How lattes and AI fit together at Capital One

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Capital One’s internet cafes and its embrace of artificial intelligence are well chronicled. This week a top executive shed more light on the vision behind those investments.

Speaking at the Morgan Stanley Financials Conference on Wednesday, Richard Scott Blackley, Capital One’s chief financial officer, said the bank’s technology investments — particularly in areas such as machine learning and AI — are setting the company up for outsize revenue growth and better credit quality than its peers.

At the same time, the more than two dozen cafes that the $366 billion-asset company now operates in markets where it otherwise has no branch presence reflect a belief, Blackley said, that while the future of banking may be branchless, it must still include a physical presence.

“The final place of where technology is going to settle out is probably beyond what our current comprehension is,” he told the audience. “What we'll see over the coming five to 10 years is really going to change the landscape of banking, and I think we've been investing to make sure that we can be competitive in that space.”

In deploying technology, the bank has been building tools on top of each other, in a way that amplifies their impact, he said.

“There is a cumulative effect these investments are having,” Blackley said. “We are getting more efficient based on the learning we’ve had, the skills we’ve built and the tools we have inside the company.”

The strategy, he explained, is to focus on technology that allows the bank to be more nimble, have access to real-time data and take advantage of machine learning and AI to achieve business objectives such as revenue growth.

The launch of Capital One’s cafes are steeped in the same nimble strategy, functioning as customer service centers without the vaults, money or regulatory approval that bank branches have. The bank plans to open cafes in markets where it already has branches, including Washington.

“Customers are increasingly going to be looking at what are the digital capabilities that you have and the services that they're able to do themselves,” Blackley said. “But they're still going to have some desire to have a physical presence available to them. So our cafes allow us to both promote our brand and to have customers be able to interface with us on a personal basis.”

Capital One plants the stores in “iconic locations” in cities like Austin, Boston and Denver, and locals use them as a local coffee shop as much as customers use the cafes for customer service, he said.

“It’s a community center,” he said. “There is Wi-Fi available, we see people coming in to sit down, have coffee and have a dialogue. It’s a strong brand positioning, but it’s also one where we’re seeing customers are comfortable to come in and talk to someone if they have a problem.”

It’s understandable that Capital One would want these cafes in highly visible locations in popular urban tech centers, but it’s still unknown what these new casual storefronts will do for getting actual new accounts opened, said Sam Kilmer, senior director with Cornerstone Advisors.

“Beyond branding and the coffee-fueled customer service center, one area I’d want to ask more about — or test and learn — is this new cafe approach’s ability to generate actual new business, as in, lead generation,” he said.

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