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Doug Brown Discusses Digital Banking with Business Insider Intelligence

Business Insider Intelligence Q&A:

NCR's SVP of digital banking on what its pivot to software and services means for customers as the pandemic accelerates cross-channel integration

Tyler Brown | October 02, 2020

NCR is pivoting its business model as the pandemic accelerates cross-channel integration. NCR ( National Cash Register from the late 1800s 1974) is well known for its point-of-sale systems and ATMs, and its business model relies heavily on hardware products and the software and services that support them. In the last several years, however, NCR has focus to its more profitable software, maintenance, and professional services businesses鈥攁nd reduced its exposure to revenue volatility related to hardware sales. With this strategic turn, NCR that ATM manufacturers and network operators are now less relevant competitors than technology vendors FIS, Fiserv, and Temenos鈥攁 from the years prior to 2018.

The company's goal with digital transformation in retail banking has been to become what Doug Brown, senior vice president and general manager of digital banking at NCR, calls the "operating system of the bank." The company's presence within the physical footprint of FIs across the country positions it well to bridge physical and digital banking, and it has made acquisitions to further its goal: Notably, it D3 Technology, a digital banking software provider, last summer. Yet it has to patch together its new model from both emerging digital capabilities and legacy, lower-margin lines of business.

Insider Intelligence spoke with Brown about cross-channel digital transformation and NCR's plans to shape itself into a software and services company.

The following has been edited for brevity and clarity.

Insider Intelligence (II): Can you talk about NCR's plans for cross-channel platform integration and how you envision the customer experience?

Doug Brown (DB): It's led with our delivery of capabilities around digital and self-service, allowing customers, businesses, and consumers to interact both digitally with their banks and credit unions, and via self-service in the physical channels, like with ATMs and interactive tellers. That model extends to software, where we're the operating system of the bank. "Digital-first" means helping customers when they want to interact with the institution across any and all channels.

II: NCR is recasting itself as a software and services company, but close to a third of its revenues come from hardware sales, and much of the rest comes from software and services for that hardware. How is NCR making that transition?

DB: It's our intent to migrate the focus of the company to "NCR as a Service." Eighty percent of the business over the next five years is targeted to come from software and services specifically. And then we're linking it to the recurring software model, more subscription-based. [Editor's note: In Q2 2020, NCR a revenue mix that included 55% recurring and 72% software and services.] 体育app are doing things like offering the hardware as a service, for example, ATM as a Service. 体育app are no longer selling you just the unit: You're buying a servicing package, and you don't really take full ownership of the ATM. The business model is to drive our product development and our innovation into software and services. But that's coupled with how hardware鈥攕till an important part of the mix鈥攊s bundled into a solution. 体育app want to leverage the strengths we've got, but we are looking forward.

II: What kind of pandemic-related trends are you seeing in the market that may be affecting what NCR is planning on doing in the near future?

DB: The pandemic has been an accelerant for the things we have underway and that our customers had underway around digital transformation. It probably brought forward what was on the two- to three-year horizon. There was an intense need for increased use of digital paired with guidance and advice. That's where our digital-first capabilities and strategies seem to be resonating.

II: It's been a little more than a year since NCR acquired D3. What bearing has that had on NCR's product and strategy?

DB: That's been an amazing success for us in servicing larger institutions. 体育app've been able to help a number of larger clients succeed in significant digital enablement and transformation projects. Some of these banks are in the process of strategically scaling up through mergers and acquisitions. TCF in Minneapolis, for example, is a sizable merger of equals. 体育app've helped them through the digital transformation of the customer base into a combined entity. 体育app've also helped some larger clients migrate strategic infrastructure to cloud. And now, that digital transformation is part of our go-to-market model. 体育app've got a technology capability that allows for better synthesis and integration at a technology level. That's a full microservices platform capability that allows us to blend the digital servicing for online and mobile banking, combined with branches and contact centers, because we've got a consistent technology and platform architecture.

II: What else can you say about demand for on-premises and cloud-based software solutions?

DB: Client appetite for cloud has accelerated faster than we anticipated. The D3 business, as a cloud-native architecture solution, has helped in the acceleration of that journey and enabled us to react to customer demand. I think we assumed it would be a 50-50 split a year ago about client adoption and take rate for on-premises or cloud, but now almost every new client and every new direction is evolving around leverage of cloud.

II: How is NCR looking at startups that are attempting to get into the customer experience as potential partners or as competitors in this space?

DB: There's a high trust equity factor that banks and credit unions, we think, continue to enjoy and will continue to enjoy over some of the startups and the neobank models. But we have an open model on our platform that allows for integration of fintech capabilities into our managed and hosted instances for clients. That allows banks to configure things that they think are important to a market segment. Examples of that might be where we allow money movement through . 体育app also allow budgeting and advice through these capabilities鈥攕omething like .