Cloud is crucial to compete with fintech: Barclaycard U.S.'s new CIO

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If Silicon Valley is coming for banks, Barclaycard has made a shrewd move: It plucked its newest chief information officer for U.S. operations straight from Palo Alto, Calif.

On Tuesday, the U.S. card unit for the U.K. bank Barclays announced Shelton Shugar as the new CIO. He has been on the job for two and a half months and was previously at Hewlett Packard Enterprise. He’s also worked at CA Technologies, Yahoo, eBay, Homestore and Verisign.

He is now based in the company’s headquarters in Wilmington, Del., and reports to Barclaycard CIO Roy Aston in the U.K.

I spoke with Shugar just before the announcement about how he plans to navigate the crowded U.S. payment space and compete with fintechs; his cloud computing strategy for the company; and how he looks at new technologies like voice recognition and chatbots.

The following is an edited transcript of that conversation.

Card issuers in the U.S. are being disintermediated by competition in mobile payments — Venmo, Apple Pay, Google Pay, Samsung Pay, Starbucks, Amazon, you name it — where there’s still a card being used, but it’s deep in the background. On another front, online lenders offer an alternative to credit cards and a way of consolidating credit card debit. How do you look at competing and surviving in this market?

SHELTON SHUGAR: Competing with the new technology focus and the fintech environment definitely presents a challenge and I think we’re up for it. We’re building new card platforms that will enable us to be right in there with the technology. I think that’s one of the reasons Barclays reached outside the financial market to recruit someone like me who came from the high-tech environment of Silicon Valley and the large-scale internet and cloud space. I’ve developed very large-scale, distributed systems, big data systems that work with hundreds of petabytes of data. All those are relevant here.

Yesterday on the "Breaking Banks" radio show we talked to Anne Boden, the CEO of the “challenger bank” Starling Bank. They operate mostly on the cloud and she feels this gives them a big advantage in cost and efficiency. We talked about how banks and card issuers are often laden with legacy technology whereas fintechs can more quickly go to a cloud. Do you think that does give them an advantage? Does Barclaycard also use cloud technology?

Our strategy is to use the cloud. We’re running our new card platforms on a private cloud internally that’s based on OpenStack, and we’re moving toward public cloud. We’re working through all the security and regulatory issues. That’s in progress. The systems we’re building are cloud-ready, so they’ll be able to scale up and down with ease. I do think that’s an advantage; it lets you focus on tech that’s more closely associated with your business, rather than the infrastructure. I think the biggest advantage is agility, the ability to scale up quickly for a new initiative or a high volume of activity.

So you could quickly launch a new card or feature and ramp up fast?

Right. If I’m out of capacity, I don’t have to put a purchase order together and buy some hardware and have it delivered and installed. I can just automatically provision.

How do you decide which apps to put on the cloud, which not?

Like any large company that’s been around a while, all our newer apps are cloud-ready. And some existing apps we’ve also made work. We’re figuring out where that line needs to be drawn to make all the regulators happy.

How can a Delaware-based company compete with Silicon Valley giants for tech talent?

There are really good people here. They understand the industry real well, they’re tech savvy, they’re able to produce good products. I’ve been in a number of Silicon Valley companies — eBay, Yahoo. If it turned out that I wanted to pull in some additional help, I know a lot of folks in the Bay Area I might be able to lean on.

Are there some good tech schools nearby?

Sure, there are some great schools in the Philadelphia area and there’s Carnegie Mellon University in Pittsburgh.

A lot of people in the industry are thinking about how to provide voice payments over, say, Amazon Alexa or Google Home. What do you think about that?

We’re actively pursuing that. We’ve got some things working right now.

How about chatbots and virtual assistants? Are you experimenting with using them with voice recognition or automated text messages?

We’re pursuing all those. We view it as, the new platforms we’re building have a common set of features in the back end, fronted by APIs, and we’re making them available to multiple channels, including web, mobile and voice.

Barclaycard in the U.K. has been pretty pioneering in the use of devices like wristbands and stickers for contactless payments. Is that something you will bring here?

We hope to benefit from the work that’s being done in the U.K.

In the U.S. there aren’t that many banks that have built their own mobile wallets the way Barclaycard has. Most just work with the Pays — Apple, Google, Android and such. Do you see Barclaycard’s mobile wallet being important in the U.S.? Is there a strategy for deploying it here?

At this point, we’re spending more energy on partnering with companies like American Airlines and L.L.Bean.

Do you worry about reaching millennials, who have an aversion to credit but use debit?
Doesn’t everyone? I don’t think our challenge there is any different than anyone else’s. Who knows what will happen to those folks when they grow up.

Realities of life will hit them.

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Mobile payments Mobile wallets Credit cards Barclays