Capital One Taps Open-Source, Cloud, Big Data for Advantage in Banking

By Darryl K. Taft  |  Posted 2016-06-13 Print this article Print
Capital One DevExchange

It is a huge chasm between what is a traditional bank IT organization and what it needs to operate like a real technology company. It is a very difficult thing to make that transition, and what is the most difficult about it is the talent equation. The kinds of skills and experiences that you will find in a traditional bank IT department are not at all the kinds of skills and talent that you find in a leading technology organization or a startup. They're just not the same beasts. And how you transition from one to another is a difficult thing.

If you really want to go out and get great software engineering talent or great data engineering talent or great cloud engineering talent, those folks want to come to an organization where they see a lot of folks who also have those skills who they can learn from and collaborate with. They also care about working with the latest technologies, modern ways of working and being challenged in ways that they can innovate. If you don't offer those things, you will never be able to attract that talent. You've got to get to a critical mass where it becomes a self-sustaining transition to a different model. And banks are going to struggle to pull themselves up by their bootstraps from where they are today.

So what we're doing is very different. And emblematic of that is our choice to use public cloud. Other banks are really reluctant for a variety of reasons to leverage the cloud. Other banks are reluctant for a variety of reasons to leverage open source in the ways that we're doing it, much less to contribute back or launch their own open-source projects. So I very much believe it's a different way of operating than other financial institutions. But the winners in this space are going to have to operate this way because the pace of innovation is ever increasing.

It's going to require the competencies around being able to innovate quickly, the ability to build software that is really compelling and well-designed, the ability to understand data and analytics and apply modern methods of machine learning and analytics operating in real time in a way that banking just doesn't do. Banking is an overnight, batch process, close-the-books-each-day kind of operation. The world is moving to real-time interaction and making decisions at the speed at which data can move. Banks aren't wired to think that way, and they don't have the infrastructure to act that way.

What prompted you to go this route and become a technology-led company? Was it an issue of meeting customers where they are or was it to gain competitive advantage?

It's a number of factors. Even in the early days, technology played a critical role at Capital One in that our information-based strategy was about leveraging data and analytics and using a test-and-learn methodology to figure out how best to serve customers.

Over time, the imperative around technology grew even greater as the digital revolution took off. And it was around 2010 when it became glaringly obvious that the way banking is going is that customers are demanding to consume banking services—whether credit cards or checking accounts or investing—they wanted to do these things through digital channels and their expectations are being shaped by how the world is moving to digital channels. So we looked at that and said if we are going to set the pace of innovation in this industry, we are going to have to really be responsive to customer needs and change the way we do things.

It was a recognition that banks typically move in this slow pace of product introduction that's driven by a waterfall methodology of delivering projects. And we recognized that the world was moving to Agile, iterative delivery and operating at fast time scales and we needed a different way of working. So we moved to an agile delivery methodology and we focused on bringing in great software engineering talent and recognizing that the way these folks want to work, we've got to be able to operate in the cloud, we need to leverage open-source software and tools, we need to build our software in a different way based on a RESTful API architecture that allows for reuse and speed of delivery. All of these things started to come together as the technology operating model for us, all driven by the imperatives of the market.

Traditional banks are going to really struggle to get there. And it may not be traditional banks that win in the end. It may be companies that come at it from a very different direction.

Why the decision to go open?

We recognized there's a whole ecosystem of innovation out there in the digital world and we can multiply our impact by having third-party developers partner with us to create solutions in ways that we might not even imagine. This goes back to the notion of can you integrate banking more into where customers are in the moment they need it. We think the ability to expose our capabilities to third parties will allow us to tap into an ecosystem of innovation that leverages what we're able to do ourselves.



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