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- Hello, my name's Jeff York.
I'm the CFO for Microsoft's Business Applications Division,
and I'm here with Sarah Strauss from Capital One.
Sarah, welcome.
- Thank you, Jeff, happy to be here.
Thanks for having me.
- Yeah.
Why don't we start by talking about
the forces that are driving transformation,
and as we all know, life and work has changed
a great deal in the recent months,
almost overnight in the way that we do business.
Tell us what that's been like for you at Capital One.
What are some of the challenges
that you guys have been facing?
- Yeah, great question.
So, you know, at Capital One,
we are always looking for ways
to better serve and protect our customers,
and thinking about fraud is a huge piece of that,
and in the current environment,
even more important than usual.
I think there's a number of factors
that have been incredibly important
as things have been changing.
You know, I think first and foremost, you know,
there's a need right now to really think,
both for consumers, for merchants,
for financial institutions, you know,
about potential identity theft, right,
and what's going on out there.
The Department of Homeland Security has even talked about
in the current environment, you know,
coronavirus-related scams are on the rise, right?
And so, it's a big part of what we think about,
of how to protect our customers and consumers more broadly,
and help them protect their personal information.
You know, I think the second thing that's been
really important is as people are staying home more,
we've seen a shift in spend into more, you know,
card-not-present e-commerce type of spending.
That shift has been going on for a long time,
but even more massive in the current environment,
and card-not-present is, you know,
tends to have higher rates of fraud
than card-present transactions.
And so it's been really important for us
to keep an eye on that and ensure that, you know,
we're protecting our customers
and delivering great experiences
when they're trying to spend.
And then I think thirdly, you know,
just kind of continuing to encourage our customers
to engage digitally and providing them with, you know,
state-of-the-art digital capabilities.
So, you know, at Capital One,
we have our AI digital assistant, Eno,
which will send our customers alerts
if a transaction looks suspicious,
or if we see something on their account
that we want them to take a look at.
And so, encouraging our customers to interact
in that digital fashion has been important for us as well.
- And can you say more about the role of technology?
You talked about digital, of course,
and can you talk about how Capital One
and, or the industry is embracing
and bringing technology into this transformation?
- Yup, I mean, you know, technology is really
at the core of what we do, particularly in the fraud space,
because if you think about the fraud environment,
being able to get access to information quickly, right,
being able to react, get that information to our customers,
to empower them to act is incredibly important.
So from a technology perspective at Capital One,
what we've been able to do is build our own
cloud-based authorization engine
that allows us to ingest, you know,
more data than we were able to previously
to help our customers kind of at the point of sale
when they're making a transaction
to one, protect them from fraud, right,
if the transaction is risky and ensure it doesn't happen,
but just as important is ensure that if it is them,
is if it is the customer on the other side
of the transaction that we're approving them,
that they're able to get on with their spending
and get on with their day.
I'm sure you, as a consumer, well know, right,
there's nothing more frustrating
than trying to make a purchase and having, you know,
that purchase declined or not understanding
why it's unable to go through.
And so, our objective is really how do we use technology
to ensure that we're delivering
great experiences to our customers,
but also protecting them in situations where
their information may have been compromised.
- Got it, interesting.
And then how does that in turn change the business practice
for the merchants and the end customers?
- Well, you know, I think the opportunity
to leverage even more kind of data
at the point of sale when the customer is making
a transaction is really, you know,
one of these rare opportunities where you can have
a win-win-win scenario, right?
So if you're the customer, you are,
you have additional kind of capability
to be protected from potential fraud.
And you're going to be able, if it is you on the other side
of that, more likely to avoid
kind of that false-positive decline,
or that opportunity, or not the opportunity,
but when you actually get declined as a customer.
If you're a merchant, right, this is equally frustrating.
If you're about to make a sale to a customer
and you feel really strongly
that that's a low-risk transaction
and then the bank on the other side declines the transaction
and you potentially lose that sale,
or on the other hand, right, if it's fraudulent,
and the bank were to approve it.
And so, the merchant also has the opportunity
to get additional spend and additional fraud protection,
and then for Capital One as well, you know,
we want to approve our customers when it's actually them,
right, and ensure that they're having a great experience.
And so, we believe that by leveraging technology
and being able to engage with both merchants
and consumers in a different way really benefits
the overall ecosystem incredibly well.
- What were some of the biggest challenges
that you encountered as you went through this change?
- Well, you know, I think the biggest,
the biggest challenge, and then equally,
the biggest opportunity, that we've seen is,
you know, during a transaction, you know,
the merchant who's on one side of the transaction,
they have a tremendous amount of information
about their customer, right?
And the relative riskiness of that transaction,
and on the Capital One side, or on the issuer side,
we have a bunch of data and information as well
that helps us understand
if the transaction's going to be risky,
and historically that, we haven't been able to use
that information in a collective way
to make a better decision, right,
and be able to kind of drive a better result
to the customer.
And so, one of the biggest challenges
and why we weren't able to do that previously
is the underlying, you know,
sort of mainframe-based architecture
that authorizations engines were built on
didn't really allow for the speed of that data
to kind of go across merchant and issuer rails.
And so, you know, I think one of the greatest challenges
we had is how do we build a system
that enables that to happen?
And then how do we, once we have that,
how do we ensure that the data
that we're leveraging is consistent,
and ensuring we're protecting the privacy of our customers,
while being able to deliver a better result on both sides?
And so I think we've done, you know,
a number of things to sort of work through those challenges,
and now we're at the point where, you know,
we can create that opportunity and be able to deliver
great results for our customers, and for merchants.
- You know, we're very honored to be working
with Capital One in the partnership.
Can you tell us a little bit more about the partnership
and what it does and everything that goes on there?
- Yup, so we're also really excited
about our partnership with Microsoft,
and it's been great to work with you guys on this.
So, like I said, I think one of the things that, you know,
we're working really closely with Microsoft on,
and the product that you guys have,
is how do we enable that data exchange
between merchants with the information that they have
on their customers and getting that, you know,
over to Capital One, so that we can leverage that
to make better decisions on the authorization?
And so, I think what's been really cool
is the way that we've built this, right,
is it's a way to kind of, for merchants to connect
to a relatively sort of simple API,
be able to kind of share data, you know,
with the right elements of consumer privacy,
and ensuring that we're doing the right thing there,
and being able to kind of get that information
over to Capital One before the kind of authorization
comes through the Visa, MasterCard network,
and then we're able to sync that up
and deliver a much better decision to the merchant,
and to the customer on whether or not
to approve or decline the transaction.
And we think there's tremendous power in this capability,
both to reduce those false positive declines
that I was talking about earlier
to ensure that we're not declining good transactions,
and ensuring the customer is able to complete the purchase,
but we're also seeing, you know, increased,
oh, an increased ability for us to capture
the true fraud, right,
which then reduces strain on the ecosystem of, you know,
merchants, you know, kind of getting,
you know, us having to take a fraud claim at Capitol One,
merchants getting the charge back
and having to process that.
And so, I think there's, it's an opportunity
to just create tremendous value in this,
in this data sharing environment.
- As we draw this conversation towards a close, Sarah,
is there any advice or tips that you could share for others
in the industry as they're about to go
through a similar change like Capital One has?
- Yeah, you know, I think a couple of tips
that I'd share share across the industry,
one is, you know, particularly in the fraud space,
just the need to always be innovating and optimizing
for the best tools to detect fraud as it occurs.
You know, fraud is a moving target.
Unfortunately, you know, we have bad actors
on the other side who are responding
to the kind of cool new technology
and defenses we put in place.
And so, you always need to be sort of innovating
and thinking ahead around how can we, you know,
have more data, interact better
with our customers, to be able to prevent
fraud from happening in the first place,
and innovation is just a really critical piece of that.
And then too, you know, how do we collectively
engage customers in the process of fighting fraud?
And I talked a little bit about some of the digital tools
we use a Capital One to be able to do that,
but I think it's really important,
'cause customers are sort of on the front lines, right?
And so, how do you engage and enable them
to sort of fight fraud with you,
and be able to say, "Hey, that transaction was me,
"it wasn't me," and if you can do that in real time,
I find that customers can be an incredible ally
in this fight to protect their information
and protect against fraud.
- Well, Sarah, earlier in the discussion,
you mentioned the word first step,
and I think it's a key word for us as well,
and we're super excited to take this first step with you
and the partnership between Capital One and Microsoft
is very exciting, and I think has a lot of opportunity,
and I think you could say, you know,
we're in the first few steps
of Dynamics 365 Fraud Protection
with many more to come and lots more innovation,
and I'm sure on your side as well.
And so, we look forward to taking those future steps
with you and thank you for your time today
and the partnership so far.
Thank you.
- Well, thank you guys as well.
We look forward to working together.
- You bet, thank you.
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