Interview with Lawrence Baxter 

​Bass Connections l Duke University l 2020

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Interviewee: Lawrence Baxter Location: By phone

Interviewer: Andrew Carlins Date: March 26, 2020

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The following is a selection from a recorded interview with Lawrence Baxter conducted by

Andrew Carlins on March 26, 2020. This interview is part of the Bass Connections American Predatory

Lending and the Global Financial Crisis Project.​​

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For full interview click here

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00:00 Andrew Carlins: I'm Andrew Carlins, an undergraduate studying economics and history at Duke University and a member of the Bass Connections team, American Predatory Lending and the Global Financial Crisis. Today is March 26, 2020. I am conducting an oral history interview with professor Lawrence Baxter, former

Chief eCommerce Officer at Wachovia. Thank you for joining me today.

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00:24 Lawrence Baxter: You're very welcome.

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00:30 Andrew Carlins: I'd like to start by establishing a bit of your background. I believe that you went to the University of Natal where you received an LLB, BComm and PhD in law and government regulation, and you've also received a diploma in legal studies and a LLM at the University of Cambridge.

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00: 47 Lawrence Baxter: Yes

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00:58 Andrew Carlins: When you first arrived at Wachovia. What were some of your

responsibilities? 

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1:08 Lawrence Baxter: I went there actually on a sabbatical from Duke Law School to help Wachovia with strategic
adjustments to their corporate positioning in the wake of legislation called the Riegle-Neal Act of 1994, which
made it possible for them to consolidate their different bank subsidiaries that spread across state lines. And

at that time, it was North Carolina, Georgia and South Carolina and a Delaware company that issued the credit

cards. And uh, I had been involved before then in some of the drafting of some of the earlier legislation, so I had an interest in seeing how it all worked in practice and they did not have anybody with that expertise.

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2:01 Lawrence Baxter:They asked me to come and spend my sabbatical there and I was working for the Chief Financial Officer, not in the legal division, but the contact was through the legal division. So I went in and prepared a study for them on how much they would save in eliminating duplicate regulation and compliance if they were to consolidate the three major banks into one based in North Carolina, which was then allowed under that 1994 legislation. And that was the bulk of my work.

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2:38 Lawrence Baxter: When I first went for the first few months of what was then a six-month sabbatical, I produced a report and the savings were so substantial that the company then adopted the recommendations and went about doing the legal work necessary to consolidate the three major subsidiaries under Wachovia corporation into one bank.

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3:02 Lawrence Baxter: And so we talked about a role that I might have, now that that work had been done. I didn't want to go into the  legal division because I had a great job as a lawyer at Duke Law School and I wanted to do something that was different. It was agreed that I should start an emerging businesses group, which I did.
The first business emerging was insurance, which was also another thing that had become possible for banks
like Wachovia as a result of judicial and regulatory interpretations. National banks were before that, very heavily
restricted as far as insurance is concerned. And because although I never had a clue about the insurance
business and I became head of it and, that was the first emerging business, I was not overly excited about
being involved in insurance because it just wasn't something I had a whole lot of expertise in. So, we brought
that business to a level of operational maturity and then I transferred it to the head of what we called
“personal financial management” at the time. It's known as “wealth management” nowadays. It was a kind of

business that very neatly complimented the financial planning for wealthier individuals. And we had also

cleaned up the credit insurance side, which, I think it was a bit exploitative, but that's a complicated subject.

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4:43 Lawrence Baxter: So, the question then was, what was the next emerging business? And I'd been very fortunate in having been at  Duke beforehand. I had become familiar with what was then still a very new concept: the internet. And I wasn't much of a technologist, but I was a user of graphical interface computing, starting with Windows  (Microsoft Windows), and then with browsers, as that browser technology came out and the very first versions of it, which ultimately matured to Netscape and Explorer, and then finally into the situation we have now with  Safari and Chrome and Firefox and so on. And it always seemed to me that once you could put a technology

platform in front of a customer, things were going to change, because the customer is going to be able to see

things they couldn't see before without going into a banking office and sitting down with somebody who has an

internal computer view of the general ledger in front of them. So I agitated for a while that we should begin what

was first called “eBusiness,” and ultimately came to be called eCommerce, that I thought at that time, really was
going to take over the business environment. But, I had met a lot of skepticism. The technology people were
all mainframe people. They were all trained in the IBM mainframe tradition and they had a very deep disdain
for the internet, which they thought was flaky, IP technology. And so, in frustration, the head of the general
bank said to me, just go and start it and I'll fund it, which he did. I was like, the dog that had caught the car,
I wasn't quite sure what to do with it because I wasn't a technologist, but I knew enough to have made friends
with some of the very few people in the technology side of the company who did have an interest in the internet.
And I assembled a group of them, who could help with designing browser technology, browser presentations,
the middle architecture and so on. And we started to develop internet online banking. That sounds commonplace
now, but in fact, there were only two other companies in the country that were trying it. One was First Union,
which was in Charlotte and the other was Wells Fargo in San Baxter - 3 Francisco, and they were (like my group
and I were) amateurs at it, we were dabbling.

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7:15 Lawrence Baxter:  So between the three companies, we were able to learn a lot from each other, and, start to build it. We were a little bit behind the Dutch bank, ING, and the South African banks, which had moved out even a

little earlier. But, we were early enough in the United States to essentially establish the framework for

internet-based banking. There had been telephone dial-up banking and computer-based dial-up banking before,

but none of it was successful at all. It failed for many different reasons. Well, I was lucky enough that I had not

only the support of the head of the general bank, but also the CEO, who, although he hated technology himself,

had the good sense to know that it was going to transform financial services. He protected me from the political,

shall we say, rivalry, of the traditional bank channels, who were not at all happy with the idea that a lot of their

services would be executed online without a middleman and woman and therefore without a very big role for them.

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8:33 Lawrence Baxter: The CEO protected me all the way through to the point where we were growing very rapidly in 2000, when we announced a merger with First Union. So, this was by chance, it had nothing to do with the fact that they were also on the internet. But, that led to a combination which I inherited and I moved from Winston-Salem to Charlotte and was then running what was probably the biggest e-commerce division in financial services in the country. And I had a very well-funded, highly energized group of people who were just terrific. So, that developed and it also started to absorb lots of different products. And, one of which actually that started earlier with the Winston-Salem based bank was the Charlotte company, LendingTree, perhaps the first online mortgage brokerage. We partnered with them very early on and literally rewrote their software to develop them into a viable platform, which as you know nowadays, is a major lending platform. We also rewrote the online banking software that we had acquired from Atlanta, based on a small online bank called Security First and made it industrial strength. And, we built then a couple of major online platforms over the next few years that had huge resiliency and could handle a lot of volume and reliability. We partnered with Accenture (formerly Anderson Consulting) in that process, and to a lesser degree with IBM, which was quickly adjusting itself from a mainframe oriented technology to internet oriented technology. One thing led to another until by 2003, we became the busiest sales and service channel in the company. By that, I mean the volume of dollars and transactions were bigger going through the internet than anywhere else in the company. We'd also pioneered mobile banking with the wholesale side of the company, the cash management side.

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10:43 Lawrence Baxter: And uh, One thing led to another to the point where in 2005, I started to realize that the internet had become so pervasive that what we were doing as a centralized organization was no longer productive because the rest of the company just simply needed to absorb and apply the internet. So, we embarked on a strategic review, which led to a big chunk of my division being farmed out to the business units. That was about 2005. Uh, and, that reduced what I was going to be doing in that capacity as Chief eCommerce Officer quite substantially. At that point, I thought, well it was probably time to go try new things. So I retired from Wachovia in 2006 to go and dabble with startups.

 

11:35 Lawrence Baxter: And it's important to note that date because of course the crisis blew up in 2008, so I was tangentially involved, not directly involved in that period, but I was still interacting with a lot of the people at the bank and hearing and being familiar with some of the changes that were happening. The ultimate irony was that Wells Fargo bought the then-combined First Union and Wachovia, so all three of the pioneers of online internet banking were all consolidated together into Wells Fargo, which I think remains one of the leading online eCommerce platforms in financial services.

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12:32 Andrew Carlins: I’m wondering if you could go into a little more detail about how online banking and digitization changed the world of financial services.

 

12:43 Lawrence Baxter: Yes. I think first and foremost, it switched the orientation of the design of financial services. So, in the older model, financial services and products would be pushed out to the public in a pre-designed form. You would have loan officers designing their products and you would have deposit takers designing things like certificates of deposit and so on, and a customer would see a range of options and they would have to choose from there. But the design didn't matter much because it was being, or at least the complexity of the design didn't matter a lot, because the products and services were being intermediated by banking staff. They could explain it to their clients and so on. With the internet, it gave a direct view into the company from the desktop of the customer. And that changed everything. It seemed there was a lot of skepticism because at first I remember people saying to me, "Well, you might get young people who are interested in experimenting with the internet who would have an interest, but the fact that they don't have much by way of savings or other financial products. They're not really important." I remember repeatedly being told that you couldn't make money out of young people. I was always very skeptical about that in two directions. One is I thought they hadn't looked carefully at the fact that young people will pay for financial services as well, but also that it was a very short term view because young people do get stuff after a while and they start to actually become very valuable customers. And it seemed to me to make sense to recruit them all the way from college. In fact, college financial services were part of my emerging businesses group. So, that's one thing. The second thing is that having a customer or client perspective as opposed to a producer perspective means that the presentation has to be understandable, if it starts to become a self-service thing and the browser enabled a customer to quickly compare with other products and other institutions, and unless they were presented in a very understandable way, one would simply lose that customer.

 

15:13 Lawrence Baxter: We used to run all kinds of metrics and they still do now (much more sophisticated by now, I am sure). One of these metrics was, how long a customer would be willing to wait after clicking on a link. And it was shockingly short. Remember we were dealing with very narrow-band internet at the time, so the delivery was slow, but after eight seconds of waiting a customer would click somewhere else. This changed the company mindset a lot. It made technology a key performance driver. It made design user oriented. In fact, we had a special lab called User Centered Design, in which specialists would run experiments with customers and other analysts would sit behind a one-way mirror and watch how the customers behaved. These specialists would make recommendations about redesigning the products that weren't actually being completely understood by customers. The move to internet financial services also meant that we were subject to much more competition because the customer could see what interest rate Wachovia was offering on a particular product, and they could immediately see what interest rates Bank of America (or NationsBank as it was then called) was offering.

 

16:29 Lawrence Baxter: And that made it a lot tougher for bankers. They could no longer assume the relationship between their customer and the bank itself was a very secure one. You had to have visually appealing browsing presentations. You had to have very deep reliability with your technology. You also had to have a huge escalation and network security because, as we see nowadays with cyber security, eventually the bad guys will find a way in. And, it changed the whole orientation of the company in terms of investment. Salaries used to be the overwhelming driver and they still are a big driver of the operating costs of banks. But technology just skyrocketed in its operating and especially capital expense, and it was hard to actually get the investment for it because of the short term views of the financial division, which would always have to be looking at whatever Wall Street and shareholders wanted over the next quarter, not the next twenty-four or more months, which is what a lot of these projects would take to do. In fact, some of the technology projects took much longer and you really had to be able to sell inside the company very hard to get the buy-in, to get the capital investment necessary to build the platforms.

 

17:55 Lawrence Baxter: The other side of it is new reputation risk, becoming very much more important and more fragile. So we started to become aware that if there was an outage, for example, for even a few minutes, certainly a few hours, that would quickly end up in the media in addition to inflicting financial losses on the company. We started to realize, as we had earlier with credit cards, that even a breakdown on the network of a few seconds during the holiday times could involve large dollar losses. This escalated the demand for skilled IT people and it required business people inside the company to be much more effective at engaging with the IT people, who were mostly engineers. And that then meant that I, among others, had to hire people who had the special skill of being kind of “bilingual” between business and technology. They didn't have to be technologists, but they had better understand how technologists thought, and the technologists needed to understand what business people really wanted. 

 

19:02 Lawrence Baxter: This was a major shift. I remember once, one of my direct reports saying to me about the challenge of the website alone. He said, "Lawrence, if you think about it, there's only two places that the entire company shows up at once. The first is the annual report, which is a glossy, 150-page production. And the second is the website." The customer can see everything on the website and it better look coherent and not disorganized and the presentation and navigation better work because they won't stick with you if it doesn't. So that whole mindset shifted everything. It changed things. And I had an unwitting advantage in that I saw things as a consumer, not as a technologist. So whereas the engineers would always be thinking about the engineering structure of the software and hardware, I didn't understand enough of that, but I would say, this doesn't work or I can't make any sense of that presentation, blah, blah, blah.

 

20:06 Lawrence Baxter: I had a very wonderful experience once. Microsoft used to fly me and a couple of other people out there often because they were trying to break into industrial scale technology platforms. There was a lot of skepticism because IBM had successfully convinced everybody that Microsoft was just a small retail platform provider. But Microsoft's ambition was that Windows NT, which was their industrial version of Windows, was to become a platform for big companies. And the place where you would really test it would be banks because the transactions, scalability and platform resilience mattered. It was all about money. So they would fly us out there.

 

20:53 Lawrence Baxter: My IT partner and I would take a group in the company plane. I remember at one time I was out there, one of the Microsoft people was very excited. He said, "You've got to come down and see what we're doing in this other lab." So I went with him and he introduced me to a young man who was clearly a technology wizard of some kind. He very excitedly showed me a very big computer screen, something we all now take for granted, but in those days was technology I'd never seen before in my life. It was like a 27-inch computer screen and there was actually a row of them. So, he said, "Let me show you what we're doing for mobile phones." And he showed me the browser that was called Windows CE, which way predated the iPhone. I looked at it and said, "that looks very cool." And he said, "look how fast it is." And I was amazed at how it would pull up information. Then I said, "So this is coming out on some kind of broadband?" And he said, "Oh yeah." And he gave me the statistics. I can't remember what they were, but the delivery was very fast for those days. I mean, it's nothing now. We've all got faster in our houses. And I said, "What's the size of this phone?" He showed me a fairly small phone. It looked like something that, I don't know if you ever remember, was called the Apple Newton, a little bit smaller than an iPhone. And he said, "that's what it's going to be." So I said, "you're designing this on a 27-inch screen. What's going to be the speed of the phones?" And he gave me some statistic, very low bandwidth. And I said, "But shouldn't you be designing this on the phone with the customers you are going to be using?" There was a sort of silence and people said, "Oh." Well, that was where my ignorance of technology helped and where  his expertise in technology didn't help because he imagined a world in which he and his fellow engineers were all operating the same way on very advanced technology, but of course the customer wasn't going to be using such technology at all. So we learned an awful lot through all of that.

 

23:09 Lawrence Baxter:The other thing that was very formative was that on 9/11, I was running a business meeting up on the 21st floor of what was then called One Wachovia, and all of a sudden one of the people in the room got up and walked out. He had gotten a message from his New York team on his Blackberry. I was a bit irritated cause I didn't like people just walking out of my meetings, but he came back and he came up to me and said, "Can I interrupt you?" And I said, "No, we'll get this meeting finished first." He said, "No, I have to interrupt you." He had gotten a message from our people in the World Trade Center, One World Trade Center, to say that they'd just been hit by what seemed to be a plane. And he said, come out here and look on the TV. And we went out and we saw the two towers going down. It was a horrifying experience.

 

23:57 Lawrence Baxter: The thing that kept the company going was the internet, because we all had to get out of the building because there was the fourth plane. The third one was run into the Pentagon and then the fourth plane was up in the air and they didn't know where it was. It ultimately crashed in Pennsylvania, but they were worried that because Charlotte was the second biggest financial center, that that's where the plane could have been heading. So security got us out of that building and we (the eCommerce Division) set up a command center with the internet. The whole company, or at least all the executives in the company operated through that command center.

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