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Figure 1: Profit-Before-Tax and Comparative CAGR Analysis of Capital One and Peers
Capital One — Profit-Before-Tax Growth, billion USD, 2005-2013 Comparative CAGR of Profit-Before-Tax (2005-2013)
Capital One vs Top 3 US Banks
$6.4bn
$5bn 10.78%
9.80%
$4.3bn $4.5bn
$3.8bn
$3.6bn
$2.8bn
Bank of
Citigroup America
$1.3bn JP Morgan Capital One
$582mn
-4.66% -5.05%
2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: Capital One, Citigroup, JP Morgan Annual Reports
2
Capital One’s “Information-Based Strategy”
Drives Mass Customization
As early as the ‘90s, Capital One was
Figure 2: Capital One’s Digital “Information-Based Strategy”
quick to identify that there was little
differentiation in the credit card industry,
with its CIO, Robert M. Alexander,
noting that “It was a one-size-fits-all
pricing approach9.” This belief led to
the creation of an “Information-Based Insourced IT
Strategy”. The strategy combined the
power of information, technology and
testing to bring customized solutions to
consumers and help deliver “the right
product to the right customer, at the Digital “Information
right time and at the right price.” As the Based Strategy”
CIO explains, “Essentially, what we were
doing in the ‘90s was leveraging the
power of data to custom-tailor products Big Data/ Digital
to our customers. We ran thousands Analytics Talent
of tests to learn about what customers
wanted10.”
3
could be accessed via a smartphone or These increased levels of collaboration organization that is able to deliver like
email. The coupons provided targeted also foster the real-time problem solving a technology company, and not like a
money-saving deals to card holders needed to rapidly innovate and deliver traditional bank17.” To equip itself with
based on their spending habits. new digital capabilities for customers. this talent, the bank acquired several
Such an approach has led to the banking technology start-ups while also
development of the bank’s customer- recruiting new associates directly from
Driving Partnership facing software for capitalone.com, college and graduate school. In 2012
between IT and Business with ongoing projects on smartphone it acquired Bankons, a mobile start-up
to Deliver Products with and tablet apps for an online portal for that creates geo-located offers. The
Increased Speed and commercial loan customers15. acquisition allowed the bank to offer tools
that reward users based on their geo-
Efficiency
location and their purchase history. The
Early on, Capital One realized that IT was Building a Digital Talent bank also acquired data aggregator firm
a key determinant of success in a digital Base to Drive In-House Bundle Corp. The acquisition helped the
world. Its CIO goes as far as to say, “For Development bank capitalize on Bundle’s proprietary
financial services, our product is IT, in a analytics technology powered by data
Its focus on analytics meant Capital
way. It’s an intangible product that we from more than 20 million Visa and
One needed to recruit analysts with
deliver through IT solutions14.” However, MasterCard branded cards18.
quantitative skills to assess complex
in delivering this intangible product, the
numbers and derive actionable insights.
company understood that traditional
While that skill set is scarce and difficult
approaches to software development
to find, securing it formed a key element
could be a hindrance. In 2011, to achieve
of the Capital One IBS strategy. As The bank beginning
greater business engagement – and
ensure their involvement with developers
early as 2006 the bank was seeking to in 2011 started to
hire three times as many analysts than
through the lifecycle of the project –
operations people16.
move 70% to 75%
the bank started to move 70% to 75%
of outsourced IT development work
of outsourced IT
in-house. Having the business team
Moving development capabilities in-
development work
house meant the bank needed to recruit
involved with the IT development team
more engineering talent equipped with in-house.
allowed the bank to monitor a product
mobile and software skills. As CIO Rob
along several metrics that include
Alexander said, “If digital is so central
quality, delivery time, cost and meeting
to our strategy, we really need an IT While acquisitions certainly helped
expectations on the first deployment.
Capital One gain access to digital
talent, that was not its only route to
Figure 3: Capital One’s Mobile App Offerings
talent acquisition. Capital One has
an 18-month Information Technology
Capital One’s Digital Service Offerings Development Program that gives new
associates the opportunity to work on
global-scale technology projects. The
exposure allows them to develop skills
needed to build new Internet, social
media and smartphone capabilities19.
4
Creating a Differentiated Customer
Experience Through Digital
Capital One’s digital leadership is not Creating Brand Awareness and digital channels and the bank is
just confined to operations. It has also really looking at how to use mobile
and Customer Engagement
successfully utilized various digital as an interactive piece23”. To achieve
platforms and technologies to transform
Through Social Media this, Capital One is making a foray into
the customer experience. Capital One is a strong proponent of mobile payments. It is testing new user
using social media and video to engage experiences in the payments space,
with its customers. For instance, in such as paying with rewards at the
Coordinating Online/Offline 2012, the company sponsored the US point of sale. It is participating in multiple
Offerings With Café Styled college football Capital One Bowl, with payments technology trials, such as
Branches the promotional hashtag trending on the NFC pilot and the QR code pilot
Twitter throughout the matchup. The programs. And it recently introduced a
Starting in 2014, Capital One is
initiative had around 120,000 people peer-to-peer payment service that allow
experimenting with a café format for
vote via Twitter in a contest to name the customers to exchange money with one
its bank branches, designed primarily
2012 college Mascot of the Year22. It also another using a bank-owned platform,
to drive services offered by their online
launched a humour-driven web video ClearXchange24.
bank - Capital One 360. Across the US,
series to drive awareness for its mobile
the bank has 9 café-styled branches that
banking offering. Capital One has come a long way in
provide high levels of customer intimacy
its digital journey. The company has
along with complimentary services21. As
set several fundamental benchmarks
well as providing access to financial and Focusing on the Mobile that its peers in the financial services
digital tools, bank staff offer personalized
Channel to Exploit Future industry are now compelled to meet.
advice on saving and investing strategies
while also providing detailed information
Opportunities And this journey has only just started,
as its CEO states, “I think there is a lot
on Capital One 360 products. Capital One has progressively extended
of work and a lot of challenging of our
the capabilities of its mobile applications.
own conventional wisdom to actually
Its app, for example, allows customers
truly now build a digital company25.” With
to make check deposits using their
its radical digital approach, Capital One
smartphones. The bank’s digital brand
is not just challenging its own wisdom,
manager has said, “Mobile is really
but that of the entire financial services
blurring the lines between traditional
industry.
The bank also holds regular meetings and competitions for young designers to encourage the creation of new products in less
than 24 hours. For example, in 2012, the bank held MoDevUX Hackathon, a competition for developers of mobile banking
applications.
There are three innovation labs, operating out of three tech hubs of New York, Washington D.C. and San Francisco. The labs
are intended to allow its team of developers to test new ideas without hampering other ongoing projects. In order to encourage
innovation across the wider enterprise, Capital One rotates developers through thelabs.
The labs use an integrated set-up with teams of three people consisting of a business analyst, an engineer and a designer.
This combination is designed to ensure that concepts become tangible and real in about two to three weeks. As CTO Monique
Shivanandan says, “We combine technology people, data analysts, marketing people, brand managers and product managers
in the labs to be sure we’re focused not just on cool technology but innovative products and services to delight the customer.”
5
References
1 American Banker, “On Capital One’s Drawing Board: Data Tools for Small Businesses”, February 2014
2 Sogeti, “Your Big Data Potential”, 2013
3 Capital One Annual Report, 2013
4 Capital One, “2014 Annual Stockholder Meeting”, May 2014
5 Bank Innovation, “Capital One CEO: ‘Digital Is Who We Are and How We Do Business’”, December 2013
6 Seeking Alpha transcript of Capital One Q4 2013 earnings call
7 Seeking Alpha transcript of Capital One Q4 2013 earnings call
8 Mobile Commerce Daily, “Capital One introduces pattern tracing to simplify mobile banking log-ins”, November 2013
9 UVA Today, “Capital One CIO Talks Big Data, Innovation Ahead of Tonight’s Information Session”, January 2014
10 UVA Today, “Capital One CIO Talks Big Data, Innovation Ahead of Tonight’s Information Session”, January 2014
11 Fast Company, “This is a Marketing Revolution”, April 1999
12 The Motley Fool, “Capital One Rolls With the Punches”, March 2005
13 Thomas H. Davenport and Jeanne G. Harris, “Competing on Analytics: The New Science of Winning”, 2007
14 Computerworld, “The Grill: Capital One’s CIO discusses business strategies for tough financial times”, November 2008
15 Information Week, “Capital One Digital Strategy Drives IT Overhaul”, March 2014
16 Harvard Business Review, “Competing on Analytics”, 2006
17 Information Week, “Capital One IT Overhaul Powers Digital Strategy”, April 2014
18 Forbes, “Capital One Buys Data Analytics Firm To Tap Spending Trends At Local Businesses”, June 2012
19 UVA Today, “Capital One CIO Talks Big Data, Innovation Ahead of Tonight’s Information Session”, January 2014
20 Thomas H. Davenport, Jeanne G. Harris, “Competing on Analytics: The New Science of Winning”, 2007 accessed through
Google Books
21 Company website, accessed in May 2014
22 Socialnomics, “5 Companies on Top of Social Media”, August 2013
23 Mobile Marketer, “Capital One exec: Mobile is interactive piece that bridges traditional, digital channels”, December 2012
24 The Paypers, “Capital One to enable peer-to-peer money transfers via e-mail, mobile devices”, March2014
25 Seeking Alpha transcript of Capital One CEO’s presentation at Goldman Sachs Financial Services Conference,
December 2013
6
Authors
Jerome Buvat Subrahmanyam KVJ Digital Transformation
Head of Digital Transformation Manager, Digital Transformation Research Institute
Research Institute Research Institute dtri.in@capgemini.com
jerome.buvat@capgemini.com subrahmanyam.kvj@capgemini.com
The authors would also like to acknowledge the contributions of Aparna Gajanan from the Digital Transformation Research Institute.
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