Rather than resign themselves to fate and surrender market share as they are increasingly marginalized by fintech startups, many of the world’s leading banks are taking the lead with a proactive strategy: launching their own internal innovation labs.
These aren’t just hollow corporate initiatives designed to generate some PR buzz. And they go beyond the typical R&D department you might find tucked away in some corner office. They are bona fide programs, with their own slick facilities backed by a real investment — both money and manpower. They are fintech incubators, startup accelerators and HR recruitment tools that will help position the institution for success in the Digital Age.
The only problem? There aren’t many of these innovation labs to be found in the U.S. The majority are found in places like Europe and Asia. American financial institutions had better be careful, or they will fall behind in the innovation arms race that will define the future of banking for the next 20 years.
Here’s a look at what a handful of leading banks are doing with their innovation labs — the goals, objectives and benefits they hope to realize.
Deutsche Bank – Digitization Labs
Deutsche Bank has created a total of four innovation labs already — the first in Berlin, one in Palo Alto, one in New York, and another in London focused solely on blockchain technologies. Deutsche Bank says they plan on opening even more labs in other cities, with one likely located in Asia.
Deutsche Bank’s labs have three principal goals: to help the bank evaluate and adopt emerging technologies, to develop a culture of innovation, and contribute to the bank’s digital strategy.
The lab in California draws off the Silicon Valley’s tech-savvy workforce, tapping developers and engineers to leverage machine learning and artificial intelligence applications. They are also looking to forge more relationships with digital innovators like IBM, which has contributed resources, expertise and relationships to the bank-led initiative.
The Berlin lab hosted a hackathon, a three day event where a jury judged entries from hundreds of enterprising young programmers, developers and designers. The aim of the event was to specifically identify solutions that could be developed as part of the Deutsche Bank API, and quite possibly recruit talent to add to the bank’s tech team.
“It is important for us that our new API is been tested first-hand by the best programmers,” the bank explained on its website. “By opening our digital platform to external parties, we are strengthening our ability to innovate and compete. We want to work with vibrant creative teams and see how their ideas come to life.”
Deutsche Bank doesn’t just use its labs as R&D centers. They also use it as an incubator for fintech startups. In the first week following the opening of the Palo Alto lab, the Deutsche heard elevator pitches from 15 startups hoping to work with the bank. The early-stage start-ups pitched a range of ideas including software that analyses data in documents, an online identity verification portal and a number of blockchain-related initiatives.
The lab has essentially become an accelerator for local startups, with a mix of characters including bank staff, venture capitalists and hopeful entrepreneurs. So far the team has met with more than 500 startups in Silicon Valley, introducing those with the most promising ideas to representatives from Deutsche Bank’s business divisions to trial and develop technology solutions. This gives the bank a front row seat in the fast-paced fintech world — and a potential preferential stake in any new innovations that look promising.
“We want to make Deutsche Bank the first stop for start-ups,” explains Elly Hardwick, Head of Innovation at Deutsche Bank. “Through our global network of innovation labs, we are combining fresh ideas from fintechs with the scale and infrastructure of a global bank.
Deutsche Bank’s innovation lab in Berlin.
Axis Bank – Thought Factory
According to Axis Bank, they were the first bank in India to introduce a dedicated innovation lab. Unlike other institutions that tend to use the generic “Innovation Lab” descriptor, Axis has called its facility the “Thought Factory.” This creative name not only captures the lab’s mission, it is also more likely to resonate with the programmers and developers who are being courted by Silicon Valley startups with cool monikers like Zynga, Spotify and Tumblr.
The goals for Axis Bank’s lab are much like Deutsche Bank. They are looking to constantly innovate and introduce breakthrough banking solutions using a two-prong approach: an in-house innovation team, and an accelerator/incubator program.
They use their lab as a recruitment tool to find talent. Under their ‘Hack for Hire’ program, they invite would-be fintech innovators from across the country to the Thought Factory, giving full-time jobs to the best and brightest. And similar to Deutsche, Axis will conduct its own series of hackathons.
The Thought Factory will also work closely with the startup community. The bank will be reaching out to startups throughout India is a series of roadshows to curate participants in for the program. Startups will benefit from having access to a wide range of technical experts who will provide help them validate, fine tune and scale their ideas.
To run the accelerator program, the bank partnered with a company called Zone Startups. Selected startups will be taken through a structured mentorship program for fine-tuning, validating and scaling their business. At the end of the three month program, the bank alongside Zone Startups, organizes an “Investors Day” in order to facilitate investments in the budding companies.
“We can tell startups the problems that are there, and they can help us with solutions,” says Rajiv Anand, Executive Director (Retail Banking), Axis Bank. “Startups get the benefit of our knowledge and basic infrastructure, and they get to meet other startups. There can be cross-pollination amongst them as well.”
The first batch of startups to join the Axis program have been focused on interesting uses for AI, big data, digital payments, analytics, blockchain and biometrics.
To help get the Thought Factory off the ground, Axis Bank partnered with Amazon. Amazon will also entertain pitches and let aspiring fintech startups engage with its team of experts. Amazon will also host various types of events — thought leadership talks, bootcamps and workshops.
The bank is also working with NASSCOM 10K, tech partners, various VC firms, global banks and academia for creating a vibrant and successful ecosystem.
Standard Chartered Bank – eXellerator
Standard Chartered Bank opened its innovation lab, called the eXellerator, located in the bank’s main office building in Singapore.
Employing about 15 to 20 people, it works closely with various business units within the bank to monitor trends, leverage emerging technologies, identify new tech partners and explore future applications for data analytics.
The bank’s group chief information officer, Michael Gorriz, said the rise of fintechs has created greater pressure on banks to enhance the customer experience, reduce costs, mitigate risks and put power into the hands of consumers through technology innovations.
“The eXellerator expedites the implementation of digital solutions to deliver more value to our clients with improved service offerings and new business models for a new generation,” Dr Gorriz said.
By creating a lab such as the eXellerator, Standard Chartered has been able to forge relationships with governmental bodies. The bank has entered into a multi-year agreement with Singapore’s national information and communications technology research institute to jointly work on data science research project. This affords Standard Chartered access to many of the country’s top data scientists and software engineers.
Emirates NBD – Future Lab
Emirates NBD, one of the biggest banking groups in the Middle East, has established what it calls its “Future Lab.” The bank describes the innovation center as a key component in its digital strategy that will enable and accelerate the development of next-generation digital and mobile banking services.
The first of its kind in the UAE banking sector, the lab will act as a strategic think tank and testing center for innovative ideas, products and services.
Managed and operated by an in-house team of business and technology experts, the Future Lab is focused on three specific areas:
1. Digital First – to explore how digital can truly impact the present and future of banking and offer a differentiated, more seamless and convenient experience for consumers.
2. Self-Service – to encourage the adoption of digital products and services by enhancing their user friendliness and engagement value.
3. Process Innovation – to achieve operational efficiency by optimizing and aligning internal processes.
“The Future Lab will be the foundation of all that we innovate, create and test in our digitization process,” says Abdullah Qassem, Group Chief Operating Officer at Emirates NBD. “The lab will essentially be the home of innovation at Emirates NBD and help cement our position as the region’s digital leader in banking.”
In its first year, Emirates NBD’s Future Lab plans to collaborate with existing partners and clients in the private and public sector, as well as identify fintech innovators who can create pioneering concepts and then take then to prototype.
United Overseas Bank – The FinLab
Back in 2015, another financial institution based in Singapore, United Overseas Bank (UOB), launched an innovation center dubbed The FinLab.
The bank partnered with Infocomm Investments to promote and to accelerate the growth of the best and brightest fintech startups and innovators in the region. This joint venture aims to help develop innovative startups that are focused on creating solutions in areas such as payments, wealth management, customer experience management, big data analytics, mobile banking and SME banking.
The FinLab hopes to accelerate the innovation journey of at least 30 startups
in a series of three-month programs.
According to UOB, fintech startups from across the region will be guided by experts at the FinLab. These include software developers, product managers and senior bankers from UOB. The startups are also mentored by successful entrepreneurs and venture capitalists such as Leslie Loh of Red Dot Ventures and Eddie Chau of TNF Ventures.
“The FinLab brings together Asia’s most promising startups and UOB employees to help transform emerging technologies into what could be the future of financial services,” says Janet Young, Head of Group Channels and Digitalization at UOB.
It seems most financial institution lack confidence in their own employees ability to innovate, but in an interesting development, UOB’s FinLab is also open to all UOB employees.
UOB’s FinLab holds innovation workshops and hackathons where more than 150 employees participate. They get to try their hand at solving various problems and tackle business challenges — activities designed to help staff identify problems and experiment as they develop innovative solutions.
Young says UOB wants to foster a culture of inclusion when it comes to innovation.
“We want our colleagues to enhance their skills in the field of innovation, and encourage them to join the program.”