Banking Giant Capital One Enters B2B Software Industry with New Venture Launch

Capital One has transformed itself into a major player in the American banking industry by competing in markets for everything from credit cards to car loans. Now he has also set his sights on the software industry. Forbes can exclusively reveal that the banking giant, which has $434 billion in assets and more than 100 million customers, is launching Capital One Software, a company that develops and sells software products to businesses that are increasing their use of data and cloud computing.

The new venture, which was created by Capital One CEO and founder Rich Fairbank, is based at the company’s headquarters in McLean, Va., and has its own dedicated staff as well as access to software developers. of Capital One’s 12,000 strong technology team. Its first product, Capital One Slingshot, helps companies accelerate their adoption of Snowflake, a popular cloud data platform, and manage the costs associated with it.

Many other companies outside of the software industry hired armies of in-house developers to create mountains of code for internal use, but relatively few commercialized some of the software they built. NYSE-listed Capital One joins a short list of companies that includes The Washington Postwhich sells its Arc publishing platform, and BlackRock, which offers its Aladdin data cloud to other investment managers.

Ravi Raghu, head of Capital One Software, said Capital One executives viewed its creation as a natural evolution of the company’s overall digital journey. “We’ve been talking about Capital One as a technology company for a while. The best proof is [to become] a technology company that actually sells software. This innovation is in our DNA.

Rob Alexander, CIO of Capital One and a Forbes CIO Next List honored, echoes Raghu’s point of view and underlines the magnitude of the opportunity the company sees in the future. “We are still in the infancy of companies migrating to the cloud. We’re still in the early innings…as they curate their data in the cloud so they can pursue things like machine learning and AI. There are a lot of avenues here for these markets to grow and expand.

A fintech before fintechs

Alexander is the architect of a long-term digital transformation plan that helped launch the idea of ​​Capital One Software. Over the past 10 years, he’s hired thousands of engineers to build software for Capital One’s own businesses and championed a strategy that saw the financial giant shut down its data centers and shift operations entirely to the public cloud, a process he completed in 2020.

The company’s obsession with technology goes back even further, dating back to its early days in the 1990s and 2000s, when it used its data management and marketing prowess to help shore up the very fragmented credit cards. “Capital One was a fintech 20 years ago and continues to be one today,” said Jason Goldberg, banking analyst at Barclays.

Under Alexander’s watch, the company created many cloud-based software tools, as it couldn’t find any from vendors for specific needs. He now plans to bring some of them to market through his new business, starting with Slingshot, which Capital One Software says can significantly reduce the cost of managing workloads on Snowflake and help eliminate software bottlenecks. data.

We’ve been talking about Capital One as a technology company for a while now. The best proof is [to become] a technology company that actually sells software.

Ravi Raghu, Head of Capital One Software

Kaushik Patel, an executive at ThoughtSpot, a cloud analytics company that’s been using Slingshot for a few months, says the fact that Capital One faces some of the same issues using Snowflake’s platform as his own company helps with it. make an attractive partner even though the financial giant is new to the software business. Its scope and resources are also reassuring. “I would be more worried [using a product from] a series A startup… that I would use [one from] Capital One,” says Patel.

Raghu, who reports to Capital One director of business services Frank LaPrade, declines to reveal how many employees her new venture will have or what products she will launch beyond Slingshot, saying only that she will be guided by what she will hear from customers. The fact that the banking giant’s years-long digital transformation journey has turned it into something of a bootcamp for tech leaders who went on to become CIOs at other major US companies means Raghu has plenty of Capital One alumni that ‘he can also exploit for information.

Founder’s Vision

Still, making Capital One Software a success won’t be a slam dunk. The markets targeted by the new company are large, but they are also full of formidable competitors whose sole focus is software and there are significant costs associated with things such as building teams that consult with customers to help them. to get the most out of the products they buy.

Capital One may also need to reassure investors, who have seen its share price fall nearly 12% this year to $127.86 as of the close of trading on May 31, that its entry into the software business will not distract leaders from its core financial activities, especially as the economy shows signs it could tip into recession.

In response to skeptics, the company can point to the fact that CEO Fairbank has repeatedly embedded it into businesses that squeezed margins and drove up costs in the short term, only to pay generously over time. “Rich is a visionary,” says JPMorgan analyst Rick Shane, who has followed Capital One for 20 years, “and…having the confidence and success to support and invest in his vision is largely a function of those past successes.”

CIO Alexander recognizes the level of commitment that will be required to make Capital One’s latest venture a success. “We approach this with… humility in the face of the challenge of building a software company,” he says. “If you look at the average [enterprise] software company, the time it takes to reach $100 million in revenue is five to seven years for winners. We recognize that this is something we have to be in for the long haul.