High touch and high tech go hand-in-hand at Citi
Philip Watson, Citi Private Bank
Citi Private Bank’s innovation supremo Philip Watson has long believed in the ability of technology and data to transform private banking, but also that human interaction will remain vital
When he takes time off to relax during the topsy-turvy pandemic world of the early 2020s, Philip Watson, global chief innovation officer at Citi Private Bank, likes to head to a small town on the UK’s forgotten Sussex coast.
“I like to visit these backward-looking places, where nothing has changed much since the 1980s,” he reflects. “Just for a few hours of escapism, it’s interesting to recall what it’s like walking down a high street with lots of shops.”
In daily reality, however, Mr Watson feels happy with the breakneck pace of a fast digitalising world, which he has brought to the doors of Citi’s private banking unit, even if some of its tradition-loving inhabitants were kicking and screaming when they heard the word “transformation” in the towers of London’s Canary Wharf or New York’s Manhattan.
“I find change more comfortable than inertia and I find absence of change is quite concerning. You have to be strong minded in this job,” he says, smiling broadly during a Zoom call from his Kent residence. “If you are attempting to update traditional ways of working, you are not always the most popular guy in the office.”
The digitalisation concept came very naturally to Mr Watson, who left the University of Leeds at the end of the 1990s to return to London, having grown up on the capital city’s outskirts, helping out at his father’s computing firm.
“In 1999, I could quite safely claim that I was the only student in Leeds with a mobile phone,” he remembers fondly, recalling his university days studying an eclectic mix of French, economics and applied mathematics.
Early starter
There was certainly no ‘Eureka’ moment for Mr Watson, when he suddenly saw a digital future. Using computers since the age of six, innovation was very much in his blood.
“That was what I grew up with and that’s who I was,” he remembers. “I was always very analytical and enjoyed my maths. But more than anything, I enjoyed using computer power to identify trends and patterns, looking for anomalies in data.”
Enthralled by the energy of the City of London, he was lured “mouth wide open” to Citi in 1999, where he started work in the securitised options department, focusing on risk management, regulatory reporting and profit and loss accounts, which gave him a “nice 360 degree view of the banking business”.
But before long, he yearned to be closer to clients. “Around five years into my career, I increasingly wanted to understand how the money we were moving around affected people’s lives and livelihoods,” he says. “You might see an option being sold between Citi and Barclays but you could not understand the end purpose of it, whether it was for speculation or hedging,” with the institutional department always too far removed from the coal face.
An opening at the private bank provided the opportunity to change this. “One of the main attractions was continuing to apply the technical side of my brain, conducting asset allocation and risk management, to help ultra-high net individuals and family offices invest their assets,” he says. “At the private bank, I could spend a lot more time meeting these people, understanding the trials and tribulations in their lives and working out solutions for them.”
It was at this time in the mid 2000s, that Mr Watson began to understand the centrality of data to the transformation process, something that many banks are only starting to grasp 15 years later. “I realised that I was in this world with a huge amount of data, and information to be gleaned from the data, but a lot of the time everything was being done on a client-by-client or product-by-product basis.”
He was often in a situation where a senior manager would ask him about total client exposure to a major stock such as IBM and expect an immediate answer, despite the huge complexity of discovering such a figure.
“We would have to delve into each and every account and then remember their exposure, so it was a very human-driven process,” he says. “One of my early observations at Citi was that we could potentially pool all this data together digitally, rather than always extracting it through a primitive system, which would take other people many hours to do.”
This marked the beginning of Mr Watson’s big data platform, known as IDEA, which now receives “well over 100,000 hits every year” from a broad spectrum of bankers, including both the youngest recruits and veteran managing directors.
“We have now gone through a cycle where people appreciate efficiency and doing things faster, so we are looking at everything holistically, with every banker identifying what matters for them and their clients.”
Not the whole picture
But it is important to understand the limitations of algorithms and the data-led approach, he cautions. “You need to preserve an element of humility; you have to recognise data can only tell you so much, but it will never tell you everything,” he warns. “Even if you have perfect data, you might not draw the right conclusions with it.”
We are still, he believes, a good distance from the robo-advisory dream which many industry experts have long been predicting and this may be an undesirable outcome, explains Mr Watson.
“A business, entirely, prescriptively driven by data? I would be a little wary of that. I am not sure we have got to the point yet where minute-to-minute, second-to-second, we can flat pack human nature into a series of data points and re-assemble them into a coherent finding and recommendations.”
It is this humility that Citi-watchers find refreshing. “For many years, Phil has worked in the City, but he is not of the City,” says one consultant who has worked very closely with the US bank for several decades. “Phil is very different from your typical banker. Not only is he a constant source of ideas, but they are ideas which can fundamentally change the way the business works.”
Taking the rest of Citi’s bankers with him on the journey could be particularly challenging in a world where relationship managers typically resent any interference from a central power hub. This led him to do two things – firstly to hold a constant dialogue with bankers and secondly to embed innovation right across the organisation, rather than just concentrate it in small hubs.
“Above all else, you need to show people that your motivation is with the client, and package it in a way that can show them how it will improve their lives. You need to prove to relationship managers that you are not driven by the new technology or data set, but by the fact that it’s going to save them two hours in which they could be doing other things.”
The cultural change is key, he believes. “It is an extremely exciting time for our industry to be involved in the re-platforming of financial services companies,” he says. “It is the right thing to do for our customers and businesses. But you can’t run change in isolation from the rest of the organisation. The organisation is always more important than you are, so you need to decentralise this innovation.”
Looking forward
While Mr Watson is convinced that by carrying on making regular, small strides, a broader transformation will eventually be achieved, he does not believe private banking in the later 2020s will be totally unrecognisable from today, as predicted by some of his contemporaries.
“Banks need to go much further afield than just offering traditional services,” he says. “A relationship in the future will enable a client to self-direct to a much greater degree, as clients want flexibility and access. Advisers will be working in much more of a financial coaching role. Covid calls for more agile ways of working and for tools and capabilities which can be scaled up and used across the board, to develop a collective understanding of the needs of the client,” he says.
But any high-end bank looking to dispense with the personal touch would be on shaky ground. “There is no question that delivery of value-added services will be accelerated through digitalisation,” he says.
“But I am not of the view that you can entirely disconnect ultra-high net worth individuals and their families from our bankers and rely totally on digital capabilities to run the relationship – not for a second.”
