Clifford Cho has seen his share of businesses during his decade-plus years at Bank of America here in San Diego.

They range from huge corporations with hundreds of employees to the sole proprietor with an office down the street.

But Cho, senior vice president and market executive leading a team of commercial bankers, says one of the more interesting types of business he’s encountered, surprisingly, are home-based retail operations run by a few people out of their spare bedrooms.

They can generate millions of dollars in sales but have few employees. Such companies rarely touch the products they sell.

Every step in the business process is handled by subcontractors, from the manufacturer at the factory overseas to the distributor in the U.S. who handles shipments to the customer.

Such web-based operations would have been unthinkable without the digital technologies that have been installed by the bank and its many competitors in recent years, says Cho.

And that’s the point.

Banks have had to invest heavily in new technologies to meet the demands of today’s business banking customer, especially the millennial generation (those born between 1981 and 1996) now entering the workforce.

Customer Preferences Drive Tech

Bank of America, for example, last year invested more than $16 billion in new technologies, according to financial industry services provider Celent.

That represents a tiny fraction of the bank’s $2.38 trillion in assets.

Other banks from the largest to the smallest like community business focused CalPrivate Bank in La Jolla and C3bank in Encinitas, have made investments.

They also include regional banks like Union Bank (see related story), which have their main offices elsewhere but a sizeable presence in San Diego.

Tom Wornham, chief executive officer at CalPrivate Bank, says the arrival of the millennial generation has driven many of the changes underway at his bank, which includes multiple new investments in technology.

This is the generation that’s grown up with technology, especially the smartphone, and they want to access the latest in products and services from their mobile devices.

“Millennials have been much maligned, but they are a huge demographic in today’s workplace,” said Wornham.

“I would liken them to Great Depression-era kids who saw members of their family and other families lose houses and jobs in the financial turmoil.” said Wornham. “The same thing happened during the recent Great Recession. Millennials have been slow to buy into the idea that they would have only one job, one employer. But they’re starting to settle down, become first time homebuyers, which is great. And they’re very entrepreneurial.”

He said the bank has invested heavily in technology to enable online banking, especially with mobile banking apps. He declined to say how much the bank has invested over the years for competitive reasons.

“We made a significant investment for a bank of our size to make sure that customers could access any way they want,” he said.

Mobile Banking Leaves Online Behind

Wells Fargo, fourth largest bank in the country with $2 trillion in assets, doesn’t disclose how much it’s spent or spending on technology. But a Forbes magazine article published last year on technology spending says the bank spent $9 billion in 2018, a small fraction of its overall size.

However, Brian Lee, San Diego regional bank president for Wells Fargo, says the use of technology has become important to the bank, given that three-quarters of its customers do most of their banking from mobile devices connected to the bank’s products and services.

“We now have more mobile active customers — 23.7 million — than online active customers, and we continue to invest in our mobile capabilities, including the ability to open accounts through mobile,” said Lee.

He said one relatively recent digital product has been very popular with customers since its launch a year ago.

“Control Tower is a great example of a new digital experience that reinforces our strategy of providing customers a seamless and comprehensive mobile payments experience in our increasingly cluttered digital world,” he said.

Lee said since the launch of the service, which gives customers a view of their Wells Fargo digital financial footprint from a single screen, “millions” of bank customers have interacted with the bank.

The product also gives customers the ability to review what recurring payments they had set up. The bank touts the fact that users going to the site can review such things as subscription services for music and monthly memberships, and then, if any are no longer needed, go to those merchants to close accounts they are not using.

“This has proven to be very popular,” said Lee. “More than 80 percent of customers who come to Control Tower use the recurring payments list.”

From Del Mar to Downtown

To be sure, other bankers in the region say it takes more than technology to do business with today’s savvy customers on the commercial and consumer side.

A. J. Moyer, CEO of C3bank in Encinitas, says being successful still requires a personal touch.

“We believe that technology is a big component of our success,” says Moyer, “but it’s mainly for convenience and accessibility. What hasn’t changed over time is the personal touch.”

“Relationships are still very important,” he added. “But we don’t see relationships as solely transactional. We use the insights gained from the many transactions we see each day to help our customers develop their businesses.”

He recently invited more than 40 customers and potential customers to a dinner at Del Mar during horse racing season. The dinner gave participants, mostly CEOs and business owners, a chance to network, and get more familiar with the bank’s offerings and experience in dealing with entrepreneurs.

Steven Sefton, president of Endeavor Bank in San Diego, says despite new technology the institution has really changed its strategy to meet the demands of today’s sophisticated customer.

The bank’s offices are located on the 31st floor of Symphony Towers, and thus are not that easy to reach, given the location and lack of parking.

“Our clients don’t come into the bank, so how do they bank with us? They bank with us through technology,” Sefton said. “We used to use couriers to pick up deposits, but now we use online bank and remote deposit capture. And the rest of that is enhancing that online experience continually.”

‘Reapportioning the Money to Technology’

Like Endeavor Bank, San Diego-based Home Bank of California has a single office, which is located in the sprawling Kearney Mesa neighborhood. The bank has $176 million in assets.

Christopher Lycett, vice president of business banking development, said the business community might not expect “high technology from a small community bank like ours but we’re doing a lot to change that image.”

Like most other banks, he said Home Bank offers a mobile app that allows clients to do such functions as look at their bank balances, and transfer money between accounts, or make deposits. He said the bank also updated its website so that clients can do more without coming into the bank.

But Lycett noted that Home Bank, which has been focused on investment property financing, completed an expansion into general community business banking services in July.

That should change perceptions of the bank.

Indeed, Lycett said the bank spent “thousands of dollars” making sure that the bank’s technology is up to date, especially mobile banking services.

“It’s still cheaper than building a new brick and mortar location,” said Lycett. “We don’t have to spend money on long-term leases as well as tenant improvements and build-out of offices,” he added.

“So rather than adding branches, Home Bank is reapportioning the money to technology,” he added.

The bank is also beefing up financial education information at the website as part of its expansion, he added.

On the commercial side, Lycett said the bank is “looking into” streamlining loan application processes by purchasing the technology to do. The service can then help the bankers make lending decisions based on data contained within the application.

“The system can take all of the uploaded information, such as personal financial statements, and come up with an underwriting score based on a spread of those financials,” said Lycett.

He said this capability would enable the bank to process more applications than in the past, and increase its loan portfolio at a more rapid pace.

Tech Collaborators? No, Competitors

BofA’s Clifford Cho points out that today’s banks just don’t compete with other banks, but with a growing list of businesses that want to get into banking services.

They are what he calls “nontraditional banks.”

“We’re seeing a lot of technology companies wanting to get into the banking space,” he said.

“On the other hand, we have a lot of banks that are essentially tech companies, For example, now they can make loan decisions based on an application submitted via a smartphone. Five years ago that was unheard of. But now it’s commonplace. More than 60 percent of our auto loan applications are submitted over a smartphone.”

Editor’s Note: This article has been edited to more accurately reflect the capabilities of one bank’s online technology.