. Energy security is now a big conversation that a lot of people are dealing with. At the same time, we are grappling with the climate emergency. You are seeing different shifts happening across the global economy. Certainly, when I look at the UK, I see a lower growth environment, but I think there are dynamics which are also positive around full employment and high levels of liquidity. So, whether it is a recession or a lower growth or a faster recovery, I think it’s too early to say at this point.

You’ve been at the bank during multiple crises it has faced in the past, including the 2008 financial crisis. As a major shareholder in the bank, what has been the UK government’s mandate to you as CEO?

The government is our largest shareholder. When I took over, they were a 62% shareholder of the bank, and they’re now below 50%. They’ve been a very good shareholder. They don’t sit on our board. They don’t interrupt or get involved in strategy. They own their shares on an arm’s-length basis. And they’re very committed to returning the bank into private ownership, which I’m very committed to delivering for them as well. And so, my focus is making sure that I deliver a valuable bank that is valuable to all shareholders, which allows the government to sell stake over time.

So, is there a glide path to that?

It’s up to them in terms of deciding when they sell, when they get good value for their stock. But for example, my half-year results, this year, I announced a £1.75 billion special dividend. In the first half we’ve announced £3.3 billion of return of capital to shareholders of which £2 billion will go to the government.

Is there any scenario in which you could witness a crisis of similar magnitudes?

No. Covid was clearly a health crisis globally. And that presented really significant challenges. We effectively shut the economy down for six months and had to really intervene and support our customers during that period. We were big lenders into small businesses through the government schemes to really help the economy keep going. But as I look forward, banks are in a very different position to the ones they were during the global financial crisis.

The regulatory environment was all about supporting banks and making sure they were strong and safe and stable. And I think what the pandemic showed was that in a crisis, the banks are not part of the crisis. They’re there to help. As we go into another economic cycle, whatever that may be, the banks are well positioned to support. And, certainly, my strategy as a relationship-led bank is support our customers through good times, bad times and through the long term. And so, stability and security, the stress testing, the capital buffers, all of those things mean the UK banking system is very robust, very secure and well positioned to weather what comes.

You just paid back to your shareholders £2 billion in dividends. A lot of CEOs might have at this stage been compelled to preserve that capital, but you chose to pay these dividends. What gives you this optimism?

We’ve got a very capital generative business. So, when I look at NatWest group, we have strong, robust franchises that are growing 16% in income in the first half of the year. We’re well diversified from a risk perspective. 93% of our book is secured. We are generating capital on a very regular basis. We have excess capital that we’re investing in growth into a £3 billion investment plan. And I still have excess capital beyond that. So, you know, making sure as I build the bank and invest in the bank, I have sufficient capital to share with shareholders, to invest in the business. So, I can withstand stresses ahead.

How is digital disruption changing the nature of relationship between the customer and the bank? One of my favorite comments on the rise of fintech on Twitter was that the entire fintech industry is a consequence of the failure of banks to hire good graphics designers…it’s certainly facetious, but is there an element of truth at the heart of it?

The rise of fintech is really exciting. You’re seeing new innovation, new technology, a much more customer focussed way of dealing with customers. It has made big banks and the industry really raise their game. And I think that’s really good.

That’s for the benefit of customers. I look at a lot of fintechs and I see how they interact with their customers in a much more connected and human way. And we really learn from that. Fintechs are competitors and partners, and we increasingly partner with fintechs. And some of their great ideas are helping us innovate. So, I think it’s a sign of development of technology, but also more competition and more support for customers. And the more choice that customers have, the better.. I relish the opportunity to learn to compete and partner with fintech.

You’re also very committed to keeping the bank as super digitally friendly. Tell us about some of your initiatives in that regard.

We describe ourselves as a digital bank for a relationship age and that’s really important. What we are seeing is really rapid adoption of digitization. And so we are investing very significantly in digitizing our experience, our customer journeys, using technology and innovation, using data to help personalize the approach for customers, and NatWest is a huge bank. But when I look at our retail banks, 60% of our customers are entirely digital. So, we really are truly a digital bank and 80% to 90% of our customers’ needs are met digitally. And this shows the really rapid adoption of digital and the way customers want to interact and do their business with us. We have one of the best mobile apps in the market, but we’re also investing in our end-to-end processes. So,. banking should be seamless and a great experience for customers in using new technologies. We are supporting a broad range of customers from the smallest businesses and startups to the most sophisticated from families and households and people to help them do banking in the way that enables and empowers their lives. And that’s where we’re investing a lot of our capital.

So, if banks like yours and large financial institutions got really good at doing digital, will the fintech industry disappear?

No, because I think there’s great innovation happening in fintech, and that will always continue as customer needs change, as people’s behaviors change, and they want to do business in a really different way. You can see people wanting to do business on WhatsApp or TikTok or different platforms or ecosystems, or there’s the metaverse and all these different ways that the world is changing.

I think innovation will always continue and that’s really inspiring and exciting. I think the challenge for a lot of fintech is getting to scale and getting to profitable models, and that’s why partnership for us with fintech is brilliant because we have 19 million customers that we look after every single day.

Fintechs have great technology and great service and so if we can access our customer base to the great innovations that fintechs have, we can bring the best together. So, one of the key parts of my strategy for the bank is very much a partnership model.

I think learning to work with fintechs and bringing the best services in for our customers is the future of banking.

Is there any fintech that you’ve encountered anywhere in the world that has particularly impressed you?

There are lots of great examples of where people are doing amazing things. I think particularly in the payment space, there are some really interesting innovations and different ways of providing, you know, personalized insights. I look at a lot of the fintechs and there is always something you can learn from them in terms of providing service or the way in which they use data to get insight into customers. I think there’s a lot to learn both through fintechs and big tech in terms of how they are changing the way customers behave and also the expectations that customers have.

Are you considering buying any?

Well, we recently made a small acquisition of a fintech called Rooster Money in the UK, which was part of our development of our youth strategy where we’ve been increasing our share of the youth market. Rooster Money has 130,000 customers; a great fintech app for parents and children. So we acquired them because it really fitted in with our strategy and filled a capability gap. And so, Rooster Money is now part of NatWest and available to our customers. It’s a great way for parents to have confidence about helping their kids learn how to save and use money, but with the safeguards as well to do that. So we will acquire if it fits with our strategy, or we’ll partner if we think that’s the right answer.

So, NatWest is the only place you have worked at that?

Yes. That is, I started as a graduate and, yeah, now the CEO.

That is a very unconventional career path. But what is it like to have learned all of your professional expertise from one institution? And what is the culture that existed at NatWest that helped you rise through the ranks?

It was certainly never my plan. Like most people, when I started my career, I sort of expected to be there two, three or four years. Over the period that I’ve been there, NatWest has changed massively. It’s a very, very different organization. I feel like I’ve worked at 10 different organizations. And the great thing about working in a large organization is, you can have 10 different careers with different roles as you develop. The culture is very collaborative. It’s a great team-based environment, and I’ve always been able to continue to accelerate and learn and develop and do interesting and challenging roles. And, my HR team always tell me off whenever I say this, but I’ve never had a 3-, 5-, 10-year plan. That’s never been how I’ve run my career. I’ve been very fortunate that I’ve worked with great people and had great opportunities, and the opportunities inside have always been more attractive and more exciting and more compelling than the ones outside. But I’m as surprised as anyone else that I’ve been there so long.

What is your advice to younger people and especially younger women who are trying to make a career?

The advice I would always give young women coming into any role but particularly into the financial services sector, it is a really exciting place to be. But I would always say you must always be yourself. It is really the pressure to conform to a stereotype. There is no stereotype. Be yourself, because you’ll be brilliant because of all of those characteristics that make you, you. So, I would always encourage people to be themselves. I would always encourage them to continue to invest in their selves. I’m always learning. Even today, I probably know less today than I knew before. So always invest in yourself and learn. Find something you love and work with great people.

You do have to be proactive. The most important thing I would say is go for it. Find something you love and, and invest in yourself and work with great people. And that really is the magic formula.

If an organization manages to be a good workplace for all genders, there is greater value there as well. What are the mistakes companies commonly make in this regard? And what would be your advice to companies and managements to do better in both these regards?

I think most importantly, you’ve got to nurture and develop your talent. And the culture of an organization is a really important sticking point of why people come to work. And I think particularly today for the younger generation, they want to have a meaning and value in the contribution they’re making. It’s not just about the role and the job. It is about what does this contribute? What am I adding value? And I’m a great believer. We spend a lot of time at work and I want to feel if I’m spending time at work away from my family, away from my children, that I am making a contribution and adding value.

And that underpins, for me, a lot of our purpose-led strategy. People want to feel that the job that they do adds value and also allows them to develop real potential. And employers have to recognize the contribution that they’re making. They have to invest in and nurture talent from start.

It’s not something that you can just do and create an environment where people can really thrive. And diversity and inclusion is a huge part of that. What you want is diversity of thought, diversity of talent. If everybody is from the same background, the same religion, the same gender, the same economic environment, you will create a wonderfully reinforcing echo chamber. What you want is that constructive challenge, that diversity of thought, you want your organization to reflect the society that you work in through a customer base and, therefore, invest in developing your talent.

And, particularly today, with the world changing so much, helping people reskill and–we don’t know what the jobs of the future are going to be like–but allowing people to make a contribution, allowing them to be completely themselves. And investing their potential means that you create the right culture, the right organization, and people want to come and work for you; they can see the value that your organization is making. So, for me, it’s all about talent.

What is your management style like? What are the paradigms through which you run your immediate team?

It’s a very team-based culture. I’m a great believer in you win and lose as a team. So, what you will see with my team is a very common set of values. An environment that’s psychologically safe. People should be allowed to challenge the status quo to have different viewpoints. That’s how you learn from each other. A very flat structure. One of the great privileges I have is being the CEO, but that is only for a short period of time. At some point, I will hand onto someone else and you know, my job is to hand it over in a better way than I took it over. That’s part of what your contribution should be. But I’m very clear with my team. We’re driving for outcomes, clear values. We’re very clear on what outcomes we want to meet, reach.

Tell us about the Rose review, which is an exercise in figuring out what is the status of women entrepreneurs.

The Rose review was a piece of research I undertook on behalf of the UK government into female entrepreneurship in the UK and at NatWest. One of the things that I set up when I was running the commercial bank was free accelerators up and down the country to help entrepreneurs.

I think, for an entrepreneur, starting a business is the most difficult thing to do and, actually, creating an environment where you can help is really important. What we could see in the UK was that there wasn’t enough support for female entrepreneurs. So, the government commissioned a report, which I led, which looked at what the opportunity was.

And it was very much data-led. We looked around the world, where are the best companies. What is the opportunity? And if we could get parity with the best in class, what that would mean? Now the UK is an incredibly entrepreneurial country. It’s a great place for startups, and there is no lack of talented women starting businesses, but if we could get to parity, it could contribute £260 billion to the economy.

So we then looked at the barriers facing female entrepreneurs in achieving all their potential. And we found were a number of things. Access and awareness of financing was really critical, particularly equity finance, and the really shocking statistic was only 1% of venture capital money was going to female-led businesses.

And there were a number of reasons for that lack of access and awareness. Female entrepreneurs have a higher awareness of risk. There was a disproportionate burden of parental and family care falling on female entrepreneurs and a lack of local and relatable role models and mentors.

The report recommended interventions, which we have driven. And I continue to drive that working with the UK government, running a Rose review board and committing to changes that we make. We now have 138 signatories to the investing in women’s code, which represents around a trillion pounds. We’ve seen more young women starting business than ever before. Last year there were 140,000 businesses started by women in the UK. 20% of businesses are now run by women, and pleasingly and excitingly in the 18-to-24-year-old age bracket. We’ve seen almost an eight-time increase in the number of young women considering entrepreneurship and starting businesses. So, there’s progress, but there’s still a lot to do. And underpinning it is massive economic contribution because, of course, entrepreneurs create new businesses. They create jobs, they create new income for the economy. And so, having a thriving entrepreneur community is really important.

We now live in a world with a lot of consciousness around ESG. Tell us a little bit about what are your bank’s initiatives in this regard.

ESG is clearly important and particularly the climate emergency is critical. We’ve made climate transition a core part of NatWest group’s strategic priority. We approach it in three ways; one, ending harmful activity; two, getting our own operations in order; and, three, funding and financing the transition. So, I’ve committed £100 billion to funding and financing their transition of which we’ve already funded £20 billion. So, it’s really important that we’re talking about a global rewiring of the economy into a low-carbon economy.

That’s going to require extensive collaboration across public and private sector between developed and developing nations at the political and economic level. So, I sit on a number of policy groups, globally, to help drive that. NatWest was the sponsor of COP26 and, pleasingly, there is real collaboration across the finance sector, the asset finance sector, the insurance sector, and government to really try and drive this change. This is not a competitive sport. No one can achieve this on their own. We’ve all got to address this. It’s probably the biggest challenge that we will face. And it’s really important that everyone plays their part in addressing this climate emergency.

You are the banker to the queen. Has she ever called you complaining about some aspect of her banking experience?

Well, Coutts is the largest private bank and, obviously, we do have lots of very prestigious customers, but we never talk about our customers.

Who is going to be the next British prime minister?

I don’t know. I mean, we’re in the middle of the leadership competition at the moment. That’s for the conservative party to vote on. But, by the 5th of September, we should have a new prime minister.

Any thoughts on the candidate that India watches, particularly because he is of Indian origin, Rishi Sunak?

Well, Rishi Sunak is a fantastic candidate. I worked very closely with him during the global pandemic, and he did some incredible things in terms of supporting the economy and we’re very lucky to have had him as chancellor. And, obviously, he’s a very strong candidate, so I wish him well.

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