S1 Ep. 8 - Goldman Sachs' Harit Talwar

On this episode of our “Reinventing Customer Experience” podcast, ZS principals Arun Shastri and Gopi Vikranth chat with Harit Talwar, former chairman of consumer business (Marcus) and partner at Goldman Sachs. 

Learn how Goldman Sachs is disrupting the financial services industry by taking traditional ways of banking and fusing it with engineering data and design to deliver great customer experiences. 

Transcript

Gopi Vikranth:                   Hello. And welcome back. This is Gopi Vikranth and I lead Personalization and Customer Experience Analytics at ZS.

Arun Shastri:                     And I'm Arun Shastri. I lead the Artificial Intelligence Practice at ZS.

Gopi Vikranth:                   We both work at ZS where we use our industry expertise, cutting-edge analytics, and technology to create real-world solutions for our clients. And in this executive series, we'll be talking to leaders about how they're re-imagining customer experience at their organizations and the role personalization plays to drive customer loyalty. Arun and I are quite passionate about this topic as it is one that our clients often wrestle with. And as consumers, we are constantly re-imagining how businesses can do a better job of engaging us. Joining us today is Harit Talwar. Harit is outgoing chairman of Goldman Sachs' consumer banking business known as Marcus by Goldman Sachs. He joined Goldman Sachs in 2015 as a Partner, Global Head and employee number one of Marcus, which today has more than 8 million customers in the US and UK, 100 billion plus in deposits, 10 billion plus in loan and card balances and partnerships with leading brands like Apple, Amazon, Walmart, and more.

Arun Shastri:                     It's a pleasure to talk to you Harit. Harit has worked in Asia, Europe and America, extensive experience in the financial services industry and has run large businesses, built and scaled startups and overseen M&A. Lots of interesting facts about Harit, but I'll just share a couple. He's been named one of American Banker’s 10 to Watch and an Outstanding Asian American in Business. I can't wait to hear from you Harit. Welcome to our podcast.

Harit Talwar:                     Thank you very much Gopi and Arun. That's quite a buildup. I hope our conversation lives up to it.

Arun Shastri:                     Perfect. Let me start here Harit. For those listeners who may not know, can you tell us more about what is Marcus?

Harit Talwar:                     So Arun as you said, Marcus is Goldman's consumer business and we've built a modern consumer digital platform with an aim to serve tens of millions of customers to help them take control over their financial lives. We see ourselves as an opportunity to disrupt financial services. Pretty much the way Amazon did to retail or Apple did to music. Our thesis is that you can transform the operating model by innovating in the customer journey, along distribution and consumption. The shampoo you buy at Walgreens or the shampoo you buy at Amazon is the same shampoo, but Amazon has taken traditional retailing strengths, combined it with engineering data and design and transformed the business model and delivered a different experience to the customer. That's what Marcus is all about. Take the traditional strengths of banking, risk management, et cetera, fuse it with engineering data and design to deliver great experiences to the customer.

                                             So that's what Marcus is all about. As you said, we've been very successful across any financial metric range of products. I do think speaking humbly, we are perhaps the most successful up and we've done all this inside a 150 year old investment back. So we call ourselves 150 year old startup.

Arun Shastri:                     Yeah. The true definition of intrapreneurship, so to speak, right, starting a entrepreneurship venture within a large organization, establish organization, but does the definition of customer experience change in this setting? What does it mean to you at Marcus and how do you measure it? Is it traditional ways of measuring customer experience? Do you have new ways?

Harit Talwar:                     So, I get very excited and concerned when I hear the phrase customer experience. I get concerned because it is much abused and there are too many businesses across industries, especially in financial services, which have only a rhetorical belief in customer experience. In Marcus, it is different. Customer at the center of everything that we do. Customer experience or whatever you call it, customer centricity, in our mind is the true, sustainable, competitive edge. It is not an additional layer on top of our product. It is the essence of what we do because our research showed that customers don't trust their banks. They don't trust their credit card companies. Especially millennials would rather go to a dentist than to their branch. And that's a pretty low bar.

                                             So what for us? We started at the core of customer centricity. The way we have built our business is what our customer pain points, how well can we address them and then how deep is the revenue and profit pool. It reminds me of the song, Do-Re-Mi from sound of music. Don't worry, I'm not going to sing it. It says, when you begin music, you start with Do-Re-Mi, sorry, it says, when you start reading, you start with ABC. Similarly, when you start music, you start with Do-Re-Mi. In my mind. When you start a business or grow a business, you start with the customer. So to meet customer experiences, not just how many seconds it takes to pick up the phone, it is the essence of your business.

Arun Shastri:                     That's fantastic. And, you had these experiences where you've worked at city, you've worked at Morgan Stanley. You've worked at Discover financial services. So I'm sure you've had an opportunity to find tune what that means, what it means to put the customer at the center. Can you talk a little bit about how your thinking and evolution about customer? How, how has it been for you from your perspective? What was it? Where is it going? Where are you now? 

Harit Talwar:                     I have always been very customer centric and the belief that it is the sustainable competitive advantage has been in my value system as a business leader for many, many, many years, but we took it to a different level in building Marcus, by Goldman Sachs. Research, we did a lot of research and we could spend many hours just on that and trying to understand consumer pain points. Essentially, there are three, if you crystallize it, customers relationship with money is broken. They don't understand it. They have too many accounts. They don't budget. They know they should budget. They have deep anxiety and it festers because if you have a backache, you talk to your friends, you don't understand money, you have money issues, you have money, anxiety, you are too embarrassed to talk to anyone. If you want to borrow, the borrowing processes or take cumbersome, expensive. You order a pizza, DoorDash will tell you where it is in different steps of it. You go to a bank and apply for a mortgage and you have to pray to God as to what is going to happen. The process is terrible.

                                             If you are a saver, unless you are the absolute ultra-ultra rich, the options which the banks give, the savers feel disrespected. So our research showed that fundamentally people don't trust the financial services providers. And how can you talk about customer experience in terms of, "Okay, you know, the call center person will say, hello, sir, thank you, sir, et cetera." That's all meaningless. The math that we did, and you are an AI guy and a data guy, and the math showed that if you want to build customer experience and trust in every interaction, three things are fundamental. You must deliver value, you must keep it simple and you must keep it transparent. What the banks do is the reverse. They make it simple for themselves and complicate it for the customer. To make things simple and transparent for the customer takes a lot of work. So the key evolution of customer experience is, can you keep it simple and transparent? No matter how complicated the product, the jargon is for us to handle, not the customer.

Gopi Vikranth:                   When we look at Marcus, it has now grown into a multi-product platform that is serving millions of customers. Can you tell us a little bit on what you did as it grew and what are you doing to expand this product and customer base as it goes forward?

Harit Talwar:                     So it's true. We started five years ago, we just finished our fifth year anniversary. If you had asked me or asked any one of us in the leadership team that will Marcus be where it is today? We would've, perhaps jokingly said you must be smoking and inhaling. So it has exceeded all our expectations. And that's because I think the firm Goldman Sachs has been very committed to it. And we have focused on the customer and we focused on execution because all this becomes rhetorical, unless you have execution excellence. So the important thing was to how to start and how to keep building. I must tell you that while, you know, today, there are some independent assessments, which are saying, Marcus is maybe $10 billion valuation, et cetera. Not that we get carried away by that, it's not easy. It's tough. It's hard work. It's grit. Things go right, things go wrong. In fact, one of the learnings I've had, I've had a couple of learnings. One is crisis management is a great project management tool, because if you have new challenges every week, it means you're making progress. 

                                             If you have the same challenge every week, it means you're stuck. Similarly, I think building a modern business today is like a flash mob rather than an opera. You know what happens in an opera? You have a very stern conductor, think of him or her as the business leader, there are very many talented people, various functions. They're excellent and they're told, do this when I tell you to do and beautiful music is created. I don't understand classical music. I don't think opera is the way to build today's business. It's all about agility, it's about iteration, it's about test and learn, it is about not just getting your digital journeys and experiences right, but having the data and the frameworks to be able to test continuously, get that feedback and do it. So, it's like a flash mob where you have the north stars, you have a lot of talented people, and you have to within the framework give them the empowerment. It's not waterfall development, it is agile and therefore, it is all about iterations. 

Gopi Vikranth:                   Yeah Harit, that's a great point. I just wanted to double tick on that a little bit. So Marcus is a digitally native organization, right? So what do you see as the advantages and disadvantages of being completely digital to drive this rich customer experience?

Harit Talwar:                     So I may be biased, but I think there are only advantages. And the pandemic reaffirmed our business model dramatically last year, where we rolled our customer assistance program to our customers. From the time we thought about it to the time we rolled it out, it was I think maybe three, four days. And the customer experience was great. So digital is great at so many levels. First of all, it empowers the customer. When the customer has to walk into a branch and physical branches are a dinosaur. The customer is on the bank's ground, not on their ground.

                                             When the customer calls, the customer's waiting for someone to pick up, the customer's not in control. When the customer does online, you're sitting at your laptop, your desktop, it's not that convenient, but when you are on the phone or on a tablet and it's inside your pocket, you feel empowered. So the first, most important thing is, there is customer empowerment. The second of course is it's a dramatic cost reduction. The third is you can offer experiences and products and what if scenarios, et cetera, which you can't in face to face interactions because the limiting factor is training the customer service representative or the sales representative. It's very difficult for them to be able to think up of various things, the training, the what if scenarios, et cetera. The fourth is particularly in a regulated industry. It lends itself to better controls.

                                             So whether it is controls, whether his product experiences, whether it is a cost, whether it is the empowerment of the customer, it is the way. And anybody who has a doubt about that needs to reflect what they're thinking. Now, there aren't disadvantages, but there are certain consequences. The first consequence is you're 24x7 and for a lot of people, the technology architectures haven't been built 24x7. And it's not just a matter of being uptime 24x7 because of the experience, digital experiences, the data needs to flow back and forth and, and horizontally and vertically and instantly. And most of the legacy bank systems are so corroded, it is like data like water can't flow because the pipes are corroded. And so therefore it becomes difficult for them. Also, there are some products in markets, which customer segment product makes, where it may take a little bit more time for digital to become the default option. So that I think is a matter of the adoption curve, which has been going up steeply, but there are some hold outs and it may take some time.

Arun Shastri:                     So Harit, heard you loud and clear. So what happens with the US financial services industry is highly fragmented, lots of different players, you talked about these corroded pipes and distinct advantages of digital. So how do players win in this market in the future?

Harit Talwar:                     First of all, the US market is very large. US consumer financial services market is very large, which is where I specialize more in. You are right, it's reasonably fragmented. Even though people say the big banks are becoming bigger, which is true, but the big banks account for maybe around 50% of the market. So it's not like search engines, whether top two account for 95% of the market or the COL awards or things like that. Then there's a lot of debate about whether it's the banks or the FinTechs or this or that, or the mono liners or the full-service platforms, et cetera. To me, the thing is it's not by category, there will be winners or losers, there'll be winners and losers by name. And I think those who can be agile and modernize their technology stacks to deliver better experiences to customers will be the ones who will do well. The technology is not rocket science. So all the technology that is needed is there. It's just, how do you implement, how do you have the execution excellence, how do you afford the cost of modernization.

                                             And those who are able to do will do, and those who are not will not, but I don't think there will be as many banks in the country as there are today. There will be a shakeout. It is happening and will continue to happen. So it's not that the big will get bigger or the FinTechs will get bigger, or the smart will, it's the smart and agile who will become better and survive.

Gopi Vikranth:                   So Harit, you spoke about technology infrastructure, data being more real time, and a lot of test and learn scenarios. How did you guys go about, because it has not been done that well in the financial services industry historically. So, can you elaborate a little bit around how did you guys go about?

Harit Talwar:                     So first of all, I would say that while I think we've done very well, we've also got flaws and we've got, we are always work in progress. Anybody who thinks that they're perfect by definition are wrong, okay? So, I think one of the things we did early on is while we have all the functions, credit, marketing, product engineering, compliance, legal, et cetera, we organized our teams by customer journeys. So if you ask somebody, "What are they working on?" They'll say, "I'm working on the password reset journey" or "I'm working on the customer onboarding journey" or "I'm working on the customer dashboard journey." They may be from any function. Okay. So organizing by customer journeys rather than by traditional departments is difficult, but preferable, and it's not necessary that you have to be perfect. 

                                             Don't go for the 100% solution go for the 80% solution. Okay. The second is that when companies want to start digitally native or transform themselves to digital, it's not just a matter of technology tools and processes, which everybody talks about, it's also a matter of culture. You need to have a culture, as I said, of continuous iteration and continuous improvement. People spend too much time, "What will my homepage look like?" It's irrelevant because there should be a thousand landing pages and customer traffic will tell you how it needs to evolve. It's not like a branch layout where you've got to sit and decide what the layout will be.

                                             The third thing is you have to make tough technology architectural decisions. If you horizontalized every everything, it's good but it reduces speed to market at least initially. If you build everything in silos, you've got speed to market, but it's not good for the customer and there should be a healthy tension every day in your organization to make those choices and tradeoffs. And as I said, it's never a zero hundred decision. So you need to focus on that.

Arun Shastri:                     So Harit, you made reference to, for example, one way that traditionally maybe people measure customer experiences, how long I keep you waiting on a phone line, how quickly I respond to you on a phone line. We also talk about digital empowerment, the customer feeling empowered because they're in control of their journey. We talk about breaking up the journey into lots of different pieces. I suspect that these are all probably KPIs that lead to an overall better measure of customer experience from your perspective. All of these things have to come together, or do you actually look for a single measure or a handful of measures such as NPS? What's your opinion on that? Do you break up the problem into lots of different pieces and then you make sure that all of them come together in some way? Or do you look for NPS, which is still stuck around as something that everyone seems to measure as a way of satisfaction within with no customer base.

Harit Talwar:                     So, my personal view is I'm a believer of lots of measures, but not a believer of a single measure. Look at the human body, if I ask you, "Arun, are you healthy?" You can't answer. Is it Cholesterol? Is it Blood Pressure? Is it Bilirubin? I'm not a physician, I just came from a checkup last week. The dashboard had some 70 different metrics. Okay. But I think there's a categorization. There have to be internal metrics which teams can feel and control.

                                             There has to be external validation. So we are extremely proud that in Marcus, between our loan product and card product, we want JD power, which is the gold standard in the industry. We do believe in NPS, so we do the NPS and our NPS goals across all our products are stratospherically high compared to rest of the financial services industry. But then you need to also look at things like your app store rating of your app. You've got to look at what is the... Not just the size of the follower base you have, because those can sometimes be bought, or if you're a large organization, you obviously will have a large one. What are the like percentages? What are the common percentages? What are the engagement customers have with you?

                                             You also then look at traffic to your different content pages on your app or on your site. I think then, there's internal traditional metrics, there's external traditional metrics, there's digital metrics of engagement. The fourth, I think is looking at customer tenure retention wallet share. So it has to be a combination of things you look at and customer experience has to be culturally embedded in the organization.

Arun Shastri:                     Perfect. So, think back to maybe Marcus employee number one, and you're thinking of how am I going to put this digitally native setup within Goldman Sachs? Of course, Goldman Sachs has an impeccable reputation for its own customer experience. From your perspective, what were your benchmarks even before you started, like you said, "I want to be like blank in this industry or blank in that." As you are giving this organizing, life and a DNA, what's inspiring you?

Harit Talwar:                     So, at the cost of being rude and not intending to be rude, the one benchmark we did not have is to be like any other bank in the US. Okay. In some ways the benchmark we had was, to be a leader in consumer financial services business on a leadership attribute, not size, the way Goldman Sachs is in its other businesses like investment banking. Goldman Sachs is not the largest bank in the country or in the world, but it punches above its weight because of its reputation for client centricity, execution, excellence, risk management, and really being at forward leaning. So the first benchmark was our consumer business should make Goldman as proud as any other business of Goldman makes its proud. And we've reached that well. People who know Marcus, have a significantly higher favorable opinion about Goldman Sachs than those who don't.

                                             Our second benchmark was that we must be the best in customer experience and customer service, both through internal, but especially external validations. So we got there. Our third was that we should build a business which is meaningful, both in the marketplace and inside the firm over a long time horizon, not tomorrow morning, but over a time horizon. And I think given the momentum we have, we feel good about that. I think if we had inspiration, it was more from organizations like Apple and Amazon, where, as I said, they transformed an industry.

                                             People didn't buy a new Neil Diamond song just because iTunes was there, but they changed the distribution, consumption pricing paradigm, and built a different business model. As I said, people go to Amazon for buying things. So they've created a different model. I think it is those who are our benchmarks and ideas. But we were also very clear, my belief is that in business, you focus on the customer, you focus on financial outcomes, because if you're not getting financial outcomes, it means you're just kidding to yourself. You're drinking your own Kool-Aid. You focus on talent because without that, you can't get the other two and you focus on reputation because if you conduct a business, which is not reputation enhancing, that's bad. So if you focus on these four things, even if some other things go wrong, you live to fight another day. Of course, we focused on technology and AI and data and all of that, but those are capabilities. The first four are outcomes.

Arun Shastri:                     That's perfect. Harit, personalization, we talked a lot about the customer journey, the customer centricity, bringing things together, what role does personalization play for you in driving customer experience? Are you a big believer that you have to be very precise with what exactly Arun needs at any given time versus what Harit might need versus what Gopi might need, or are you about designing the system so that whoever it is that comes and they consume that they do the best they can within that system?

Harit Talwar:                     So if you had asked me a few years ago, I would've said personalization is an absolute, absolute, absolute must. If you ask me today, I would say it is essential, but be careful. Okay? So first let me talk about why personalization... It's obvious it's important, you can't treat Arun different, you can't treat Arun and Gopi the same because their needs, their aspirations, their emotions may be different. And so you have to have the ability to, and that's why when we built our data architecture, it is the ability to capture different types of data structured, unstructured, but more importantly than to have it belong to the organization rather than a particular function and then be available in a democratization of it so that it is available to different decision makers at the time that it needs to be, not that it is the power storage of a few data scientists.

                                             Okay. The role of the data scientist is to make themselves redundant, not to make themselves centralized. Okay. So all that needs to be done. The only thing you need to remember is sometimes excessive personalization can cause confusion and sometimes excessive personalization has a creepiness factor. "How do you know so much about me? I don't want you to know so much about me" and they're right. And we can overdo it. Okay. So you need to have a strong sense of judgment, not just get carried away by your technical engineering and data and AI capabilities. 32:41 If personalization makes things more simple... See everything in Marcus, we go back to, "Does it make it more simple and transparent and valuable for the customer or not?" If it does that, good. But if it does creepiness, be careful. 

Gopi Vikranth:                   Yeah. I think you are basically looking at personalization as a way to provide more relevant and thoughtful experience rather than getting to the other side of the extreme, where customers start feeling uncomfortable. Right? So I wanted to switch gears a little bit and ask you this question around partnerships. So Marcus now and Goldman Sachs now has partnerships with Apple, Amazon, Walmart, and some of the most Marquee brands, which customers love. Can you give us a little bit of an idea around what was the thinking and how did you land some of these partnerships and what do you see as a role going forward? What` shape will this take? Let's say you take the next few years.

Harit Talwar:                     Sure. So we've always had a dual strategy, a direct to the consumer under the Marcus brand. We've also had a strategy. What we call BaaS, Banking as a Service, where we would manufacture products and embed them into other ecosystems because we don't want to be so proud and arrogant, like some of the largest banks in the country that people will come to us rather than us going to people. No, we want to go to the people. So we have a direct to consumer and we have embedding our product manufacturing capabilities into other people's ecosystems. So that's what we've done. The credit card is embedded into the phone. We've also said we are going to also embed our credit card into the General Motors ecosystem because we believe that the car of the future is not just a transportation vehicle, it's a platform. Okay.

                                             We similarly have seller financing embedded into the Amazon ecosystem. So it gives us distribution, gives us reach, takes us to where the customer is and we've been very clear that we would like to have the opportunity to work with organizations who share the same belief as we have in the customer centricity and customer experience and belonging to Goldman Sachs, I have no doubt that Marcus was able to impress these partner organizations with our capability and our thinking. But also what was very important was that we belong to Goldman Sachs. We are part of Goldman Sachs and it's an organization which they have known for decades. And so we've been able to have conversations with our partner organizations at the right levels.

Gopi Vikranth:                   Yeah. Harit, so final question for you. This is to the futurist menu and the technologist and the futurist in you. So flash forward and imagine the consumer banking industry five years from now with no constraints on technology and other things, what are your top three predictions about how customer experience and personalization will change this industry?

Harit Talwar:                     See, I have said earlier too, I don't think the future of the industry is in engineering, AI, data, et cetera. And I'm not wanting to offend your sensibilities. Those are capabilities which are required. The future of the industry is in embracing insane customer centricity and organizations, which will be able to embrace that and deliver a higher level of customer empowerment, they will win. So that's my overarching thing. Now within that, in terms of trends, I don't know there are many, but the one which is unmistakable is that physical locations will continue to become dinosaurs.

                                             I think the second, which is unmistakable, which is the converse of that, that digital will continue to be, every time we say that it has got embedded and we'll accelerate and then if you look back five years, we were shot in our predictions. Okay. I think the other is that how do you transform? How do you take interactions to become relationships? So whether it's in the payments world, whether it's in the remittance world, whether it is in the core banking world, there are a lot of transactions and banks think transactions is equal to customers and relationships, and it's not. So, if you're in the payment side, how do you go up the funnel in terms of the shopping journey? I think integrating financial products and services and features into the lifestyle outcomes which customers are wanting to do and using data and technology to integrate into that experience, that's where frontier is.

Arun Shastri:                     Harit, thank you so much for taking your valuable time and sharing it with our audience. I think Marcus has been and continues to be just an amazing success. And as employee number one, you have lots to be proud of. And I think that at just some of your insights simple yet, very profound. And I think certainly Gopi and I benefited from it and I'm sure our audience will as well. So thank you very much for doing this.

Harit Talwar:                     Thank you very much Arun and Gopi, enjoyed talking to you and your organization ZS, one which I have a lot of personal fondness and regard for.

Arun Shastri:                     Thank you very much Harit.