Staying ahead of a technological shift in your industry can be tough when you’re not a tech leader like Google or Apple. Should you marshal the internal resources necessary to do cutting-edge development on your own, or simply wait for one of the tech giants to make their move, join them as a partner — and risk letting them come between you and your customers?
That was the situation facing Canada’s largest bank, Royal Bank of Canada, three years ago. RBC didn’t see itself as a competitor to the tech companies as it became clear that consumers would soon expect to use their mobile phones to make payments, says Linda Mantia, executive vice president of Digital, Cards & Payments at the $26 billion financial services institution. In fact, Mantia says, the Toronto-based bank “wanted to be everyone’s best partner.” But it also wanted to move quickly to understand the technology, how it could be deployed, and how consumers would respond to it.
“RBC knew for years knew how massive a transformation mobile was going to be to payments, so we weren’t confused on how important it was to get it right,” Mantia explained in a recent interview with InnoLead. The bank, she says, “understands payments right to their core” and has always done R&D in the area.
“We are trying to use all these amazing new technologies that are being developed to drive solutions for problems that clients have always had. We’re just in a better position today than ever before to solve those problems.”
Project Origins
Here’s how RBC’s digital wallet project got the go-ahead back in the summer of 2012, a time when Canadians were just starting to use and love the super-convenient tap technology that allows them to make purchases under $50 by simply tapping a credit or debit card at the point of sale, no signature or PIN required.
Mantia recalls her first meeting with head developers Edison Ortiz and Terry Lee. “I was relatively new in the role and the team was taking me through it,” she says. As they explored the various technological approaches available to them, including one that required customers to insert a special secure SIM card into their phones, “I just asked the usual questions people would ask like ‘Why would a client use this? It feels like a lot of work.'”
“That’s where we started. We said the minimum condition is using your phone has to be at least as easy as tapping a credit card, and the SIM [proposal] wasn’t that. That’s why I said, ‘I don’t get it. We’re rushing to do something that’s worse than what we have today and we’re going to spend a whole bunch of money. It doesn’t make sense.'”
Mantia had been very involved in early e-commerce before becoming a banker in 2003. “One thing I feel pretty good about is that I can spot who understands technology well,” she says.
Storing account information on a SIM card struck her as less digital, as opposed to more digital. The developers told her they believed there was indeed a better way to do things — relying on the cloud and sending secure data wirelessly — but it had been dismissed earlier on. “As I listened to the team I said, ‘We have to give it a go, because this approach with the SIMs and the role of the telcos sounds fraught with risk. Let’s at least make sure and convince ourselves there isn’t a better way.”
The first step was a small one — giving the team two weeks to come up with a solid proposal. After four days, Mantia got a thumbs-up text saying they could do it.
Because it was a high-priority project with a tight deadline, executives waived some of the bank’s more pesky bureaucratic rules or “very very strong governance,” as Mantia puts it. “A lot of projects get mired down in that, but we said, ‘Look until this goes into production — until it even comes close to touching the RBC servers — what really matters?'” For Mantia, it was giving the project momentum.
Normal procedure would have involved writing the business requirements, having compliance and the control functions weigh in, and then a technology team build it, RBC decided they were just going to give the team a month to build. “Then we’ll bring all the right people in to ask the right questions and see that it’s moving in the right direction,” explains Mantia, “because they don’t need us to write business requirements and we don’t need a bunch of people to pre-approve the architecture. We’ll get it on the back end. So that was just an example of what was different.”
She continues, “We have to be incredibly tight on the importance of security, the importance of the privacy of client data and our brand. We right away said, ‘Thank you everyone else for your input. Right now these guys are going to just invent, and long before it hits our servers, everyone will have more than their opportunity to stress test it, to hack it, to ensure that we have the right quality of code.'”
Mantia also had the buy-in of David McKay — who took over as RBC’s CEO last year and was then head of Canadian operations. “He has a real passion for payments and a lot of experience in payments,” she says, adding that he saw the project as “a big deal and the beginning of something major and transformational.” For the actual building phase, it was decided that the mobile payments team should move to their own separate space, which they nicknamed the Shipyard. The significance? They were planning to build something big. “All the relevant business, technology and digital people were in the room,” says Mantia. “It was great because obviously they had a lot of energy. It was exciting, they were given a lot of autonomy to do something. It had all the guardrails around it. It was just a different way of putting those guardrails in.”
Launch and Reaction
The first ship sailed in March 2013, a few months later than planned, when McKay showed off the new digital wallet technology at a Toronto McDonald’s, buying some burgers and fries in what was the country’s first mobile-phone debit card transaction. Then, in January 2014, the bank officially launched its RBC Wallet for clients, offering both debit and credit transactions. (At this point, the system only works on Google Android phones and BlackBerry devices — not iPhones.) It will soon integrate loyalty cards, with more features planned for the future.
The RBC wallet has been hailed for its innovation and elegance in the business press. Earlier this year, the Globe and Mail’s highly respected Report on Business magazine published a major article on the RBC wallet, noting:
“The bank isn’t Apple or Google, or a Silicon Valley upstart, yet it built a product that is far more advanced and nimble than many of those introduced so far by U.S. tech leaders. It also managed to do this with a measly budget of $10 million and all within the confines of a stodgy Canadian bank. And yet more surprising, it was built by what tech snobs might consider a B team of developers.”
But consumer enthusiasm has been slower to build. In the comments section of the Report on Business article, readers asked some of the same questions Mantia and her team have been grappling with for years: Why would I want to pay with my phone instead of my card? What’s the value-add?
The answer is on the way, says Mantia, who notes that we are still in the early days of the payments revolution. The act of paying for something likely needs to be linked to a coupon or special offer that brings a shopper into a business, and a loyalty program that will try to bring them back — not to mention continuing to reduce the friction of pulling out a card to pay for things.
“Everything we did was to [make] all our inventions as flexible as possible, so when cars are able to pay for your gas themselves and pay the toll by themselves, we want to have the kind of infrastructure that could support that,” Mantia says. “That’s what we invested in.”
