Banking Innovation Labs: How Banks Are Truly Innovating Like Fintechs
The Financial Brand
The world’s leading retail digital banking and financial marketing publication, and host of The Financial Brand Forum.
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.
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.
Those who are only comfortable using a technology after all the t's are crossed may not be able to keep up.
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Truist Bank
Truist's CIO for Consumer Technology and Innovation at Truist doesn't even relegate an innovation lab to the confines of the term 'lab.'
"When you look at many of these spaces, they aren't really so much innovation labs as they are just agile workspaces," says Meyer. "Often they feature open floor plans and a couple of conference rooms. Then they call it a day."
A special feature of the center are three "Innovators in Residence" offices. The concept for these is to bring leading-edge companies to the center to participate in projects and share ideas with Truist staff. The initial three companies are Amazon Web Services, Verizon and Unqork.
American Express
American Express, the payments mogul, has a far different take on innovation than the rest of the banking industry.
In fact, as far as AmEx goes, its strategy is far more comprehensive.
"We were very much building things 90% of the time," says Luke Gebb, EVP of Amex Digital Labs during a Banking Transformed podcast. "But now we follow a very diverse set of strategies to determine when we will build, when we will buy, and when we will partner."
Reality Check:
Pride of invention may have to be ditched.
"We think to ourselves, is there a player out there who could help accelerate our efforts?" Gebb, an Amex veteran, told Jim Marous. "It could come in the form of an acquisition. It could come in the form of a minority investment and operating agreement. Or it could simply be a partnership with another company."
Citi Bank
Not every innovation lab must be a physical spot, a brick-and-mortar location that engineers flock to in order to show off their technical know-how with new products.
To show off Citi's skills with technology, the bank designed a website for its innovation lab, which features a 360-degree virtual building with rooms showing details about the lab's new initiatives.
The first two "rooms" feature a welcome video and a "Meet the Team" set-up. The third room dives into the emerging technologies the bank is investing in while the fourth and fifth rooms are dedicated to Citi's current fintech partnerships and a showcase of how it innovates on a global level.
Mastercard
"We create and deliver the new products and services that are going to drive our growth in the future," Ken Moore, who heads Mastercard Labs, tells The Financial Brand. "Clearly, not everything's in my shop. We bring it down to risk, because there's risk, or at least commercial uncertainty, associated with every new product."
In the article on Mastercard, Financial Brand Executive Editor Steve Cocheo identifies key trends happening in the banking innovation space.
As he describes it, the market itself has become part of the development process, part of the lab. hink about the way software development has changed. Instead of moving from "2.0" to "3.0" and so on, many applications are now in a state of more or less continual updates and improvements — constant evolution.
"Some products and services operate in very heavily regulated areas so such speed is not always possible," Moore tells Cocheo. "Sometimes things take a slightly heavier lift. Even there, we are trying to apply the same principles and practices."
TD Bank
TD's new innovation lab is right down the street from its headquarters in Cherry Hill, New Jersey.
The bank remodeled its existing University City branch to enable it to make quick changes in format and layout. This is designed to accommodate tests driven by the TD Workshop innovation lab.
"We wanted the ability to test and iterate in a live store environment," explains Turley. (TD refers to its branches as stores.) The original branch had around 6,000 square feet of space, much more than a retail office requires given modern banking practices and traffic.
"So we transformed it into a place where we could innovate and provide space for meetings with the community," says Turley. Community outreach will be a major goal of the Workshop.
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These are fantastic examples of banks fostering environments for innovation. Collaboration with partners and industry experts is essential if banks are to lead the way with new financial products and creative solutions to the problems #banking customers face today.
Helping financial services leaders to navigate change & uncover new opportunities - by bringing new ideas to the discipline of the market. Corporate Innovation, Banking, Strategy & Technology Trends Expert
2yGood starting place for anyone wanting to understand how banks typically approach #innovation (or at least one aspect of it). But having worked in this field for many years, I know it’s only a piece of the puzzle. Much depends on the quality of leadership in theses hubs - and the strength of their underlying #innovationstrategy. Thanks for putting this out 💯 Jim Marous and team!