Valley Bank COO: Israeli fintech talent is “strategically critical” to our future
The Bluevine acquisition brings approximately 180 R&D employees, most based in Tel Aviv, into Valley’s broader technology ambitions. Russell Barrett says the bank plans to use Bluevine’s software, AI expertise and risk-management capabilities across its operations while keeping further acquisitions on hold for now
“We are quick to be curious, but not quick to act,” says Russell Barrett, Chief Operating Officer of Valley Bank, describing the bank’s approach to artificial intelligence. He sees AI as a rare opportunity for smaller lenders to compete with banking giants such as JPMorgan without matching their enormous technology budgets. Valley is also looking to Israel for an edge: its acquisition of fintech Bluevine brings a team of engineers and AI specialists that Barrett says could become strategically critical to the bank’s future.
You come from the worlds of technology and banking. How does the AI revolution differ from previous shifts you’ve witnessed?
“If you look at the internet or mobile technology, they were largely new channels through which we delivered existing products and services to our customers. With AI, the entire world is changing from within. This is arguably one of the most significant technological developments, and opportunities, I’ve seen in my 30-year career. I believe AI will act as a force multiplier for employees’ capabilities. At the same time, it will transform the banking industry in ways we cannot yet foresee.”
What does this mean for a bank like Valley, which competes against much larger institutions?
“There are about 4,000 banks in the U.S., and Valley ranks among the 30 largest. Compared with JPMorgan, we are obviously not a large bank, but relative to the U.S. banking system, we are significant. I believe AI represents a major opportunity, especially for banks of our size. We will be able to do things that currently require JPMorgan to spend billions of dollars, and in many cases, do them much more cheaply.”
Can you give an example?
“Personalization. If I wanted to build a tailored experience for each of my customers today, it would require a vast number of developers and a massive investment to customize the service for every client. In the age of AI, understanding each customer’s behavioral patterns, preferences and needs, and adapting services accordingly, will become far more accessible. This technology will no longer be the exclusive domain of banks that can afford multibillion-dollar investments. It will become a capability available to virtually any bank.”
But banking is an industry where an AI error could have serious consequences. How do you manage that risk?
“The entire banking industry is built on trust. When it comes to AI, there are two ways that trust could be compromised. First, hostile actors might use AI to steal customers’ information, funds or other assets, which is why we must protect them. Second, AI is not yet perfect and can make mistakes, so controls are necessary. This is not just about defending against external threats; it is also about overseeing the AI systems we deploy within the bank. We must ensure that their decisions are explainable and that the systems are continuously monitored, so they do not deviate from their intended functions.”
On the one hand, everyone says banks must use AI. On the other, adopting it too quickly could be risky. Where do you stand?
“We are quick to be curious, but not quick to act. We are trying to understand what is possible. When you are highly curious, you discover things that are already ready for implementation within the bank, things that can improve the lives of our employees or customers.
“We believe AI will significantly improve the bank’s efficiency. We anticipate an improvement of approximately 500 basis points in our efficiency ratio through the use of AI. However, we intend to proceed very cautiously to avoid unintended consequences. We want to understand the cause and effect of every technological decision, including the costs associated with using specific models and tokens.”
Let’s turn to Bluevine. It is a 13-year-old company, not a young startup. Why did you choose it?
“The first reason is business and financial. Bluevine has an impressive operation that aligns directly with what we are trying to achieve in the U.S. small-business market, where we believe we have a significant competitive advantage. It has approximately 177,000 active small-business customers and about $2.1 billion in deposits. That gives us a substantial entry into digital banking for small businesses.
“Furthermore, the fact that Bluevine has been around for 13 years is a huge asset. The company has experience, patience and a deep understanding of its customers and products. This is not a product it simply built, launched and left behind. It has spent years developing, refining and adapting it.
“In a sense, there was already a natural convergence. Bluevine evolved to operate much like a bank while retaining its DNA as a technology company. That is precisely what we believe needs to happen with banks in the U.S. You must operate as a bank, but you also need to be a technology company to do it well.”
What does the acquisition mean for Bluevine’s operations in Israel?
“The talent is one of the most attractive aspects of this acquisition. Bluevine has approximately 180 R&D employees, most of whom are based in Tel Aviv. The Israeli ecosystem in which Valley operates is quite unique for a U.S. bank of our size. This is the result of years of operating alongside Israel’s technology industry. We believe the talent here is not merely important to us; it is strategically critical to how we envision our future operations.
“I think Tel Aviv will serve as our engineering hub. We are certainly open to expanding our engineering operations here. The more control we have over the technology and digital experience through Bluevine, the more opportunities we will have and the more we will be able to build.”
To what extent will Bluevine’s technology transform Valley’s technology?
“Significantly. To date, a large portion of our software development and engineering has relied on third-party platforms. Bluevine gives us the opportunity to build more of our software and customer experience in-house. We will leverage its technology for account opening and customer onboarding, and not just for small businesses.
“We also find Bluevine’s approach to risk management, including fraud prevention and anti-money laundering, highly innovative. These capabilities have the potential to transform how we operate across the entire Valley organization.
“Furthermore, Bluevine’s use of AI, along with the expertise of its data and AI professionals, will be relevant far beyond the company’s current operations. The knowledge and talent we are gaining will be an asset to the entire Valley organization and are strategically important to us.”
Is this Valley’s first acquisition of a company whose primary operations are based in Israel?
“Yes. Valley has completed approximately 22 acquisitions over the past 25 years, but this is our first acquisition of a company whose core operations are based here. The origins of the deal can be traced back to the acquisition of Leumi USA about four and a half years ago. Looking back at the journey we have taken since then, we have come to realize just how significant the opportunities in Israel really are.
“With this deal, we reach a point at which we have injected nearly half a billion dollars into the Israeli ecosystem over the past five years.”
Does this acquisition whet your appetite for further fintech acquisitions in Israel?
“I think we are all set on acquisitions for now. We need to digest this deal, and we have no acquisitions planned for the foreseeable future. However, the opportunities that emerge from Bluevine will likely far exceed what we can currently imagine.
“When Valley acquired Leumi USA, I don’t think anyone could have foreseen that five years later we would be acquiring an Israeli fintech company. So, five years from now, who knows what opportunities this deal might unlock, both in fintech and in terms of what we might be able to achieve in Israel?”
Valley is also involved in investments. Do you intend to become more active in investing in technology companies?
“We have a venture capital arm in the U.S. with approximately $200 million in capital, a significant portion of which has already been deployed. Furthermore, the international and technology-focused operations we gained through Leumi USA represent one of Valley’s most substantial sources of deposits. In effect, this serves as a gateway for Valley, not only to Silicon Valley and the West Coast technology ecosystem, but, most importantly, to Israel’s tech ecosystem.”
In recent years, banks have become prime targets for cyberattacks. Does AI make this threat even greater?
“Absolutely. Hostile actors can use AI to try to steal customers’ information and funds. But from our perspective, it is not just a matter of defending against external threats. Once you introduce AI into a bank, you must also ensure that the systems you deploy behave exactly as intended.
“The banking industry is built on trust. We therefore need robust controls, transparency and the ability to explain how an AI system reached a particular decision. We also need to monitor these systems continuously. You cannot simply integrate AI into a bank and blindly trust it.”
What will banking look like when customers arrive with their own AI agents?
“We are already seeing technology companies offer individuals their own personal AI agents. We must therefore prepare for a world in which customers’ agents interact with our own, carrying out tasks that people currently perform themselves.
“I don’t expect this to happen tomorrow, but in the not-too-distant future, we will see customer agents communicating with bank agents, not necessarily to seek advice or choose products, but to perform routine banking tasks such as verifying a check, re-signing a document or making a payment. These processes will become far more flexible than they are today, within a system that is currently quite rigid.”
But if a customer’s agent finds another bank offering a better interest rate, it could simply move the customer’s money. Wouldn’t that potentially create chaos?
“As with anything, I’m sure there will be a small group of people who try to take advantage of the system.”
