Bank CEOs’ Congressional Testimonies Spotlight Digital Strategies, Inclusion

The hearing is titled: “Holding Megabanks Accountable: Oversight of America’s Largest Consumer Facing Banks.”

And the appearance of and testimony by executives from the seven largest banks in the country on Wednesday (Sept. 21) before the U.S. House Committee on Financial Services will touch on all manner of subjects, including capital reserve ratios, mortgage lending and financial inclusion.

But the very title of the hearing seems to indicate at least some defensive positioning on the part of the executives.

They will likely field pointed questions about lending activities and whether various underserved communities have adequate access to brick-and-mortar bank branches. The committee laid out those concerns in no uncertain terms in its own memo on the hearing. But along with discussion about Paycheck Protection Program loan extensions, reserve ratios and capital cushions, expect to get a broad overview of where America’s biggest banks see the Connected Economy heading — and their role in advancing the technologies making it possible.

The committee summed up the ongoing seismic shift neatly: “Financial technology continues to transform the financial system, particularly with the growth of digital banking, the rise of digital assets including cryptocurrencies, and the increasing use of artificial intelligence (AI) including machine learning (ML), to aid customer relations, fraud detection, and underwriting.”

The Testimonies

Digging a bit into the testimonies of the executives themselves, which were released in advance of the hearing, we find a wide-ranging discussion on technology, and specifically how digital initiatives can foster financial inclusion, convenience and security for banks’ customers. And, not surprisingly, investment by the banks in advanced technologies is running into the billions of dollars.

The investments come at a time when, as JPMorgan Chase CEO Jamie Dimon said, per his own testimony, “The U.S. economy today is a classic tale of two cities. There are headwinds and tailwinds.” Consumer spending is strong and resilient, he noted, and charge-off rates are low, but “many Americans are being crushed by high inflation eroding real incomes, particularly from higher prices on gas and food.”

Macro challenges aside, tech modernization continues across each of the banks appearing before the Committee, and the digital shift is in evidence in the numbers.

“Our customers,” Dimon contended, “value our digital servicing options. Every day, we have about 20 million active users, logging in an average of two times a day. Our digital assistant is capable of handling 77% of tasks and has about 1.2 million engaged customers each month.”

Truist CEO William H. Rogers detailed in his submission that “clients increasingly prefer to conduct commerce digitally.” As of the second quarter of 2022, there were 4.3 million users of the Truist mobile banking application, a 13% increase from 2020. Digital transactions represented 44% of all transactions year-to-date across digital, ATM, branch, and contact center channels.

U.S. Bancorp CEO Andy Cecere detailed in his testimony that “we seek to meet customers where they are.” And he noted that last quarter, 82 percent of consumer transactions were enabled by U.S. digital capabilities, with 64 percent of loan sales executed digitally.

Similarly, Wells Fargo CEO Charles Scharf pointed to the inexorable trend of consumers increasingly shifting their banking transactions to digital ways and means, where a recent tally of 27.3 million mobile active users, was up 5% percent from 2020.

Bank of America CEO Brian Moynihan’s testimony detailed a $3.5 billion investment plan, for this year alone, to “enhance our platform, fund next-gen projects, and extend our digital leadership into the future.” The company has seen 2.8 billion logins by more than 54 million verified digital users in the last quarter alone. In July the bank saw more than 1 billion user log-ins, our largest single month in history. With a nod to AI, which drives Erica, the bank’s virtual assistant, total interactions have been increasing in triple-digit percentages, as measured in year-over-year growth. And Zelle, of course, has been growing by double-digit percentages.

Citi CEO Jane Frazer made mention of the fact that “with the proliferation of new technologies, the use of mobile and cloud and managed services to conduct financial transactions, a changing geopolitical landscape and the increasing sophistication of threat actors, Citi and other financial institutions have been and will continue to be subject to cyber incidents.” To that end, she emphasized the importance of the bank’s participation in industry, government and cross-sector knowledge sharing groups to enhance cyber-resilience.