U.S. Bancorp (USB) Earnings Call Transcript & Summary

All right. Are we ready for the best and last of the day? From USB or U.S. Bancorp, we have Terry Dolan, Vice Chair, CFO. Terry has been with the bank for, as I'm reading the bio, 25 years. It's amazing to see people have that type of longevity these days. And he's joined with another class of '98, Dominic Venturo, who's worked his way up to the payment processing side, all the way up through running digital now. And since that's where banking is going, it's great to hear from these 2 guys about how they're going to be at the forefront of the digital change in banking. With that...

Well, good morning, everyone. We appreciate the chance to present here today. I will start us out on Page 2. I'll remind you that today we'll make forward -- we may make forward-looking statements that are subject to risk and uncertainty. I'll refer you to our safe harbor statements for further information. On Slide 3, you'll see a quick overview of U.S. Bancorp. The red on the left represents our physical branch locations. That's over half of the states in the United States. However, our consumer banking distribution is much broader than that through direct and distribution partners. We have consumer -- customers with credit card, auto, mortgage and loans in all 50 states as a result. And then finally, internationally, we have 3 business lines: Elavon merchant processing, Corporate Trust as well as Fund Services. Turning to Page 4, we'll view our size as a competitive advantage. So you think about we have the scale to compete effectively against both larger and smaller institutions, and we faced fewer capital and liquidity requirements compared with our larger and more complex peers due to not being a G-SIB designation. On Slide 5 shows that we have 4 simple and diversified businesses. Our mix of more traditional banking operations along with our payments franchise, wealth management and investment services businesses, provide good revenue balance between spread income and fee income, and this helps us reduce earnings volatility through the cycle. On Slide 6 and the following slides, I will talk about the digital objective and how we're achieving that objective through our strategy and the opportunities we see from having strong digital capabilities. So this is really the area that I'm responsible for within the company, and we're organized within the digital space around 3 main customer segments. So consumer, business and the corporate. And we design all of our products and experiences around those major customer segments. And we're really focused on the excellent experiences because the excellence of the experiences, the ease of doing business with us, the simplicity of being able to get from, I'd like to do business with you to actually doing business with you, is enabled and unlocked through the digital capabilities. And we don't do all that purely in the digital domain. So we believe in a human-led interaction that we have with our customers, but then being able to enable that to happen seamlessly in digital. And so you'll hear me talk about things like DIY, which is do it yourself; and DIT, which is do it together. And that's where the banker, through technology, comes together with the customer to enable those discussions to turn into reality. And as we deliver excellent customer experience, we have found that it helps us drive incremental growth, loyalty and increased retention. Those investments in digital not only allow us to better retain those customers, but they also allow us to run the business more efficiently. And part of this is, and I'll talk about this more, how we think about the underlying platforms and the reusability of the technology so that we can apply that across the businesses without having to build everything one at a time from a bespoke or a product-centric organization. And lastly, I'll mention here. One of the other things we've done from an efficiency perspective is unlock things like a digital assistant, which is industry-leading. It's where customers can interact with our Smart Assistant to be able to get simple jobs done, answer questions and learn more about how to use our solutions when they may be uncertain. Turning to Page 7. So I'll talk a little bit about above and below the glass. So when we say above the glass, what we mean is interacting through the device, whether it's a computer or whether it's a tablet or whether it's a phone. And those are the experiences that we all use as individuals when we do business with financial institutions like ours. And when we talk about below the glass, we're talking about the technology modernization, the infrastructure, the architecture and the important engineering decisions that we make that enable us to be able to do that in a reusable and a cost-effective way. I mentioned do it yourself and do it together, and these are places where we're using the technology to enable things like CoBrowse, where a banker or a service rep is able to see exactly what the customer sees and help guide them through being able to use our products and services in a simpler way. And as we innovate and invest, our efficiency will improve through these below-the-glass reusable solutions, but the experiences will get better as well. Turning to Page 8. Let's talk a little bit more about above the glass and how that looks. And our success in implementing the digital strategy can easily be seen in the upper left of the accolades. So these are outside-in views looking at our apps, the features, and comparing them to the competitive benchmarks that others offer. And I'm proud to say that we've moved up to #1 in the Keynova ranking for the mobile app, which is the industry benchmark around the usability and experience as well as the features. We've had over 1.5 million sessions through our CoBrowse capabilities, and this is a little bit unique to what we do within U.S. Bank. So I mentioned CoBrowse and how it executes, but we also have 1-way video and 2-way video. We can extend that through appointment scheduling. So a customer can set an appointment, have an experience, do it digitally, and be able to onboard a transaction. Having these differentiated experiences allows us to have strong digital sales growth, as you can see on the right-hand side of the chart. And across our major categories, digital sales grew in excess of 20% year-over-year. In total, we saw digital sales grow 29%. We recently, through our new applied platform, which is part of the reusable experiences, have added consumer, small business checking, other loan products, and most recently, our Automated Investor or robo-adviser solution offered by U.S. Bancorp Investments. This allows for better conversion and faster time to revenue. If we go to the next page, on Page 10, we'll talk about digital engagement. Coming out of the pandemic, 80% of our customers and transactions are now digital, with mobile leading the way. Loan sales are at 63% digitally driven now versus 45% beginning last year. The percentage of small business transactions digitally has grown over 2.5x in the past 2 years. And as you can see, we're experiencing very strong digital trends across the board. One of the things relative to that, that I'd like to just mention that's a little bit unique is we have a solution called text to apply. So I mentioned CoBrowse, I mentioned sales delivery and I mentioned do-it-together. So we have a solution where when the banker is having a conversation with a customer or a prospect, if there's an interest in a particular product, the banker can actually follow up with a text message, with the customer's permission, that's preformatted. So when the customer clicks on the link, they're brought into our experience, the information we know about them is prepopulated and then we're able to take them through the sales closing and onboarding journey seamlessly. And so that's a unique differentiator in that space. As I turn to Page 10, I'll talk a little bit about our below-the-glass approach. Part of this is focusing on the data, the infrastructure and the human capital to create these clean, reusable and reliable architecture sets. Reusable code libraries, centralized portals to allow that to happen, a design system that allows all of these visual elements and digital interaction elements to be precreated, pretested and ready for use by the development community, which enables faster delivery and time-to-market. I mentioned the Smart Assistant earlier, and I'd like to just update you on the activity there. We've seen over 6 million questions get answered through launch of the Smart Assistant, and we've seen the customer satisfaction and its ability to answer the question at industry-leading rates. And we recently received the top ratings from Corporate Insight in this regard. Instead of creating multiple point-to-point solutions, we've created APIs that help connect the above-the-glass and the below-the-glass processing platforms. While these APIs have created seamless experience for the customer, as I mentioned, they also help us be more efficient. By creating this solid foundation and architecture below-the-glass, we can bring the data back up through the glass to help with things like personalized offers, experiences, and insights for the customers. A really simple example that you might bring that to life is when a customer has a transaction on their account that is for a subscription payment, we're able to tell them in real time that, that happened. Why? Well, what we heard from customers in research is they try things that are in a trial -- free trial period, but then they forget about them. And they find out months later, they've been paying for a subscription they might have forgotten about. And so this is part of insights to action that allows for the customers to be able to manage their financials better. And we benefited from these efficiencies because we were able to reduce 25% of our overall branches since the end of 2018. On Page 11, I'll talk a little bit about real-time payments. So real-time payments is the first new payment rail, as I'm sure you know, in probably 40 years. What a lot of folks don't understand about real-time payments and why it matters is it isn't just the fact that the payment is real time. That's good. It also isn't just the fact that it is guaranteed good funds, which is also good and useful. But it's because the remittance data carries along with the payment transaction. So what does that mean? Very simply, in the old environment, within accounts receivable, accounts payable, billing and processing, there's multiple steps that happen. They send a bill, then you get the payment, you may get it through ACH. But what you don't get is the remittance data along with that message. So being able to combine those up allows for the entities that we do business with, corporates and other businesses, to fully integrate and operationalize that in the back office, leading to processing operational efficiencies and the lack of a need to do things like settlement reconciliation adjustments and more. And that's the first set of sets relative to real-time payments. Other things that we have innovated on are things like being able to enable companies to do disbursements for things like insurance payments, rebates, incentives and more, and we're delivering those through the real-time payment solution. Now not everybody has real-time payments or wants them relative to the consumer side of things. And so we've also added this capability called Payee Choice. Payee Choice and the solution allows the [ ordinating pay ] to be presented to the end point, but then the endpoint can choose: I want to be paid via ACH, I want to be paid real time via real-time payments and the like. And so that enables customer choice and broader flexibility relative to the implementations. So while real-time payments is still in its infancy, we've seen it continue to grow. Real-time payments should provide us with good secular growth opportunity, especially as a tool to deepen our relationships and further those ecosystems. And it's very sticky because as businesses adopt real payments -- real-time payments and integrate them into their workflows, they have made that transition, and it's now fully integrated into the way that they do business with us. We have seen very strong growth in the real-time payments, as you see, 3.8x in the current year-to-date. I'll now turn it over to Terry, and he'll talk you through a little bit deeper dive relative to a couple of our recent transactions and partnerships. Thank you.

Thanks, Dominic. Good morning, everybody. I appreciate the opportunity to be here. So I've been the CFO since 2016. And 2017, Andy and I stepped back, and we really said this is an organization that has a lot of potential, but we really need to step up our investment. I'm glad we did with respect to technology and the digital capabilities. You can throw a lot of money at this, but ultimately it comes down to leadership. And so I want to recognize Dominic for his leadership in the organization. He's been recognized in the industry a number of different times for his capabilities, his knowledge and his understanding. And he's a very humble individual, but he's done a fantastic job. I do -- when I step back and I think about U.S. Bank, it's been a significant journey. We've gone a long way. We've made so much progress with respect to our digital capabilities, and Dominic talked a little bit about that. But what I'd like to do is maybe just kind of give you 3 examples, and there are many different examples in the organization that we could throw out, but we're making progress on a lot of different things. Andy and I have talked most recently about our business banking payments ecosystem that we are in the process of really creating. And we've made a lot of progress with respect to that, and we think that there's a real opportunity here. So maybe by way of background, we have a little over 1 million relationships in business banking, and we have significant merchant relationships. And there's opportunity to be able to bring those together. And over the course of the last several years, one of the things that we have been working is really utilizing digital platform, digital capabilities in order to be able to net the banking services that we can offer, our payments services that we offer, and to do it in a digital way because it's really important for it to be seamless, integrated and easy to use. If you talk to small businesses, what they are really interested in is ease of use in terms of managing their business. Now let me step back and kind of give you a perspective. If you're a small business, and some of you may have run small businesses, there's probably 5 or 6 different types of systems that you really need to be able to knit together and to work to have work effectively. Think about inventory management, sales management, receivables and capabilities associated with payroll and your payables capabilities. And they all, from a small business perspective, really need to be knitted together in order for you to be able to make progress in this particular space. Now over the course of the last couple of years, we've not only built things internally, but we've also looked at opportunities to be able to acquire fintech that are specialized in this particular space. And we have, over the last 2 years, made some investments in talech, which is one organization, as well as Bento. Let me talk a little bit about that talech -- about both of those. But talech, we acquired about 2 years ago. And one of the reasons why we saw this as a real opportunity is that talech is a software capability that really sits in the middle. Think about it in terms of either a dashboard or a controller that is really central to a small business person's life, that can easily integrate with the systems that I just talked about, inventory management, sales management, payroll and things like that, in order to be able to digitize the movement of money, your banking services, et cetera. So think about talech being kind of central to a small business owner. And when they adopt that, it really makes their life easier in terms of helping to manage their business. Also think about talech as kind of the left side of their balance sheet from the perspective of receivables and cash movement in running their business. And for the last year or so, we have been working on integrating, creating the platforms and really starting to create this dashboard or this kind of central point of control. And we have now started to kind of roll that out. In 2020 versus 2021, we've actually seen that quadruple in terms of the number of customers that are adopting talech. And with our 1.1 million business banking customers, we think the ability to get that adopted in has the opportunity to create some significant growth opportunities. But also think about Bento. Bento is the right side of the equation or the right side of their balance sheet. Bento brings travel, it brings expense management, planning, control capabilities and their ability to manage their payables side of the equation. So knitting those 2 together, I think from a small business perspective, is going to create lots of opportunity for us to be able to expand the business banking relationships, the ones that we have, as well as to drive growth with respect to the number of relationships. So that's kind of business banking. We've also been talking about alliances, and alliances and partnerships are going to be critically important. And we're powering a lot of those partnerships through our digital capabilities that Dominic has talked about. About a year ago, we announced an alliance with State Farm. And I think there's a couple of different perspectives. When you think about alliances, oftentimes, it is on the product capability side of the equation. In this particular situation, it's really around distribution. And if you end up looking at the map, you can see the significant amount of distribution that they have. In fact, we have access to about 19,000 agencies across the entire country. And if you end up looking at the map, a lot of that is outside of our footprint that we exist in today. And so if you think about the progression that we have gone through with respect to this alliance, we're still very much in what I would say probably the third inning or the early stages of the alliance. But last year was really about bringing their customers on board, going through the conversion, getting them on to our platforms. Earlier this year, Dominic and his team spent a lot of time creating the tools and capabilities for the agents as well as U.S. Bank to be able to have a view into what those customer relationships look like and to be able to kind of develop and roll out the digital capabilities that will help to support this partnership as we move forward. Today, where we are at is we are starting to focus on that agent engagement. So if you think about 19,000 agents, being able to get them more engaged in the process of selling banking products and services. And the reason why it's so important from their standpoint is what they know is that when you have the banking relationship, in addition to the insurance relationships that they have, that, that stickiness and retention of their insurance relationship goes up. And so that's an important part of the equation. And so that is one of the things that we are focused on. And then most recently, in the third and fourth quarter, what we are rolling out jointly with them is really the business banking side of the equation. State Farm is one of the largest organizations in the country that has connections to business banking. Tie that back to the business banking strategy that I talked about just a few moments ago, and you can see that there's a lot of power in this sort of an alliance in the future. And the last area that I would just focus on is most recently, we announced the acquisition of Union Bank or the future acquisition of Union Bank. And I think from a digital standpoint, there's a lot of opportunity. So they have about 1 million consumer customers and a little under 200,000 business banking customers. And the business banking connection, again, with our banking, business banking and payments ecosystem, we believe that there's a lot of opportunity there. On the consumer side, in terms of digital, quite frankly, from a technology standpoint, they're behind. And you probably are aware, based upon some of the public announcements that have taken place. And I would -- I'm going to steal something from Dominic here a minute. If you think about 1 million customers, we're putting them in a time machine from a digital point of view and bringing them forward 3 to 5 years in terms of the product, the capability, the services, et cetera, that they are going to have access to. And so our most important priority once we close is to lift and shift the systems on to U.S. Bank's platforms. And once we get there, to start to roll out our products and services from a digital point of view because we believe there is a significant amount of power with respect to the Union Bank customers and the digital platforms that we provide. So there are 3 examples from a digital point of view in terms of how we see this continuing to power U.S. Bank going forward. So if you think about it, I'll leave you with this. In summary, we have a great banking franchise, great banking products and services. We differentiate ourselves in terms of our payments capabilities, and we also have very strong digital capabilities, that I believe when you put those 3 things together, are going to power U.S. Bank in terms of growth in the future and industry-leading performance as we move forward. So with that, let's go to Q&A.

[ Julien ]?

Dominic, can I ask about the big picture or systemic impacts of real-time payments? I'm curious, for example, how quickly -- is it going to completely replace ACH? And how quickly will that happen? Is there any benefit to bank of ACH over RTP? What does it mean for the credit card networks? And also like the big mobile wallets get a lot of their revenue from instant transfer, you pay out 1% to get the money out of your digital wallet into your bank account. I mean that, presumably, also goes away, so that takes a bit of oxygen from them, too. Is that right?

Thanks, [ Julien ]. So let me approach it this way. You have to sort of think about overall, though, what real-time payments really does versus what the other payment solutions do. There are a place for the different payment types that exist. So you think about the credit card business and you think about retail distribution and the ability for anybody to go anywhere and make a purchase with a payment card, that's sort of one well understood sort of ecosystem. In the case of real-time payments, the challenge that we've had -- so first, we were the first to launch real-time payments, and it's just sort of a year-plus old. But not all of the banks were up and running on real-time payments. And so you need the endpoints in order to get the network effect out of the platform. We, as an industry, have made really good progress in terms of enabling the endpoints and getting access to the accounts that are connected to the network. So that's a pretty important milestone in being able to do that. But the other leg of the stool then becomes how the corporate users, for example, are able to integrate these solutions into their ERP and other processing solutions so that they're able to take advantage of these capabilities. And that's sort of where we are in the evolution journey, and I'd like to liken this to like a step function, because we have a standard format. We've got the integrated data that I mentioned before. But then you have to have sort of the company enablement. And that's a project for the companies to be able to do, or it's a project for their software providers, ERP systems and the like, to be able to do the integration. And as those happen, think of it as one integration that unlocks the capability for all the users of that platform. So it starts to look more like step function. So that's part of the ecosystem evolution and evolvement, and we're seeing really good traction as an industry there. Then your other question is, is this going to make ACH go away? Or is it going to make some other payment vehicle go away? And what I would say to that is, sadly, we're still writing checks. And so we've been looking for checks to go away for an awful long time, but they tend to solve edge cases. They have behavioral characteristics that folks use. And so they -- even though there are many other options available, they still use them. So will there be a sunsetting? Not likely in sort of the near to moderate term for sure. But is there an opportunity for growth? Absolutely, because cash and check in B2B payments is still a very large share of payments. And as businesses adopt and as these endpoints are available now, which they are, we will see a lot of that transition happen. And it so happens that real-time payments are more cost-effective operationally and otherwise than cash and check. So I think that's sort of the pie to focus on as opposed to another version of electronic, at least in the near to moderate term.

Yes. The thing I would just add is, and I would agree 100% with respect to the step function that Dominic ends up talking about. But also, if you think about consumer, it took consumers a while for them to adopt, and then all of a sudden, it just took off. And when you get the endpoints kind of put into place and things like that, I think that, that adoption comes fairly rapidly. It doesn't completely eliminate ACH or wire or whatever might be the case, but it comes rapidly. And I think that we're getting closer to that inflection point that's going to take place. So from our perspective, as we think about it, it's important for us to be on the leading edge with respect to being able to provide real solutions to our corporate customers, and we're very much focused on that.

[ Nick ]?

There's obviously a lot of economics that come from the sort of existing retail payment ecosystems that are out there. In this case, is this one where you envision that there's sort of specific fees that are tied to, whether it's real-time payments or sort of talech and Bento? Or is this just part of the offering that you roll out to your commercial clients? It's just -- we just keep making the product better and better and better because that's just the nature of capitalism?

Let me take that one. Yes. Well, let me start and then let me maybe talk to talech as an example and maybe part of our strategy because it's very common, for example, when you -- in the fintech world when you have a product offering, those sorts of things, that you really start with offering the service and then expanding on that service in order to be able to drive revenue. But you really need to be able to get that product into the marketplace in order to be able to capture as much market share as you can early in the process. So our strategy with respect to talech is by and large, to have a talech or talech [ lite ] that we can get out into the market that's relatively inexpensive or even free in order to be able to push that out, to be able to capture as much of business banking market share as we possibly can. Now we also believe that there is a lot of value with respect to the business banking payments ecosystem that we are creating. And with value comes the opportunity to be there through subscription pricing or product pricing that with that value proposition that we create, that we are going to be able to generate some pretty significant revenue opportunity. Now that would be either in the form of payments revenues or in banking products and services, et cetera. So it will be coming in, what I would say, maybe some of the traditional sort of ways. But we do see that there is significant opportunity when you digitize that payment capability within small business. When you think about real-time payments, I think much of that is also the same, not necessarily that it starts out as free. But I do believe that there is a significant amount of value that is created to corporate America that they're going to be willing to pay for. And we certainly are seeing that as we are talking with corporate America and we're going through use cases, et cetera, with them. And the value that's being created is not only in the payments capability, but the significant cost reduction that they can generate in their back office, because as Dominic said, when you do it in the real-time world, you immediately connect the remittance with the payment. You immediately eliminate the reconciliation process and all those sorts of things, and there's significant cost in corporate America associated with that. So there's real value to them. The analogy that I would probably use is when we rolled out virtual pay, that was a product offering that has significant growth when we rolled it out, and it was beneficial to both the client as well as to us from a profitability point of view.

Mike?

For Dominic and Terry, where are you in the process of investing relative to getting payback for those investing? And I told you I was going to ask this question. But the reason is, look, you have the services, you had do it yourself, do it together, Cobrowsing, insights to action, real-time payments. And then Slides, what, 8 show you ranked #1 across the board, Slide 9 shows all this amazing growth rate. You closed 1/4 of your branches. So maybe your employees are super happy. And I'm sure your customers are very happy. But from a shareholder standpoint, you've had negative operating leverage for the last 5 years. And you just said you started in 2017. You said, you know what, we're going to invest more. You've been around for over 100 years, 150 years. So I get it, you have a long-term perspective. But where are you? Because it's been a little painful as a U.S. Bancorp shareholder to see the negative operating leverage at a time when a lot of other banks here at this conference have committed to having positive operating leverage next year. So you front-loaded the expenses. How much more do you have to go? When do you see the payoff?

Yes. Why don't we start with Dominic. Maybe, Dominic, what you could do is kind of talk about where we are in the investment -- in the digital journey from an investment point of view. I think that would be kind of a helpful reference.

Yes, absolutely. I think that is a great place to start. And thanks, Mike. So if you think about what I described in some of the updates that I provided relative to the new features and abilities, a lot of those have been unlocked in the last 12 to 14 months. So we started this journey 2.5 years ago. And when we first started, we began the Agile transformation that is part of the, how do you actually execute and deliver these things so that you can deliver weekly updates, daily updates to platforms, capabilities, software, website. That was the beginning through the agile. But then we had the underlying sort of platform capabilities that required. So rather than having a sales process that is product-specific from one point to the endpoint of the system, we've built out the platforms and capabilities to allow for sales and onboarding to happen across a slew of consumer products. Each incremental product is less expensive to deliver. So you build the platform, you deliver the first product, and then you get efficiencies out of each individual product. So throughout this year, we have added -- we're up to, I think, 8 products in total in the consumer side, which is a good chunk of what's there. So the progression is moving along really well. And you see it in the way that we see both the digital sales as a percentage of total also in the year-over-year sales growth. So that's sort of the maturity relative to, say, consumer and sales delivery. I talked about service delivery, same story. The investment started 2 years ago. The ability to close out those DIY and DIT experiences and to reduce activity in the call volumes, for instance, in the call centers because of self-service. Call volume doesn't go down in total, but it goes up less than it would have otherwise as you're ultimately growing the business and moving it forward. So servicing and interactions, the maturity is very good. Within small business, we're a little bit further behind in terms of that maturity level, and we're embarking on the inclusion of the sort of one view for the customer, being able to get a 360 view, but also being able to run their business from the portal that we have. And so that investment currently is in the ramp-up phase. And then in the wholesale and corporate side, the demand has been much less for a lot of this activity, but it's picking up because all of us see what happens when you're a consumer doing things, and you want to be able to do some of those more digitally. And so we're not blind to that, and we're working specifically on the payment side, but then in terms of things like portal consolidation and the like, will pick up. So it's sort of a layered cake. Matured in the consumer space, emerging and growing on the business case in terms of investment, in corporate is some more work to do as we begin to get efficiencies out of that, lead that into the corporate investment. Terry, what would you add?

Yes. So maybe coming back to your specific question. I thought that, that -- I wanted to have that sort of context. And what I would say, Mike, is that we're always -- you know us, we're always very focused on cost management. I mean, Andy and I grew up in the Grundhofer days. So we know how we could cut things that we -- if we needed to or if we wanted to. But we're really balancing that short term and that long term. We really think that it's very, very, very important for us to be able -- to be investing in the digital capabilities. Dominic talked a little bit kind of about where we're at in that investment phase. And we're still -- I think it is still important for us to be investing. Particularly on the corporate side of the equation, it's important to be leading there as opposed to following. And so we're going to continue to make that investment because it's important from a long-term point of view. But that said, if you step back 3 years ago or so, a lot of it was related to, what I would say, foundational activities that really generate or had the opportunity to be able to generate very little revenue. It's things you had to kind of go through. And any time you go through an investment curve, as you know, the expense tends to be more front-end-loaded and the revenue starts to come. But I think that we've laid out a number of different cases, situations where we think that there's really significant revenue opportunity to start to develop. And business banking being one of them, through the alliance that we talked about being another, and we could go through a number of different opportunities. So the revenue is following. It's going to come, and I feel very confident of that. What I -- what's really hard at this particular point in time is to exactly say it's this quarter or this year or whatever may be the case, but we're getting much, much closer, let's put it that way. And again, we're going to be very focused on managing cost. A large part of it right now is making sure that we're managing that cost in order to be able to make that investment.

Is it fair to say, so the ramp-up days though would be over, and now, it's simply a continuation of this higher level of spend?

Yes. I don't think that we need to ramp up more investment. I think it's really where we can direct the investment. 3, 4 years ago, it was probably more so on the defense and the foundational. And today, well over 60% of our investment is revenue initiatives that will help to drive the future.

So a follow-up question with regard to the Bento and the talech that you went through. So you've got the opportunity to embed that within the small business customers that you have. But what about with State Farm agents? Do they represent small businesses to you? Are you saying 19,000 State Farm agents should be an opportunity set for that? And then what about the partnership that you have with the 2,000 banks that you work with? Is that something that would be leveraged by them as well? Just trying to understand the scope of opportunity.

Yes. Well, I think there's -- particularly, there's 3 areas that I would highlight, maybe not so much the Elan relationship, which was the last one. But clearly, in the business banking space that we have, we have 1.1 million relationships and we can drive that very hard within that particular space. Within the alliance, State Farm, again, they are one of the biggest connectors to small businesses in America. And in October, we're actually launching business banking products and services, and I would expect that the payments piece would be connected and tied to that through their agents, but the most important thing in the near term is agent engagement. But that, I also think, is a very significant opportunity. And then Union Bank. They have another 200,000 small business customers. And quite honestly, we're going to have a much bigger presence in California, which I think allows us to be able to compete more effectively. So it's not just the Union Bank clients and customers, but I think it's also small business in the State of California.

That's [ Dave ] in the back, and then [ Ross ].

Just on the real-time payments, how do you guys plan to grow that network going forward?

Well, I'll tackle a bit of that because I mentioned the network effect pieces. So where we're focused right now is around the enablement of the ERPs and other entities that corporates use to be able to do payments. And that's that step function that I was talking about. The other part is solution-based approaches to the customers. So think of this as working in partnership with the corporate customers to be able to look at all their process and operational sort of issues where they have the opportunity to unlock some value, and how these solutions can help. And we've seen good traction, as I mentioned, in both sending payments as well as doing things like disbursements and the like. So that's sort of product development plus engagement. And then the third part relative to the scalability has been the network effect of the industry, which has been an industry effort, but making really good traction in terms of places that we'll go. The latest sort of iteration of that is being able to do a request for payment. So the short version of that is, the system will enable you to, with the bill, make a request for payment and then pay it. Why does that matter? There are millions of corporate billers out there that are billing endpoints, whether it's a business or somebody else. And rather than send an invoice and then get the real-time payment, they can actually send a smart invoice, if you will, that enables payment, and we're unlocking that through treasury management and through talech and the other solutions as well. All of that will help grow.

Do they always require your resources to help them get onboard? Or any of these...

No. So we've built APIs and direct software connections that are sort of plug-in capable. So this is not each individual one is a technology project, if you will.

The President's Working Group just released a report about cryptocurrencies and stablecoins and with some rules of engagement suggesting that banks are basically the chosen ones to potentially issue stablecoins. I know you guys have recently announced that you might custody crypto transactions. Can you talk about how crypto fits into the payments world that you guys are building? Because I know a lot of the value proposition is tied up with real-time payments.

Yes. So I'll be quick, but just a couple of things. We did announce, and we have launched the custody services for crypto. So that's the ability to actually do the custody services, but that's not payments, right? So that's custody or the key for the asset. In terms of the actual payments piece, so what's been issued so far has been predominantly guidance as opposed to firm sort of changes. But as you think about the evolution of that and the banks have a potential role relative to stablecoin, like that's an entirely different animal than a crypto asset, right? So crypto asset, high volatility, what have you, but a stablecoin is staked to a dollar deposit. And we have had regulatory guidance that would let us hold and manage the dollar deposit side of that. We're not currently doing that, but that has been available. The next bit of that is if a payment system sits on top of it, we still need the regulatory rules to be defined that allow us to actually process the payments and the other pieces of that for that opportunity to get unlocked and realized.

One final question.

Yes. You talked about the State Farm alliance. Could you just give us some sense of what the size of the prize is might be related to that opportunity?

Yes. I mean, it's -- number one, I don't know if I can actually put a dollar amount on it. But if you think about the map that was up there and 19,000 different agents being able to fundamentally provide products and services through those agents to customers, maybe we've been at it for just a little over a year, and maybe one way of kind of thinking about is in that time frame, and this is fundamentally without a branch network in many of their areas. On the deposit side, we've been able to grow the equivalent of about 1 major MSA in deposits in terms of customer relationships. And on the credit card side, about 4 MSAs. So I think that there's real opportunity that exists within that. And then I think the final thing maybe I would just add to that, is that the deposit relationships that we are creating, about 55% of that is out of footprint. 55% of that is out of footprint. So these are deposits and relationships that we would never have had, but for that sort of alliance. And I think that, that's a real opportunity. So I think we've run out the clock, but appreciate all the different questions we've had. I'll turn it back to you.

No, thank you, Terry. Thanks to Terry, Dominic, Jen and Al, USB. Thank you to everyone for attending. It's good to be in person, and there's lobster. Let's go.