2948: Lessons in Digital Transformation With Shawbrook Bank

[00:00:01] How can AI and automation revolutionise traditional banking? And what are the real-world impacts of these transformations? Well on today's episode of Tech Talks Daily I'm delighted to welcome Russ Thornton, Chief Technology Officer at Shawbrook Bank. And Russ is at the helm of a comprehensive digital

[00:00:22] transformation at Shawbrook, leveraging AI-powered decision-making, workflow automation from Pegasystems. And I want to dive into exactly how these innovations have slashed things like loan processing times, saved thousands of man-hours and significantly improved the customer experience. Because we hear a

[00:00:40] lot about these big emerging technologies and AI this and AI that, but where's the bottom line? What problem are we solving? What are we improving here? This is some of the stuff that I'm excited to talk about today. And Russ has

[00:00:53] also got an intriguing origin story so I want him to share insights from his own unique career path and maybe some of the lessons he's learned and hopefully we'll get a few teasers on the future projects on the horizon for Shawbrook

[00:01:06] Bank too. So buckle up and hold on tight as I beam your ears all the way to the UK where you can sit down with myself and Russ where we'll talk about all this and much more. So a massive warm welcome to the show. Can you tell everyone

[00:01:23] listening a little about who you are and what you do? Sure, my name is Russ Thornton. I'm the Chief Technology Officer for Shawbrook Bank here in the UK. I've been here for about five and a half years. I look after basically all things

[00:01:37] technological across the bank and the group and have had the pleasure really of setting a strategic tech vision and strategy back when I joined and had a chance to sort of see it through to execution. So that's

[00:01:50] probably the quickest synopsis of my journey so far to date. Well it's a pleasure to have you join me and before we started recording we're talking about your very personal journey and how you ended up here in the UK but for everyone

[00:02:02] listening I always try and find out a little bit more about my guest's origin story, where that passion for tech came from, what lit the spark and how those experiences influenced their approach in their work today. So I've got to ask

[00:02:15] you, can you tell me a bit more about your journey and how your past experiences might have influenced your approach as CTO of Shawbrook Bank here in 2024? Sounds good. Yes, I grew up in the States, my family live in

[00:02:28] Colorado and actually I've got a bachelor's degree in music so nothing to do with computers. Always had a like mathematics etc and studied quite a bit through university but I moved to San Francisco in 90 to be a conductor of

[00:02:41] music theater and operetta and actually did quite a few big shows back when you had a full pit orchestra and not sort of electronic gizmos because I found in music I was pretty good at singing and piano but not great and I found that

[00:02:55] what I was actually really very good at was actually bringing in different types of instrumentalists, singers together to work as a team. But unfortunately conducting doesn't pay particularly well especially in San Francisco but I was in

[00:03:06] Silicon Valley, the right place at the right time, learned the PC trade right at the heart of sort of PC and internet networking. I found I was pretty good at it, made some good money at it so yeah moved here in 97 to live abroad for a

[00:03:19] year. Again as we mentioned before I found out I quite liked it, worked in banking for really for the entirety of the time that I've been here either from setting up dealing systems, working for big banks, started up a

[00:03:32] couple of software companies. Again good at a lot of bits of technology but not great at any one and but again where I found out actually was sort of the most comfortable and the most effective was as a CTO bringing in groups of

[00:03:44] technologists together to work sort of towards that common business outcome. So yeah so similar in terms of approach, very different between music and computers but yeah I think that sort of varied path to get me here is

[00:03:57] giving me kind of a 360 view on technology and I think that's really helped me out in my current role. What a great story and one of the things I always try to do on these podcasts is getting people thinking differently about

[00:04:08] technology and I would I think for the large part most people listening when they hear about your previous life as a conductor and the world of music and now technology that they're very separate worlds but hearing you describe it there

[00:04:20] and having the right people in the right place coming in at the right time it feels like there are a few synergies between that musical world and the world of tech. Am I right in saying that? I think you're absolutely right and also I kind of

[00:04:33] use the analogy if I take it right back to Pythagoras who is the father of modern math and modern music because when you think about music it's a logical series of patterns and combinations of notes and instruments

[00:04:43] look at computing it's a series of code bases that work together to make a different type of outcome and I think there's a large amount of computer professionals are also current or used to be professional musicians so I think there's actually probably a tighter corollary than people might

[00:04:59] otherwise think. And again fascinating story I think it's almost a podcast episode entirely on its own but I wanted to invite you on here today to talk about Shawbrooke Bank's digital transformation program because again the

[00:05:14] world of banking we all have bank accounts or most of us have bank accounts but don't know too much about the technology behind it all and the things that we take for granted so what were the main goals behind that digital

[00:05:26] transformation program and how do you prioritize these objectives to meet those I don't know experiences and expectations that customers demand? So Shawbrooke started in 2011 with this sort of ethos to serve the underserved after the 2008 financial crisis so if you were a limited company buy-to-let

[00:05:45] landlord it was hard to get mortgages you know if you were a day rate contractor making good money it was hard to get personal loans or mortgages so we found that there was a whole bunch of that sort of customer base that

[00:05:56] but was not served by the big banks and that's how sort of Shawbrooke was formed it went public and then in 2017 two private equity companies delisted Shawbrooke and that was kind of the beginning of it because the the private

[00:06:08] equity firms really knew what the outcome and impact of investing properly into tech and digital transformation could do much easier to do when you're private versus public and they sort of rallied the the exec team around

[00:06:23] that and brought myself in. I think in terms of that the main goals first was setting the foundations and you can't do a lot of these whizzy things unless you've got the basics of business productivity, network infrastructure, data platforms, information security postures and then organizing yourself like a

[00:06:41] fintech and we largely did that through 2019 and 2020 and then from there we really hit sort of the transformational sort of starts I think and really we have a sort of an objective of we want to use our really smart humans combining

[00:06:56] that deep human expertise they've gained over the years in these complicated sectors combine the best of human with great tech and data to drive those sort of customer outcomes so we're of the view that will never be a hundred percent

[00:07:08] digital because we always want those really smart people making those right decisions when it matters but we really want our smart people to do really smart things and not really sort of mundane things which we found was happening

[00:07:19] quite a bit in the group so really we rallied around a philosophy as we're going to write our own software we're gonna own that customer experience or in broker experience with our own software and then we're gonna partner

[00:07:31] with best-in-class technologies like Pega and others for everything else so that we can sort of automate those moments that matter for our customers but also for our colleagues really trying to make sure that they are doing intelligent things not having to scramble around data not having to

[00:07:48] create their own models for decisioning to make not only their lives easier but much more effective and from that we're still playing in those 16 different market verticals and but we're really focusing on simplicity underneath those and that's quite hard to develop a diverse product set to your customers

[00:08:04] but keep that simplicity be behind the scenes so ultimately when we look at sort of the the annual results we've been growing between 20 to 24 percent year-on-year last year we had a 38 percent cost income ratio which is

[00:08:18] fantastic in terms of just the sheer profitability that it gives you and then our investors just pile that right bang into into more investment and automation because they're convinced that really adds long-term value so I guess in terms of prioritizing the objectives we started with the

[00:08:34] foundations we started that customer experience we've really been focusing on that colleague experience whether they're underwriters or loan originators or our call center and now we'll start tackling sort of the core back-end banking engine as our next phase but these things take time you need to have

[00:08:51] investors who have the will to change and not to sort of think it's going to happen overnight and yeah and then off you go and you just got to set some marathon not a sprint but and it takes a while so I'm quite happy to say right now

[00:09:05] we're really starting to reap the benefits of all that sort of that the time and effort we spent the last few years on and we have done brilliantly I think we're what 10 minutes into our conversation we've not mentioned AI yet

[00:09:16] but I have been six seven tech conferences the year recorded 30 interviews with so many different companies and of course all everyone's talking about is AI and I always try and look beyond the buzzword and talk about what problems are we solving what improvements can we implement here and

[00:09:33] what difference can it make to the bottom line for businesses and improve experiences etc so I've got to ask how is the implementation of this AI powered decisioning and workflow automation from I think it was Pegasystems how's that

[00:09:46] improved your loan processing times and customer experiences at Shawbrook Bank because ultimately it's all about measurable impact isn't it 100% and I thought we've actually and when you look at AI there's kind of two different sides to it there's what I call statistical AI which is machine learning

[00:10:02] and then there's sort of gen AI which has been sort of the thing that's really exploded over the last 12 to 18 months so we've been using machine learning models for a very long time not only helping with automated decisioning for

[00:10:15] an unsecured personal loan so if you go to clear score a money search market and you look for a personal loan and shopper pops up that means that we've done a seven second journey through our automated decisioning model to auto

[00:10:27] approve you for a loan or not similarly when people want to buy properties from us if people want to get a SME loan we've got really robust models on the front end but we also have robust machine learning models when customers

[00:10:41] are in life so we've got a product internally that that looks at our limited company customers looks at their commercial current account information runs a lot of simulations over it and they're based on their cash flows and we

[00:10:54] can predict if a company's going to be in trouble probably about three or four months before they even know they're going to be in trouble and that gives us a chance to be able to have a phone call saying look mr. customer have you

[00:11:05] been noticing these trends I think we should talk about how we sort of make this work where you don't get yourself into a spot of bother and that type of using data and models to not just help get people through the front door but to

[00:11:15] help do the right thing by customers in life is really important to us that and on the gen AI side aside from the co-pilots and the developer productivity there's some fascinating things inside of there that again help us review

[00:11:29] customer information whether that's going out to externally held customer information that we have inside of our own organization so we're looking at training models to where if we need to do a credit review or we need to do an

[00:11:40] assessment of a current customer are really smart people don't have to go I've been to a million different places to harvest that information in but we can use gen AI not to sort of just to gather that information but to provide

[00:11:52] baseline assessments on it again so we can do things faster more accurately and and not have to continue to sort of grow people as we grow the bank and refreshingly when I was researching you and the story and journey you've been on

[00:12:05] there it's not just about AI and I was also reading about the impact of pegas low code capabilities especially on your underwriters productivity and indeed the overall loan approval process are you able to expand on that for people that

[00:12:19] have not seen this sure thing so on the front end for customers we use standard technologies like react and C sharp services but when it comes to business process automation it's really hard to build that yourself and I've worked with

[00:12:33] Pegasystems in the past and knew about its ability to not just define a process graphically but that graphical process becomes the code that actually gets executed and how you can then create really nice interfaces for colleagues based off of those processes to make that sort of end-to-end engagement

[00:12:52] really slick and very fast to implement so we brought in pega yeah a while ago we started inside of our unsecured personal loans business where once a loan was applied for the completions process was so manual and we got to the

[00:13:07] point where we are able to drop sort of sort of a completions times by you know 75% which is huge so we're able to get 75% more business through the door simpler more effectively with clear sort of audit trail behind it by using the

[00:13:20] peg a platform and that's what really sort of made the penny drop inside of shopper saying ah if we could do it for this let's just sort of rip up the rulebook for how we underwrite mortgages let's look at how the policy is has been

[00:13:33] created let's look at the process and rethink it from scratch let's create a service design that we think is going to be best in class and then use pega to come in and automate it and right now we get from we can get a customer to an

[00:13:46] indicative mortgage offer in in eight minutes we can get it from a indicative mortgage offer to a full mortgage offer an average of 11 days I mean it used to be 40 days and now we've pulled that down to an average and we've had a

[00:13:58] couple that we've done in less than a day and then that's what we do now so our underwriters can handle three times more cases and they used to processing times are about them from 40 to 11 days and for brokers it means that we give

[00:14:13] them a surety they know that if they come to us we're going to get process their customers needs quicker and we take deals off the table as result so it's great for the customer because they get their money faster great for the

[00:14:23] broker because they're able to fund more deals in great for our underwriters because they feel like they're doing value-added stuff and again ultimately good for the for the bottom line and we're sort of further expanding on that

[00:14:34] with a group called pecsim who are trying to automate the completions process I mean how many times have you been in a chain and you have no idea what's happening up and down the chain well they've automated that completely in

[00:14:46] Australia now they're working with the Bank of England to automate the completions process here so we managed to get a refinance because we've automated that end-to-end journey from indicative mortgage offer to refinance in seven days yeah from actual completion so that to us is what we see

[00:15:02] is kind of that the future of mortgage processing to where it's completely digital and exactly where you are in every step of the way and it's kind of good for all parties around and it's just good for the industry so that's been a

[00:15:14] huge boost for us and we have like I said for further plans to continue to refine that and there's so many powerful stats in everything you just mentioned now and I think that's so important especially at a time where every tech

[00:15:25] project is under close scrutiny now for what ROI will it deliver what business value will it deliver and I'm curious what would you say are the key achievements from phase two of your digital transformation particularly in the buy to let mortgage underwriting process anything you can share around

[00:15:40] that and those big achievements you've had yeah just I mean really just echoing what the sort of the stats that I ruled out yeah those were specific to buy to let but really that the next stage is how we take that into bridging loans to

[00:15:53] commercial investments to development finance to our owner occupied businesses and now that we sort of established that the beachhead it's how do we make that sort of consistent across the rest of the group because that's what's really

[00:16:05] going to drive sort of the at the future value and I think when it comes to transformation projects I think one pitfall that people sometimes run into is they say well I'm going to deliver this thing for you mr. board and it's

[00:16:17] going to take two years two or three years to deliver them when actually if you really focus on short sharp interventions that add value really quickly maybe not massive amounts but it starts to win hearts and minds and then

[00:16:29] you just start layer on piece of value and all of a sudden that transformation journey has got a bucket load of momentum because you've proven that the model works and you've kind of earned the right to play and I think we've done

[00:16:40] that not only for the unsecured loans but certainly in sort of the the vital mortgage processing and now we've got the right to play to roll it out to these the rest of the group and I suspect many people listening to your story

[00:16:51] around the world will be inspired and I suspect that many leaders will have those light bulb moments going off at the moment and maybe even inspire them to embark on their own digital transformation journey so for anybody

[00:17:03] that's just setting out on that what lessons would you say you've learned from Shawbrook banks digital transformation journey and how have those lessons shaped your future plans do you think yeah so I think a few

[00:17:15] things as a CTO trust your instincts if you go into an organization and you realize that X Y & Z bit of foundation work needs to get done you need to have the strength of your conviction to get those things done otherwise you're going

[00:17:27] to be building a transformation on a deck of cards and that that could be quite hard I think then from the second side on top of what I mentioned before about adding value in short sharp interventions just always speak the

[00:17:40] language of the business always try and figure out what's the benefit to customer to colleague to financials to risk and then try and keep it as less techie as possible it's really hard being a technologist because you want to

[00:17:54] talk about all the great techie things that are out there but really learn the language of the business and what concerns the businesses have because inside of that will be those nuggets of things that you really should be going

[00:18:04] after first for those initial quick wins and how do you ensure the integration of low code and intelligent also my automation solutions align with their your bespoke software from direct customer interactions because I would imagine there's a huge piece there that we don't talk about enough and it's

[00:18:22] probably a big concern for other people with bespoke software because a lot of businesses think what they're doing is unique and nobody does it like us and our bespoke software is crucial to that and of course and put the most but I

[00:18:33] think most businesses are very similar but how did you get around this yeah so you really need to spend a lot of time thinking about that microservices and API integration layer that sits between those customer and broker websites that

[00:18:46] you provide and these low codes and solutions like like pega if you get that integration layer right which is a very technical thing then that interaction becomes so seamless now and indeed there's things that that peg are doing

[00:18:59] as well to where you can start to embed Pegas greens into those custom UI is that you build as well to try and make those integration points a lot more seamless so yeah really focus on the integration points and look at products

[00:19:12] that give you the ability to make that sort of integration process easier and looking ahead I'm not sure if you're gonna be able to share anything here but are there any future transformation projects that you might have planned and

[00:19:25] how do you envision these projects further enhancing your banks operations and custom customer satisfaction scores and all that good stuff is is anything you can share around that road ahead yeah sure we were right in the middle of

[00:19:37] another big piece of work which is for our savings deposits business yes we we don't have branches current accounts so everything for our deposits businesses is online we're in the process of rewriting the front-end application that are those

[00:19:52] customers use with their own software using peg it for the customer service agent screens and telephony and call center that should be cutting over customers towards the tail end of the year that's a really big deal for us to

[00:20:04] help with better journeys for the savings customers and better retention so again that should hopefully be be well underway tail end of this year and into next and then after that it's it's looking at those back-end systems of

[00:20:17] record that book the loans and then hold the deposits and that process the loans we've got like a number of banks we've got a few of those more than we want so we're going starting at a rationalization effort just mean let's

[00:20:29] say we don't want to have as many as we have so selecting a technology provider and which will be sort of announcing in the next sort of month or so and then going through that next phase which is drive simplicity drive better customer

[00:20:42] satisfaction not just when you get them in the door but how you manage their either their loan or their deposit sort of in life and then that'll be another sort of good two-year stint but that for any technologist in banking they know

[00:20:54] how hard that is and we wouldn't been able to even start thinking about tackling that had we not done the colleague layer and the customer layer first Wow incredible what you've done there and I love how you're continuously

[00:21:07] improving as well and I'd love to get you back on maybe early next year see how things are evolving for you but we started the podcast talking about your origin story from being the conductor a musician and now to being the CTO and as

[00:21:22] we come full circle I'm not gonna ask you to look back at your career and none of us are able to achieve any degree of success without a little help along the way very often somebody see something in us maybe invest just some time in us and

[00:21:35] helps us along the way but so is there a particular person that you're grateful towards I hope you get you where you are today that maybe we can give a little shout out to yeah 100% and it was really quite a quite an easy choice the CEO at

[00:21:49] Shawbrooke when I joined is a guy called Ian Cowie and any transformation journey is difficult 2019 was a challenging year for me and sort of early in 2020 as we saw the specter of the pandemic looming ahead of us he said are you okay and I

[00:22:04] said it's just really quite difficult there is a lot of stuff going on at home and he said look I'm gonna invest in this thing called a coach for you so this lady called Angela Rutherford Adams and and that was a game-changer not just

[00:22:16] sort of a warm fuzzy coach but someone who really helps you challenge your thinking not just at work but at home because these things are really inextricably linked and so the sessions I spent with Angela really just helped me

[00:22:28] turn my attitude and mindset into a much more productive space which really has been sort of the foundations for a lot of the stuff that we've done over for me personally at the bank over the last last few years so these were a dual

[00:22:41] shout out to Ian for saying hey do you need some help mister and then for Angela to for the coaching sessions that we had those if anyone has that the pleasure of having a personal coach take it and embrace it with both arms because

[00:22:53] it will definitely make a difference. Wow again incredible story one of the reasons I love asking that question is you mentioned in there and just him taking a few moments out of his time to say hey are you okay let me invest in a

[00:23:06] coach for you it was a simple act for him and he's probably forgot about it now but it's meant the world to you and completely shaped your career and it's so important that we share these stories so Ian big shout out to you and indeed

[00:23:17] Angela and for everybody listening whether they're a potential customer or a business leader wanting advice and maybe connect with you and learn more about the journey that you've been on where's the best place for people to find

[00:23:30] out more information about all things Shawbrunk Bank and indeed yourself? Yeah easiest places to go to our website Shawbrunk.co.uk you can find me on LinkedIn as well people want to sort of reach out happy to to connect but yeah

[00:23:44] those are probably the easiest places to find us. Well again thanks for joining me on the podcast today love chatting with you about AI powered decisioning and workflow automation from Pega how you're using low code and intelligent automation solutions to improve loan processing times by 75% and saving your

[00:24:04] underwriters I think 1500 man-hours per month and improving customer experience as a result and driving simplicity through the organization pure gold from my side but just thank you for sharing your story with me today. Pleasure it's

[00:24:18] been yeah been good fun thank you. I think it's evident that the integration of AI and automation can yes dramatically enhance banking efficiency and customer satisfaction but what further innovations can we anticipate in the financial sector and how can other organizations emulate the success of

[00:24:36] Shawbrunk Bank's digital transformation? This is where I want you to share your journey and join me in diving a little bit deeper so please let me know who's been instrumental in your journey towards success how do you see AI shaping

[00:24:48] the future of your industry I want you to share your thoughts join the discussion by emailing me techblogwriteroutlook.com x linkedin instagram just at Neil C Hughes and while I've given you lots to think about there I'm also going to prepare for tomorrow's guests got

[00:25:03] another cracker lined up for you but thank you for listening today and until next time don't be a stranger