ACCELERATED INNOVATION: ELEVATING CLIENT SERVICE

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VICTORIA KENT: So, Paola, when we think about the macro environment in 2023, we see high inflation, interest rate increases, geopolitical instability in the Middle East, and of late 43 euros billion of outflows from long-term European funds in October alone. Clearly it's been a challenging year for our European asset managers. Given that backdrop, scale and efficiency and the ability to keep pace with new investment opportunities has never really been more important. How do you manage these priorities in your role as head of transformation for Intesa?

PAOLA PAPANICOLAOU: Well, Victoria, I would say that the environment we live in today is really changing at a greater pace from what we were used to. And this is real for investments and markets, but not only. I would say the same for technology, for instance. So new technologies just enter the market and disrupt things. So, what I would say is that I think an asset manager at a large banking group should be more and more aware and capable of managing an ever-changing environment.

And this can be done in two ways. One approach is to be there seeking for what could be coming next. So having a new, let's say, and a careful perspective towards what's coming. So, observe the markets. And the other one is to be more and more flexible and resilient. So, to be able to navigate the change and make it become an opportunity, even when it was unexpected. So, I would say that our group is working to achieve these fundamental capabilities. And this has to do with the attitude, of course. And it has to do also with the infrastructure, the people, the technology, and all of that.

VICTORIA KENT: I think when we talk about flexibility in regards to a platform or the way that you work with your clients even, it does bring to mind the point of needing to innovate on an ongoing basis in order to maintain pace with those changes that you were talking about. What does innovation mean for your business, and how do you think about enablers such as AI and the use of AI more broadly potentially Intesa. Are there particular use cases where you're considering that?

PAOLA PAPANICOLAOU: Innovation is part of our daily job. So, we have a large innovation department that is sitting within my area of coordination-- so within Transformation. And our innovation department looks at the market. Seeks for the opportunities. In a very periodic way, we do observatories in wealth management or in banking or even in other industries or in customers' behavior because we want to know what's going on.

The other thing that we do is that we also follow the money. So, we look for the investments. Who is investing in what? What are fintechs doing? How is this world moving? And we have a very large number of fintechs that we monitor just to see how they are evolving.

VICTORIA KENT: Paola, what does innovation mean for your business? And how do you think about AI as an enabler for Intesa?

PAOLA PAPANICOLAOU: Innovation is just our everyday business, I would say, given the market as well. So, what we do is we have a very large innovation department that is sitting within the transformation area, and we have people that basically do I would say three things. One is observing the market. And in the observatory we observe trends, we observe companies, we observe fintechs, we observe technologies.

The second part that we do is that we plan innovation. We plan innovation and we choose which are the areas of interest of our group where we want to invest. For example, doing POCs or some specific use cases, et cetera. And the third part is scaling up innovation. Because to us, innovation is business. It has to mean at the end of the day we improve our processes, we improve our offering to our clients, we improve the way we work, we improve our employees' life. So, this is how we approach innovation.

AI now is a big trend, I would say, so we have implemented AI across a lot, I would say, in our processes, some of it towards our clients. For example, we have chatbots through AI for our clients in our call centers. We have used AI, for example, in transaction monitoring activities. So, I would say it's something we have really introduced.

I think that the new frontier now is GenAI, and it is what we're looking at. And we are here as well doing some interesting use cases. And we have a program at the bank that is called AI Acceleration that we have introduced in our business plan. So, AI to us is something very relevant we are looking at.

VICTORIA KENT: Continuing with the theme of innovation, having had the pleasure of partnering with you over the last year, it's very clear that Intesa sees significant benefits from streamlining your operating model, particularly across business lines. Could you tell us a little bit more about how you see technology helping you achieve that, and maybe some of your goals and expectations in relation to efficiency or synergies that come from that?

PAOLA PAPANICOLAOU: Yes. Technology is certainly an enabler. We use technology to enable a change. We use technology to enable a better business service towards a client. And we use technology, of course, to better serve our colleagues and let them do their job better. So, for instance, the partnership that we developed together and the adoption of the Aladdin platform across-- because we decided together with you to do a full adoption of your platform, across the enterprise on asset management, wealth management, et cetera. Across legal entities as well.

This has supported us in two things, I would say. The first is that we decided to leverage upon a third-party technology and a third party's investment in technology and high level competence in developing what we consider being a best of breed platform. So, to focus our investments and our core in what we know how to do best-- so in our business. So, this is an example of technology adoption in a partnership model.

So, you don't have to build everything inside. It's very wise to buy when you know that there is an ever investing as well and looking-forward model somewhere in the market. And this way you can focus people, investments, and activities in what is, let's say, your magic in the sector. So being able to focus on what is relevant for us and for our customers.

VICTORIA KENT: Can you tell us a bit about Intesa's client base and the business lines that you cover?

PAOLA PAPANICOLAOU: Our business split is 50% from retail banking, 16% from corporate and investment banking division. 12% comes from subsidiary banks, and 13% from private banking. And then we have insurance and asset management. So, this is overall our split. And 75% roughly Italian market. 25% from abroad. We have a pretty diversified business, both in countries and in segments.

VICTORIA KENT: You mentioned technology as an enabler and technology to enable expansion. We know that Intesa is currently expanding its business beyond its domestic stronghold in Italy. How do you think about technology as connective tissue to achieve and maintain consistency through that period of expansion?

PAOLA PAPANICOLAOU: For sure, technology enables also of that. So, Intesa is an Italian bank, but our group has a presence as well abroad. So, we serve approximately 21 million customers, of which 7 million are abroad. So, using consistent solutions and technologies across gives of course some benefits that we could refer to. One is for sure the efficiency. You can scale, and scaling is important.

You can definitely have operations and processes that look alike in different countries. Maybe they cannot always be the same. We know there is different regulations. We need to respect obviously local regulations. But nevertheless, let's say that the common infrastructure enables a common process. And so, this means that when we see something working and it works very well in a country, in certain occasions we can definitely then expand overall. So, we can still keep what is maybe a distinguished element in a country, but building on something that is consistent across. It enables again efficiency and better operations and better business.

VICTORIA KENT: Thinking about the priorities of your clients given the increasing importance of ESG considerations across Europe, what are the themes or trends that you see emerging, and what's front of mind in the ESG conversation for Intesa?

PAOLA PAPANICOLAOU: Well, we are very much focused on ESG, obviously. And we are very much ahead, I would say also, generally in our European area. Even the building we are sitting in today is a proof of our commitment to ESG. So ESG is definitely-- I would say it is also a trend, but it is also something that we have decided to tend to before the regulation and the commitments. So, for sure it is something that we need to focus on when we drive clients' investments, and we see clients are very much interested into that. But it is also something we are using for our own business model and processes.

So, there are several activities that we do also, for example in our data centers, to be more and more ESG-compliant. And there is also, as I was saying, overall the theme of the energy in investment. So, we are also developing a new partnership with you on this, on asset management, on how to emphasize and bring in our portfolios more and more of that.

VICTORIA KENT: Switching gears slightly, I'd love to hear a bit about the career journey you went on to become a leader in the technology industry, and maybe your thoughts on how your career and the presence of women broadly in the industry has evolved over that time.

PAOLA PAPANICOLAOU: Well, my journey in the technology industry started from private banking, so I wasn't in technology actually before that. So, when I came in Intesa Sanpaolo in 2015, I came in the private division and my job was to create a new business model that was looking forward. And it was the private wealth management model that we were just launching, and it had to do with how approaching, let's say in a holistic way, our clients. So, not only to give them advisory on their wealth that they had with us, but also to take in consideration their wider wealth. So, the real estate or their company, their family, and so on.

And this was very successful. And after three years I did that, they called me from headquarters and they said, |”there is an opportunity in innovation”. And my first thought was, but what do I know about innovation? It has to do with technology. But the reality was that HR and the group had a great vision because they wanted to bring in the technology team a person who had always done business, and new business models, et cetera.

And honestly, it was a great mix because I was sitting next to my really good colleagues in technology. So, they knew the tech, I knew the business, and what we did is that we worked together and we developed new initiatives and new opportunities for the group. And really, Aladdin came up also because of that because we put together the technological view and the interest in evolving our technology with a strong business need. And so, this was an interesting approach.

And then from there, I moved to transformation. And today I can tell you that after five years, almost six-- I'm heading to the sixth year in the technology area, I really think that it was a wise idea. Because today, if I look at the managers of the future, I think people will need to have larger competencies. The future will be less and less fragmented, I think, between roles.

Today here in this building, we have people from technology thinking together with the business people and when you go by the corridors and you pass by the rooms, you see people sitting together and working together. It's not any more people splitting in different buildings and just talking through emails. It's really working next to each other.

VICTORIA KENT: And going back to the question of women in technology and in the industry, I know from my experience having worked in investment banking and then come into technology latterly, it certainly wasn't a career direction that I necessarily considered out of university-- going into a tech-based role. It appears to me that in talking to some of the graduates that we employ today, the female graduates are very interested in technology as a career, largely for those reasons-- because it centers on innovation.

I think there are aspects of it that lean more heavily now into the business. It's not this standalone dusty unit where you don't see the change factor and it's disconnected from a business environment. So, I suppose it'd be great to hear from your perspective. As a woman in technology, have you seen more women coming into that space with you, or do you still think it's the preserve of men in the main? I think both of us work in an industry where many times the room and the table tends to be dominated by men rather than women, but it'd be interesting to hear your thoughts on some of that.

PAOLA PAPANICOLAOU: Yes, I think it's really changing, Victoria. What I see is that there is more women in the industry. And just to give you an example, in Intesa we are now hiring 2,000 people in tech. New people with fresh experiences as well because we want to mingle a little bit. So more experienced people with people who have less experience. Or maybe they have an experience in different industries or in different areas.

We are really focused on gender balance, and what we see is that we are able to bring in roughly 40% of women, which is a very high number. Because if you look at the status right now, the numbers of the market are not really there. So, what I can tell you for sure is that there is more interest of women to work in technology, probably because as you said, there are some attitudes that generally could be associated to the female gender that are really interesting in the technological environment.

So, for example, problem solving or being oriented to the customer. Because today, technology needs to serve the customer in being really user-friendly. So, I think these things can trigger the interest also of women in the area. And I do see also numbers in STEM universities rising, and this is very good.

VICTORIA KENT: It's an excellent catchment for both of us when we come to future commitment to hitting those DEI targets. We talk about diversity in relation to Intesa, and certainly working at BlackRock it's a huge priority for us. But it's also a priority for all of our clients. How important is DEI to Intesa, and what are some of the initiatives that you might like to highlight?

PAOLA PAPANICOLAOU: So, DEI for us-- it is part of our core business, I would say. We have very high-level commitments in generating equal opportunities for both genders, but not only-- we're not of course talking only about gender diversity. We're also talking about age, about religion, about countries, and everything. So, we have a very strong focus on that, and I can tell you that the environment for us-- it is really much, much more modern than several other peers in the industry. And this is something that working in our offices you can sense.

And we have specific targets that we are hitting. We have a specific commitment. And just to give you a small example, when we propose new managers or new candidates in certain positions, we always make sure there is an equal representation of all genders. Then the choice will be of course made upon who is best for the role, but there has to be a number of candidates that equally represent genders.

VICTORIA KENT: As technology in finance becomes more complex and fast-paced, it's important that all of us are aware of our own mental health. What do you do to decompress and find space to balance the demands of your career?

PAOLA PAPANICOLAOU: That's a very good question, Victoria, actually. So, what I personally do is that I do a lot of sport, I travel a lot, and I have hobbies that really take me off my ordinary business thought. And I think this is very important. It is important to widen up your views. And I read a lot as well-- things very often that have nothing to do with my business and my job, because I think it is important. It opens up your mind and it really-- it relaxes me a lot. Plus it stimulates new thoughts. It's very important to really commit to that.

For example, we as a company and in this building that we're sitting, we have a gym within the company. We have a lot of healthy food, for instance, which is another relevant thing. And I think the other thing is the work-life balance. And thanks to remote working that has been in our group before COVID-- but then after the pandemic, I think it grew up a lot, people can balance their life better. Because for example, young people who maybe live outside Milan-- they don't need to commute every day and spend their time in a public transportation. They can also work from home.

Or a young mother can work from home, or somebody who needs to take care of a person in their family can work from home. And I think all of these things and what the company also does to support this work-life balance is really important. And it is very important that we all take rest when we need and do things really outside our ordinary business workday.

VICTORIA KENT: We talked a little bit about some of the themes that we see emerging in the industry, and we've certainly talked about how Intesa is thinking about technology, both of which are interesting subjects points for the near and mid-term. So, Paola, what are you most excited about in the next two to five years?

PAOLA PAPANICOLAOU: Well, there is so much to be excited about, because there is so much change. So, for sure technology is something that is really ramping up, and we can see that. There is always new solutions and technologies that we can bring in our group to really start making the change of the way we work and our business model.

I think that in the upcoming years, what is going to be more and more requested by the client is really a different-- or let's say an evolution in how the client is served. So, we went through omnichannel or multichannel, and what is happening is that the client more and more wants to be enabled to change the way he or she can relate with their private banker or their bank or their transactional operations, whatever it is.

So, what I think the industry is focusing more on is to be able really to make this experience the more pleasant, possibly, the simplest possible way, and the safest possible way for the client. So, there has been a lot of investments in the front end in the way a client can interact with the bank, the banker, et cetera. And this is going to be a trend that it will be moving forward. And I think there is a lot of space for our industry to be of course compliant, because we are a highly regulated industry, but still, let's say, at least a little bit more user-friendly.

The second thing that we think is a huge trend is the modernization of the legacies. Most of the European banks are based on several M&As, and the whole legacies and infrastructure can be improved, can be modernized, and can then give the benefit both to the bank and the client to have better operations. For instance, being able to build a new product on a new technology is definitely easier. Or the way you can use data in new technology is much better compared to legacy systems.

So, these are two things that for sure will drive the change, together with the fact of having also a wider set of products. So, for instance, this that I just said has been the base on which we have built the two initiatives that we launched on the market. And one is Isybank and the other one is Fideuram Direct. And so Isybank is a retail transactional bank that we have built in partnership with Thought Machine to build the new core banking system fully on cloud.

Fideuram Direct is a new banking model to serve affluent and private clients that we have built in partnership again with BlackRock in this case. And so, it is based on the Aladdin platform and has a model of advisory based on Aladdin. These are two examples of new initiatives that we launched that we consider to be our digital challengers-- our challenger banks to really get ready for what's going to be the upcoming future and the client's needs. So, we want to be ready to serve our future clients with new infrastructure and new business models.