Scott Marcar<\/p>\n
I’ve got the best job at the bank.\u00a0<\/p>\n
An enthusiastic statement from Scott Marcar, CIO at NatWest Group. With more than 500 branches serving over 20 million customers, NatWest is one of the largest banking groups in the UK and one that has become increasingly digitally-dependent in its operating model. Marcar says it is, \u00a0in practice, a technology business:\u00a0<\/p>\n
If you think about the retail bank for NatWest today, 97% of everything the bank does with those customers is digital, with the mobile app, through the web, through CoRa, which is our chat channel. Even when you go through our Wealth business, or you go into our Commercial Institutional business, which is dealing with governments and large corporates, 80% of everything we do with those companies as well is digital first.\u00a0 So, NatWest is fundamentally a technology business.<\/p>\n
That\u2019s reflected in the workforce demographics, he notes:\u00a0<\/p>\n
Roughly a third is technology, almost 20,000 people actually building and running the technology for the bank, everything from customer-facing channels all the way through to cybersecurity infrastructure architectures.<\/p>\n
AI, of course<\/p>\n
This is an amazing time to be in technology, reckons Marcar:\u00a0<\/p>\n
I’ve been doing banking technology for well over 30 years, and been through a number of technology revolutions in that time, from the advent of the PC, to the internet, to mobile apps, to cloud, and now we’re sitting in this kind of almost utopian situation of AI coming in.<\/p>\n
On that last point, Marcar is conscious of the speed of change that AI drives, recalling that two years ago the tech didn\u2019t feature on the agenda when talking to the board about strategic direction:\u00a0<\/p>\n
That’s a massive reflection that, in the last two years, this has just grown so fast, and is having a fundamental impact on strategy of the bank, the strategy of our department, etc.\u00a0<\/p>\n
It all comes back to the customer, he states:\u00a0<\/p>\n
When we think about what is the future of banking, Customer Experience is absolutely the heart of everything that the bank cares about. We are well aware that every customer, has multiple choices. They often have many bank accounts with many different companies. Unless you have an amazing experience, customers are going to go somewhere else. What we’re seeing more and more as experiences evolve. We’ve digitized the world over the last 20 years, but now that experience is shifting very, very quickly to an AI-led experience, so for the bank, it’s absolutely important that we are at the forefront of that, that we are part of that ecosystem, and that we’re driving that direction.\u00a0<\/p>\n
AI is already having an impact in various places around the bank. Today at NatWest, over 40% of all code is either AI-generated or AI-assisted, says Marcar, which means:\u00a0<\/p>\n
We can go faster, we can produce more products, we can produce more features, we can get those into the hands of customers, delight our customers, as quickly as we possibly can.\u00a0<\/p>\n
It\u2019s also having a profound effect on empowering customer-facing employees, he adds:\u00a0<\/p>\n
If you’re a relationship manager, if you’re a branch manager, or you’re sitting as a teller in the branch, whatever that role is, you’ve got better customer insight, you’ve got better information at your fingertips. You don’t have to fill in loads of forms and go through lots of governance processes because actually AI can do that for you. You can have a much more engaging relationship with your customers, and that is really important.\u00a0<\/p>\n
The process automation aspect is something that banking has been in need of for a long time, he suggests:\u00a0<\/p>\n
Whilst all banks around the world today have done an amazing job of digitizing for customers, actually when you look inside the banks, they’re still pretty analog. We\u2019ve still got a lot of people, we’ve got a lot of processes, and there’s a real opportunity to streamline that. There’s an efficiency advantage, there’s a cost advantage, but really it’s about how do we free up our people so that they can have more of their time to actually serve our customers, rather than having to deal with their own internal manual process. So, there’s a lot of effort going into how we adopt AI, how we embed it in our ecosystem, so ultimately we can make ourselves better, we can make ourselves more efficient, and then we can serve customers much better.<\/p>\n
Risks<\/p>\n
All good news then? There are some risks to address, concedes Marcar:\u00a0<\/p>\n
One of the interesting things about digitization over the last 20 or so years in banking is, 20 years ago you’d think [by now] every bank in the world would be smaller, every process would be fully-automated, and yet every bank in the world is bigger. You have to question what has really changed in that period? What has really changed is you’ve seen whole new ecosystems come up. Fraud is now the number one crime in the UK, so fraud departments of banks, cybersecurity departments of banks, economic crime departments of banks, are tenfold bigger than they were 20 years ago. Things have changed.\u00a0<\/p>\n
AI also comes with a huge sustainability challenge for the world, he adds:\u00a0<\/p>\n
Obviously we’re seeing incredible investment go into data centers around the world. The capital committed over last year alone was over a trillion dollars into essentially AI-driven data centers, again largely in largely into US companies. That’s becoming a real threat around the world, so you’ve seen the balance [shift to]. how do we make sure we move forward, but we move forward in a way that actually has sustainability embedded?\u00a0<\/p>\n
And then there are the AI models themselves:\u00a0<\/p>\n
The frontier models that everyone uses, ChatGPT, Gemini, Claude, these models are incredibly, incredibly powerful, but they’re incredibly large. Huge, in fact – a trillion parameters. That becomes expensive to run, energy inefficient, huge trading costs, huge inference costs.\u00a0<\/p>\n
For its part, NatWest is trying to tackle this problem head-on as Marcar explains:\u00a0<\/p>\n
We are investing in writing our own models, writing Small Language Models. We\u2019ve hired a team out of Meta to come to NatWest to do AI research, but essentially they’re building us a set of proprietary models built on open source, so taking things like Llama or or Gemma from Google, and then building our own models on top of it. The goal there is that we can customize it to be very specific, to solve specific problems, and we can run much smaller models – 7 million parameters, not 1 trillion parameters, models that can actually run on your device directly.\u00a0<\/p>\n
That in turn feeds back to the Customer Experience, he says:\u00a0<\/p>\n
You’ve got things running locally on your phone that can be super-quick, super-efficient.<\/p>\n
This also offers efficiency benefits and avoids an increasingly common issue for AI adopters – out-of-control tokenomics<\/a>. Marcar confirms:\u00a0<\/p>\n The token costs that you can get into running the GPTs of the world unconstrained can be huge. We’ve already seen the headlines about companies spending billions on tokens. Fortunately we haven’t yet, we’ve managed that very tightly.<\/p>\n Investing in innovation\u00a0<\/p>\n NatWest is also a major backer of UK innovation. A second hat that Marcar wears is as Chair of the bank\u2019s London\/Southeast Regional Board, the part of the organization that gets involved in local community activities. He also runs the Open Innovation team at the bank, which invests in start-ups. He argues that the bank has a role in enabling the UK prosper and to foster an innovation ecosystems:<\/p>\n We’re a big consumer of technology, we’re a big consumer of third party solutions from around the world. But when you think about it, let’s be honest, the majority of those third party technology solutions that we consume are built and developed in the US, and that is a problem for our economy, it’s a problem for the country, and it\u2019s something that we feel very passionate about. We have a role to play, along with government, along with private investors, along with the innovation ecosystem, to really try and to change some of that. We’ve got a big role to play to foster that ecosystem, to work with the community, encourage investment, and\u00a0just to try and make that real.\u00a0<\/p>\n