Digital Journey of Charles Schwab - Balancing acquisition and digital transformation - Case Study - Frank Schwab - October 2024

Charles Schwab's Digital Transformation Journey

Balancing acquisition and digital transformation

The Charles Schwab Corporation, founded in 1971, has evolved into a multinational financial services giant, with a market capitalization of USD 115 billion as of September 2024. The acquisition of TD Ameritrade Holding Corporation in October 2020 fueled substantial growth, expanding Schwab's balance sheet size from USD 243 billion in 2017 to USD 667 billion in 2021. However, the Federal Reserve's aggressive interest rate hikes since 2022 have posed challenges, impacting net interest margins, which fell to 59% in 2023 from a peak of 94% in 2020 and 2021.

Despite these challenges, Schwab has maintained effective cost management, keeping operational expenses at 0.16% of average client assets. The bank's digital initiatives, including a fully digital lending solution, enhancements to Schwab Personalized Indexing, and the launch of the iRebal platform, showcase its commitment to innovation. The integration with Salesforce Financial Services Cloud and the launch of the Financial Planning Action Center further enhance client-advisor collaboration.

While Schwab's digital transformation has yielded positive results, operational efficiency metrics have seen limited progress. The bank's Cost-to-Income ratio (CIR) increased from 59.2% in 2017 to 66.1% in 2023. During the same period, assets per employee increased only slightly from USD 13.82 million to USD 14.93 million, and profit per employee rose modestly from USD 0.13 million to USD 0.15 million.

Charles Schwab's focus on its investment and advisory business, evidenced by a threefold increase in active brokerage accounts and growth in client assets per employee, highlights its strategic priorities.

The Ameritrade acquisition contributed significantly to Schwab's growth, but also brought integration challenges. The bank's digital transformation journey, while successful in many aspects, underscores the complexities of balancing growth, innovation, and operational efficiency in a rapidly changing financial landscape. Schwab's ability to navigate these challenges and continue its digital evolution will be crucial for its future success.




🏔️ Daily trades peaked at 6.5 million in 2021.
 
⚙️ Average Order Execution speed is 0.03 seconds.

📈 Market share increased from 7% in 2018 to 13% 2023

🚀 Acquisition of TD Ameritrade Holding Corporation in Oct 2020 doubled Schwab’s balance sheet size

🚀 Number of active brokerage accounts tripled from 10.8 million in 2017 to 34.8 million in 2023.

💵 $2.3 Billion Investments in Software & Technology between 2017 and 2023

⬆️ Cost-to-Income ratio (CIR) increased from 59.2% in 2017 to 66.1% in 2023 

➡️ Assets per employee increased only slightly from $13.82 million to $14.93 million


Executive summary 🔗 https://bit.ly/3TRwcav


FrankSchwab.de

1. A Case Study on
Charles Schwab Bank’s
Digital Transformation Journey
Balancing acquisition and digital
transformation
Frank Schwab, October 2024
Selected Key Learnings
Daily Trades Peaked at 6.5 Million in 2021.
Average Order Execution Speed is 0.03 Seconds.
Number of Active Brokerage Accounts Tripled
From 10.8 Million in 2017 to 34.8 Million in 2023.
Cost-to-Income Ratio (CIR) Increased
From 59.2% in 2017 to 66.1% in 2023
$2.3 Billion Investments in Software & Technology
between 2017 and 2023
A Case Study on Charles Schwab's Digital Transformation Journey,Frank Schwab, October 2024FrankSchwab.de

2. A Case Study on Charles Schwab's Digital Transformation Journey,Frank Schwab, October 2024FrankSchwab.de
Charles Schwab As of 31
st
December 2023
Founded 1971
Headquarters Westlake, Texas, U.S.
Number of Locations 380
Market Capitalization USD 115bn (September 2024)
Balance Sheet Size USD 493bn
Profit USD 4.65bn
Charles Schwab in a Nutshell

3. A Case Study on Charles Schwab's Digital Transformation Journey,Frank Schwab, October 2024FrankSchwab.de
Charles Schwab‘s
Product Portfolio is
Broad and Deep

4. Average Order Execution
Speed of 0.03 Seconds

5. With the Acquisition of TD Ameritrade in 2020 Charles Schwab‘s
Balance Sheet Size more than doubled to 667 billion USD in 2021
A Case Study on Charles Schwab's Digital Transformation Journey,Frank Schwab, October 2024FrankSchwab.de
0
200
400
600
800
Balance sheet size in billion USD (year end)
2017 2023
294
667
2021
493
243
2019

6. Daily trades peaked at
6.5 million in 2021

7. 0
5
10
15
20
25
30
35
40
2017 2023
A Case Study on Charles Schwab's Digital Transformation Journey,Frank Schwab, October 2024FrankSchwab.de
10.8
34.8
Charles Schwab Tripled its Active Brokerage Accounts
x 3
Active Brokerage Accounts in million

8. Net Interest
50%
Asset Management
& Admin Fees
25%
Trading
17%
50% of Charles Schwab‘s Revenues are Interest-based
Revenue Sources 2023
A Case Study on Charles Schwab's Digital Transformation Journey,Frank Schwab, October 2024FrankSchwab.de

9. 2017
oApplication Modernization
oCloud
oStreetSmart & StreetStart Mobile
2019
oPaperlessaccount opening
oSchwab Advisor Portfolio Connect
2020
oSchwab Plan
oVirtual Practice Management
2021
oSchwab Starter Kit
oiRebalupdate
oSingle Digital Envelope
2022
2023
oSchwabTrading
oUpdate Mobile & Web Trading
oSchwab Model Market Center
Charles Schwab Digital Banking Journey
oProxy Polling Solution
oSalesforce Integration
oOnline Financial Planning
A Case Study on Charles Schwab's Digital Transformation Journey,Frank Schwab, October 2024FrankSchwab.de

10. 0
100
200
300
400
500
600
700
2017 2018 2019 2020 2021 2022 2023
2.3 Billion USD IT investments (2017-2023)
IT Investments in million USD
A Case Study on Charles Schwab's Digital Transformation Journey,Frank Schwab, October 2024FrankSchwab.de

11. A Case Study on Charles Schwab's Digital Transformation Journey,Frank Schwab, October 2024FrankSchwab.de
CIR increased from 59.2% in 2017 to 66.1% in 2023
59.2
58.5 58.9
64.5
59.4
57.9
66.1
52
54
56
58
60
62
64
66
68
2017 202120202018 2019 2022 2023
Cost-to-Income (CIR) ratio in %

12. 2017 202120202018 2019 2022 2023
A Case Study on Charles Schwab's Digital Transformation Journey,Frank Schwab, October 2024FrankSchwab.de
Minor Productivity Gains from 2017 to 2023
123,864
243,295
Net Interest Income per employee in USD
Profit per employee in USD
179,188
330,761
95,000
191,031
140,909
285,667

13. Charles Schwab’s Market Share almost Doubled in 5 Years
A Case Study on Charles Schwab's Digital Transformation Journey,Frank Schwab, October 2024FrankSchwab.de
7 13
2018 2023
2019202020212022
9% 13%12%12%

14. Learn more about Charles Schwab’s Digital Banking Journey
Executive Summary
A Case Study on Charles Schwab's Digital Transformation Journey,Frank Schwab, October 2024FrankSchwab.de
The Charles Schwab Corporation, founded in
1971, has evolved into a multinational
financial services giant, with a market
capitalization of USD 115 billion as of
September 2024. The acquisition of TD
Ameritrade Holding Corporation in October
2020 fueled substantial growth, expanding
Schwab's balance sheet size from USD 243
billion in 2017 to USD 667 billion in 2021.
However, the Federal Reserve‘s …

15. Globally more than 300 presentations
"Bitcoin, Blockchain & Co”
“The Future of Money“
”Digital transformation
in banking ”
“The rise of wallets & CBDC “
FrankSchwab.de
[email protected]
Luxemburg
Odessa
Miami
Zurich
Florenz
Prague
Singapore
Panama City
Frank Schwab
Strategic Advisor & Board Member
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