The Covid-19 crisis challenges banks to increase the pace of digital transformation. Fintech labs develop products to help.
Stymied by regulatory mandates, legacy technologies, intractable work processes and staid corporate cultures, large financial institutions have never found change particularly easy—or welcome. Still, banks and other financial institutions have long sensed a change in the air. Digital transformation (DX) has fundamentally altered shopping (e-commerce), interpersonal relationships (social media) and entertainment (streaming services), along with countless other business and societal functions.
Financial services tried to go along. They now use cloud computing to implement digital payment and transfer systems. They experiment with blockchain and other types of distributed ledger technologies. Some have even opened digital-only banks.
Was it enough? Covid-19 says no.
“Covid-19 is accelerating the need for digital transformation in financial institutions,” says Charles Gildehaus, BCG Digital Ventures co-founder and partner. “Smart financial institutions are doubling down on DX.”
They have no choice. Stay-at-home orders have left many institutions reimagining the future of banking and financial services. It’s a vision borne of the need to cope with newly distributed workforces.
“Covid is throwing the need for DX into sharp relief for these institutions,” Gildehaus says. For example, financial institutions without digitized hiring and onboarding processes are suffering more than those that have already automated those processes. Banks without collaborative communications technology are finding it more difficult to get work done than banks that have it.
Just ask Frederico Pompeu, the BTG Pactual partner responsible for boostLAB. “One of the main challenges banks faced after Covid-19 was the massive adoption of the home office without lowering the bar of the services and products that they offer,” he says. “In our bank…more than 90% of our 2,700 employees are working from home right now. All the major banks in the world are facing this same issue. This is a unique opportunity for the fintechs and banks that have a client focus and the best [user experience]. These will be the ones who will become stronger after this crisis.”
Gulru Atak, global head of innovation for Treasury and Trade Solutions at Citigroup, believes that digital transformation will affect both business-to-consumer (B2C) and business-to-business (B2B) banking channels. “Covid-19 is driving digital transformation,” she says. “Even corporate clients, who have traditionally been a little more cautious about using digital channels for banking transactions, are becoming more open to the idea. With Covid-19, things are changing drastically. There’s no going back.”
The 34 innovation centers, labs, hubs and accelerators examined by Global Finance all demonstrate active programs of startup support in the B2B fintech arena. Products nurtured range from payment systems for self-driving taxis to deploying geolocation software to better locate and manage bank branches. But there’s no denying that financial institutions, like the rest of the world, are suffering in the grip of pandemic. Innovation labs try to help.
Digital banking is top-of-mind for many innovators. Cipriano López González, vice president of Sustainability and Innovation at Banco Colombia, believes that “banking is an essential capability of society; it will always play a key role. But the physical bank will disappear and digital banks will take their place.” The first digital-only bank in Colombia arose from Banco Colombia Innovation Lab.
In Germany, Commerzbank Group Main Incubator is currently coping with the Covid-19 crisis in part by using video collaboration tools developed internally. “We managed to start working from home very early,” says incubator CEO Mark Spitz. Collaboration technologies are only one set of products Main Incubator has developed for the fintech field. Others include immutable distributed ledger technologies and technology to capture information from paper invoices, using that data to populate wire transfers.
Discussing the incubator, Spitz says, “We’ve already closed some funding rounds during this crisis. Thanks to our digital innovations, 2020 will not be a gap year for us.”
Joerg Landsch, Deutsche Bank’s head of Innovation for the Americas, believes that the most successful innovation centers balance “real-life opportunities today with the possibilities of tomorrow.” While he envisions a time when quantum computing will radically alter banking, he seems equally excited about a recent innovation that helps Deutsche Bank better handle the truckloads of paper regularly delivered to its document custody center.
Previously, Deutsche Bank employees had to manually process those documents on behalf of the bank and its clients—a costly, time-consuming and cumbersome operation. After studying the problem, Deutsche Bank Innovation Labs reached out to startups specializing in artificial intelligence (AI) and robotic automation. Working with the bank’s business, technology and operations arms, the lab assessed several solutions before settling on one offered by the New York City–based WorkFusion. Employing cognitive automation technology, this solution has dramatically reduced the amount of human intervention required to process paper documents, increasing profitability in the process.
Still, innovators can’t help but envision the future.
For Ram Shoham, co-founder of Accelerator Frankfurt, the future is blockchain. After five sessions focusing on an array of fintech offerings, Accelerator Frankfurt will now concentrate on this dispersed-ledger technology, the underpinning of cryptocurrencies such as bitcoin. Shoham believes that by tokenizing assets—or digitally listing and storing rights to an asset that would otherwise be difficult to transfer via cash or cash equivalents—blockchain will open up entirely new asset classes to investors.
“Now you invest in stocks, in bonds, in savings. You have cash,” Shoham says. “With blockchain, we’re going to see big new possibilities open up in real estate, in art, in technology. We’re going to be able to tokenize all these different investments that have not been available to retail investors before.”
Mike Todasco, director of Innovation for PayPal Innovation Lab, looks even further down the line. More than 20 million small and midsize enterprises (SMEs) now use PayPal as their payment system. Todasco envisions upping sales via augmented reality. Imagine watching a movie, and all the products shown in that movie are tied to a database. You like the actress’s shoes? The curtains in the hero’s bedroom? You pause the movie, click on the goods, and are linked to sites selling these products.
In these labs and accelerators, banks work with outside startups—and sometimes internal teams, as well—to solve challenges faced by the banks themselves and by bank customers.
Barclays Accelerator, Powered by Techstars
Improving the risk posture of online banks, blockchain and change management are key issues for Barclays Accelerator, powered by Techstars. A partnership between the bank and the Boulder, Colorado–based Techstars seed accelerator, Barclays Accelerator offers 13-week programs at Barclays facilities in London, New York and Tel Aviv. These accelerators connect startups with investment opportunities, mentorship and marketing support. Barclay’s and Techstars take a combined 6% share of each company accelerated.
BoostLab Powered by BTG Pactual
In an effort to create new products and services for BTG Pactual, its suppliers and partners, boostLab works with advanced-level scale-ups and startups already offering market-ready products. These companies may have already received seed or Series A funding.
Each lab session runs for six months. Among its startups and scale-ups are those focusing on fintech and related topics, including machine learning, artificial intelligence (AI), Big Data and blockchain. Admission is competitive: Of the 300 companies that applied for the lab’s last session, only eight were selected. The lab provides mentorship from senior executives, along with workspace and networking opportunities. While funding isn’t guaranteed, investment may be negotiated between the startup and BTG Pactual’s investment vehicles. The company’s Venture Debt arm also lends money to certain companies.
Among the innovations arising from the lab is a partnership between BTG Pactual and a fintech that helped the bank penetrate the small and medium-size enterprise (SME) credit marketplace, creating a new revenue stream for the bank. Its portfolio in this arena now runs about $500 million.
Citi Innovation Labs
When Citi Treasury and Trade Solutions grew tired of its expensive, labor-intensive accounts-receivable processes, the bank’s VC arm invested in HighRadius Corporation. This software company specializes in technologies to integrate receivables. The result was Citi Smart Match. This software program combines disparate pieces of Citi’s internal payment information with machine learning and AI. The result is a more automated, efficient way to compare payments received with expected receipts.
The partnership is the result of work done at Citi Innovation Labs, hosted by Citi Markets and Securities Services and Citi Treasury and Trade Solutions. The labs are located in cities around the world, including Dublin, London, New York, Singapore and Tel Aviv.
Work done at these labs consists of Citi-internal research and innovations and a four-month accelerator program for outside startups. “Our innovation is a combination of our own research and implementation and engagement with other vendors to bring cutting-edge technologies to ourselves and our clients,” says Nimrod Barak, global head of Innovation Labs for Citi Markets and Security Services. “Our innovation labs play a significant role in how we improve business.”
Labs focus on a broad array of challenges facing 21st-century financial institutions. These include determining how to deploy AI and machine learning to glean meaningful insight from vast amounts of bank data, improving security and efficiency, and refining the customer experience. Additional areas of concentration include forecasting, risk management, curtailing money laundering, and implementing high-scale, low-latency trading technologies.
The labs have accelerated more than 100 startups. At each session’s conclusion, Citi Ventures can choose to invest in these companies.
Commerzbank Group Main Incubator
Main Incubator is a research and development subsidiary of Commerzbank Group.
Its mission is to research and develop innovative technological solutions for Commerzbank Group and its customers. The incubator is divided into three departments: prototyping, corporate venture capital and community building.
Incubator CEO Mark Spitz believes that the incubator forms an essential function: nurturing the value that nimble startups bring to large financial institutions, while imbuing in those startups a respect for the fiduciary responsibility banks shoulder. “We’re the men in the middle,” he says. “We’re trying to help startups understand that this is a regulated environment. We’re looking after other people’s money. We need to be extra, extra careful.”
Typically, the incubator tries to limit the incubation period to three months. (“If you can’t show a concept within three months, we’ve either gotten to you too early or you’re not very good at presenting,” Spitz says.) During this time, the incubator’s staff of technological professionals asks probing questions about the potential project—questions that the startup itself might not have considered. “You can’t just say you’re working on blockchain,” Spitz says. “We need to know, what’s your blockchain framework? We need to punch holes in the idea in order to give the startups guidance.”
What type of projects are incubated? "Increasingly, the use of open source [programming] and common standards is helping us to drive innovation,” Spitz says. Specific products include a payment system for a Daimler/Bosch partnership that is developing self-driving taxis, and the use of quantum computing for easier securitization. In the age of Covid-19, the lab is also producing products to power digital banks.
Startups may potentially be funded by CommerzVentures, which takes a stake of less than 25% in each company funded.
DBS Asia X
DBS Asia X (DAX), an arm of DBS Bank, was launched in 2016. One of the largest innovation labs in Singapore, it operates out of a 16,000-square-foot co-working space. DAX has matched dozens of startups with operating units inside the bank, and with the bank’s SME clients. Many of these startups focus on fintech.
DAX plays a key role in DBS Asia’s efforts to leverage technology to redefine banking. For instance, DAX is part of the DBS Startup Xchange, a program fostering partnerships and mentorships with fintech startups to co-create solutions for DBS and its customers. The inaugural DBS Paradigm Shift Global Hackathon was conceptualized and held at DAX. It gathered 2,500 innovators from around the world to envision the future of banking.
In addition to nurturing startups, DAX hosted more than 200 events and tours in 2019. Among these were lectures by thought leaders from Amazon, Visa, Deliveroo, Unilever, Tableau and more. DAX also offers internship programs to undergraduate students.
Deutsche Bank Innovation Lab
Deutsche Bank’s five innovation labs are located in Europe, Asia and North America. They work with startups to identify, evaluate and enable the adoption of emerging technologies in support of Deutsche Bank’s overall digital strategy. Startups fostered have specialized in network load balancing, improving the user experience and machine learning, among other topics.
Elevator Lab Powered by Raiffeisen Bank International
Johann Strobl, CEO of Raiffeisen Bank International, believes that “RBI is one of the leaders in fostering fintech ecosystems.” It’s a fair assessment. RBI, whose branches sit in 13 countries throughout central and eastern Europe, founded Elevator Lab in 2017. It now offers three startup programs.
The four-month Elevator Lab Partnership Program is a remote program for later-stage fintech startups. The program helps these startups improve their products and scale them internationally. While collaborating with RBI, selected startups work with bank mentors to develop proofs of concepts. Startups may receive funding through Elevator Ventures, RBI’s venture capital entity, but RBI takes no stake in the startups. Elevator Lab also offers startups potential access to RBI markets, customers and business partners.
Startups in the Elevator Lab Partnership Program visit RBI Vienna headquarters occasionally throughout the program. Travel and accommodations are paid for by Elevator Lab.
Two additional programs are Elevator Lab Challenges and Elevator Lab Bootcamps. Both are organized by individual banks in RBI’s network. Elevator Lab Challenges offer later-stage startups a point of entry into the local RBI bank, along with the possibility for subsequent pilot projects. Elevator Lab Bootcamps focus on early-stage startups, offering them the possibility of developing viable products with the help of local experts.
Elevator Lab Powered by Tatra Banka
Elevator Lab powered by Tatra Banka (part of the RBI ecosystem, see Elevator Lab Powered by RBI, above) offers fintech startups the mentoring and processes needed to scale their ideas more efficiently. Startups work in conjunction with teams of bank market-research experts, programmers, designers, data analysts and business people. The teams’ goal is to create a bridge between innovative startups and the bank and to speed the development of the types of prototypes that can help the bank meets its digital goals.
The lab has partnered with companies such as Cisco and Microsoft to support startups working in the fields of geolocation and augmented reality. For example, startups working with Tatra Banka have developed a model to deploy geolocation programs to optimize the bank’s existing branch network. As part of this project, the bank is enriching its internal data with publicly available information that helps pinpoint sociodemographic factors that may affect customer needs and behavior. This model can be used to determine where to open new branches or relocate old ones. Additional projects have centered on investment banking and human resource management. The lab also hosts various business and technological lectures, events and hackathons.
OTP Bank Innovation Lab
OTP Bank Innovation Lab aims to ensure OTP’s competitive edge. The lab has four arms: OTP Startup Partner Program; internal innovation initiatives; the Innovation Branch in Budapest and a new Robotic Process Automation Competence Center.
The Startup Partner Program is an international program for scaleups and later-stage startups. The program gives these companies the chance to build goal-oriented, business-focused, and mutually beneficial partnerships with OTP. OTP and outside experts help the startups and scaleups refine their products. Business validation, customized mentorship and co-working space are all provided. Funding is potentially available via the PortfoLion Venture Capital Fund, part of OTP’s VC arm. The Lab also organizes regular, internal themed idea contests to unlock innovation potential within the organization. The OTP Bank Innovation Branch, located in Budapest, is a functioning bank branch developed to test novel customer servicing solutions, branch management methods, branch design principles and product concepts. Robotic Process Automation Competence Center was launched in late 2019 to foster the bank’s digital transformation by finding ways to automate repetitive, manual tasks.
RBL_Start is an arm of the Warsaw-based Alior Bank. It’s an accelerator that matches mature startups with bank departments and with Alior Bank customers that have expressed specific fintech or insurtech needs. Recent companies accelerated have focused on the fields of data analytics, customer engagement and security improvement. Selected businesses develop proofs of concepts for possible implementation in banking or insurance. The lab has just announced a special initiative for startups, seeking to help banks better operate during the Covid-19 pandemic.
Wells Fargo Startup Accelerator
The Wells Fargo Startup Accelerator is a six-month program that connects startups with a global network of business mentors, venture capitalists and financial executives. Upon
completion of the accelerator, some startups may be offered the chance to work with different lines of business within the bank. In exchange for an investment of up to $1 million, Wells Fargo Startup Accelerator takes a minority stake in each company. Recent companies that have taken part in the program include Ascent, a regtech compliance platform helping banks to navigate and comply with complex regulations worldwide.
YES Fintech is Yes Bank’s startup and scale-up accelerator. Its goal is to work with startups to co-create solutions for bank customers in 20 markets around the world. It provides startups with equity of up to $1 million without claiming a stake in the company. Areas of concentration include cybersecurity, analytics, process automation, smart decisioning, wealthtech and investech.
IN-HOUSE INNOVATION LABS
These innovation centers typically don’t work with outside startups. Instead, they gather innovators from within the financial institution’s ranks to design new fintech products and services.
Banco Columbia Innovation Lab
Nequi, the first all-digital bank in Colombia, was founded in 2015. Through March of 2020, it had about 120,000 monthly users. In April, as Covid-19 tightened its grip, that number more than doubled, to roughly 250,000.
Nequi is the child of Banco Columbia Innovation Lab, an organization charged with finding technological solutions to challenges faced by the bank and its customers. The lab innovates within five areas of study, including open innovation, analytics, digital banking and sustainability. The fifth innovation channel, dubbed “innovation with impact,” focuses on sustainability and serving the underbanked.
The lab strives to “decentralize and democratize innovation” within Banco Colombia and for bank customers, according to Cipriano López González, bank vice president of Sustainability and Innovation. “We want to vaccinate ourselves and our customers with innovation DNA.”
One recent innovation is Plink, an analytical tool that uses AI and machine learning to help Banco Colombia’s corporate clientele better understand customer behaviors. Discussing this product, López pointed to a bar in Medellín that experienced customer drop-off at 9PM. The reason? Bar patrons were heading out for dinner. After obtaining that information, the bar decided to start serving food. It later found that many customers were leaving immediately after dinner. Information from Plink found that the bar was too beer-heavy: many women preferred to have a cocktail after eating. So the bar added cocktails to its menu.
BNY Mellon Global Innovation Centers
BNY Mellon Global Innovation Centers operate out of nine locations—five in North America, three in Asia and one in Europe—where BNY Mellon professionals incubate new ideas and technologies. These innovators work with bank clients to identify business needs, then develop solutions to address those needs.
Capital One Labs
Capital One Labs are located in New York City and Arlington, Virginia, and build fintech products and services designed to advance Capital One’s business. Recent projects have focused on building infrastructure to accommodate machine learning, and a fraud data visualization tool that protects customer account information from malfeasance.
At Fidelity Labs’ eight locations, Fidelity product managers, designers, developers and engineers identify emerging opportunities for the bank. These innovators then imagine ways to capture those opportunities. They develop new ideas, test those ideas and build prototypes.
PayPal Innovation Lab
The PayPal Innovation Lab expanded from four cities in last year’s listing to six this year: Singapore; San Jose, California; Scottsdale, Arizona; Chennai, India; Bangalore, India; and Shanghai. The lab focuses on internal innovation to better serve clients. Areas of concentration include information security, payment infrastructures, risk and compliance, digital payments and customer profiling. To generate and implement fintech products and services, PayPal Innovation Lab collaborates with local universities for research and development. Recent programs include the inaugural Global Innovation Tournament. During this event, more than 5,000 employees brainstormed ideas in the fields of customer communications, workplace inclusion and international expansion. The winning idea centered on climate change. PayPal is now working to integrate climate awareness into its platform, encouraging users to reduce the climate impact of their purchases.
UBS Investment Bank Innovation Lab
Streamlining the processes involved with organizing more than 150,000 client meetings and events annually is only one technological innovation to come out of UBS Investment Bank Innovation Lab. Focusing on innovating business throughout the bank, the lab helps incubate and accelerate business ideas, quickly assess their viability, then find and implement solutions.
Lab personnel work with employees from every arm of the bank, creating multidisciplinary teams to understand challenges and opportunities, then developing new approaches to internal business operations and servicing customers. In its two years of operation, the lab has executed dozens of successful projects, introducing new products and reaping benefits such as increased revenue growth. One recent project transformed the bank’s voice trading business to successfully support remote trading during the Covid-19 pandemic.
VENTURE CAPITAL ACCELERATORS
These VC firms fund innovative fintech startups and scale-ups, using networks and savvy as well as money to boost long-term prospects for success.
Accelerator Frankfurt is a VC and private equity firm offering a four-month, go-to-market program for B2B fintechs, along with startups operating in the fields of cybersecurity and insurance, among others. The accelerator offers startups mentorship, co-working spaces and professional services including strategy consulting, legal consulting and marketing. Seventy percent of startups accelerated find companies to fund their projects. Accelerator Frankfurt sometimes provides direct funding as well, and has recently started an investment fund for blockchain startups.
DPixel is a Milan-based venture capital and management consulting firm that finances dozens of different types of startups, including fintech startups. Fintech areas of concentration include blockchain, AI and Big Data. Every year, dPixel analyzes more than 800 projects and meets with roughly 5,500 startup personnel. It helps generate more than €36 million ($38.9 million) in investments. dPixel offers pre-acceleration courses aimed at startups at the idea stage; acceleration programs targeting startups with a clear business model, preparing these companies for potential investment; and matching programs that connect startups with corporations in need of innovation.
FinLab AG describes itself as a fintech “company builder and investor.” This VC firm, based in Frankfurt and listed on the Frankfurt Stock Exchange, houses both an in-house fintech incubator and an incubator for outside fintech startups. Its aim is to scale those companies’ products and services beyond Germany to the greater European, then global, banking marketplace. Companies incubated work to secure digital identities, implement blockchain and develop cryptocurrencies, among other innovations.
Luiss EnLabs is an accelerator operated by publicly listed LVenture Group in conjunction with Luiss Guido Carli University. It typically hosts two five-month accelerator sessions each year, both focusing on early-stage startups. It provides companies with mentoring, management and opportunities for investor networking. It has facilitated about €70 million in funding for accelerated companies. Some of these funds come directly from LVenture Group. The rest has come from other VC firms and angel investors. Luiss EnLabs takes a 9% stake in each company accelerated. Recent companies funded include BigProfiles, a company that deploys AI to help banks better profile customers to predict their behavior.
Santander InnoVentures is the VC arm of the Santander Group commercial bank. It has created a $200 million fund to support the Santander Group’s innovation agenda. Its goal is to help fintech companies leverage Santander InnoVentures’ brand, network and know-how to grow their businesses. Santander InnoVentures provides these startups with access to industry experts and technology teams that give startups the technical support necessary to scale operations. The fund’s investment committee determines which startups receive investment. Among companies funded are Ripple—a global financial settlement solution that allows banks to transact in real time, across currencies, without the need of intermediaries. Another is Digital Asset, a provider of distributed ledger infrastructure to capital markets.
Startupbootcamp is a network of 23 seed accelerators that support startups in more than 20 industries, including fintech. It has accelerated more than 870 startups. Total funding tops €722 million, with each company accelerated receiving average funding of €907,000. Accelerator programs last for three months, during which time startups collaborate with a network of partners, mentors and investors. Recent startups accelerated have focused on new technologies for asset and wealth management, blockchain and cybersecurity.
These innovation centers are unaligned with banks or VC firms. Some arise from consultancies or university departments with close ties to the financial industry.
Beta-i is an organization created to boost entrepreneurship. It helps new and established businesses grow by offering innovation services in the fields of acceleration, corporate innovation and education. It also runs Lisbon Challenge, one of Europe’s most active startup accelerators. For its planned 2020 program, Beta-i reviewed more than 2,000 applications from companies in 10 industries. Its broad partner ecosystem includes companies such as Amazon Web Services and BNP Paribas.
Beta-i also supports a fintech-only program called the SIBS Payforward Accelerator. (SIBS International is a payment services company.) Since 2016, SIBS Payforward has worked with more than 250 startups. Areas of concentration include account management, AI/customer behavior, digital currency and open banking.
TechQuartier is based in Frankfurt and bills itself as “a creative arena and melting pot for entrepreneurs and innovators from the financial industry and beyond.” It has helped startups in nine industries raise more than €1 billion in total funding. More than 40% of startups nurtured work in fintech. TechQuartier’s broad partner ecosystem includes companies such as Visa, ING, IBM and Deutsche Bank.
DEVELOPMENT-ORIENTED INNOVATION CENTERS
These fintech innovation centers are run by governments, nongovernmental organizations and economic development organizations.
Copenhagen Fintech Lab
The Copenhagen Fintech Lab offers a range of startup and scale-up programs. Incubation programs run for three months, offering early-stage fintechs free co-working space, access to corporate partners, and opportunities to pitch to VC investors. The Nordic Fast Track Program targets Nordic startups outside Denmark that already have a working prototype, and that seek to scale the solution into the broader European market using Copenhagen as a base. This program offers work space, mentorship, legal help, data access and access to technology partners. The Copenhagen Fintech Accelerator is a joint effort between the Copenhagen Fintech Lab and the Danish Industry Foundation. Startups accepted into this program receive €60,000 in pre-seed funding, €50,000 in resources and tools from companies such as Amazon and Microsoft, office space, one-on-one training and the opportunity to present their proofs of concept to established companies. The 4-month Global ScaleUp program is designed to help Nordic fintechs scale globally, with a particular emphasis on selling in the English and German markets. Startups are offered strategy and growth workshops; trips to London and Berlin to meet potential partner banks, collaborators and investors; and country-specific seminars. Startups pay for access to this program.
Owned by the government of Hong Kong, Cyberport is an economic development agency charged with developing the tech industry in that city. So far, it has supported more than 1,000 tech companies in areas such as blockchain, cybersecurity, AI and Big Data. Cyberport’s co-working spaces houses more than 380 companies. Assistance for fintech programs includes professional support services, go-to-market support, compliance support and collaboration opportunities with financial institutions. Various funding programs provide anywhere from HK$100,000 ($12,740) in seed money to much larger amounts for incubation funding. Businesses can also take advantage of the organization’s HK$200M ($25 million) co-investment fund for digital entrepreneurs.
DIFC Fintech Hive
The goal of DIFC Fintech Hive is to create technological solutions for the challenges faced by finance and insurance companies in the Middle East, Africa and South Asia. Part of the Dubai International Financial Centre (DIFC), this three-month accelerator operates in the fintech, insurtech and regtech fields. Programs provide startups with co-working spaces, mentoring, workshops, industry expertise and marketing exposure. FinTech Hive doesn’t take an equity stake in startups and doesn’t promise funding. It does, however, connect startups to its investor network of angel investors and VCs—including the DIFC fintech fund. DIFC Fintech Hive is currently holding a Social Distancing Challenge, soliciting ideas on how to keep financial and insurance businesses running during the Covid-19 crisis.
FinTech Innovation Lab
FinTech Innovation Lab is a business development organization based in New York, with additional programs in London, Hong Kong and Cairo. It 184 alumni startups have developed nearly 430 proofs of concepts. Fintech Innovation Lab reports that it has raised more than $1.1 billion in funding for startups nurtured. Areas of concentration include mobile biometric authentication platforms, risk analytics, data mining and analytics, cryptography and regulatory compliance. The organization charges no fees and takes no stake in the company.
These hubs are hosted by consultancies seeking to find innovative tech solutions for their clients.
Bain Innovation Exchange
The pivotal word at Bain Innovation Exchange (BIE) is “ecosystem.” It refers to the revolutionary ideas emanating from an ever-expanding network of established businesses, startups, venture funds, entrepreneurs and BIE employees who work together to bring innovation to Bain & Company clients.
“Innovation is a top-of-mind topic for many CEOs,” says Rishi Roongta, BIE’s founder. “We work with key Bain clients on their innovation projects, and we have a number of mechanisms to help them.” Relationships with more than 100 VC funds, providing startups with the cash needed to develop products for institutional clients, is one such mechanism. Ties to the founders of startups and disruptors who can be called upon to develop solutions to solve the specific challenges is another. Innovation immersion conferences (called “treks,” and currently held virtually), hackathons and other events enhance the ecosystem.
Among established Bain clients, the question is always “how to accelerate the pace of innovation,” Roongta says. “These large companies need to think about how to make themselves more innovative and disruptive. They need to make themselves more efficient, robust and agile. They also need to think about how to partner with disruptors and relevant technology players to offer innovative products and services.”
To meet these needs, BIE professionals work with other members of the ecosystem to build, launch and scale disruptive new business products, market-test ideas, then pilot and scale new products.
BCG Digital Ventures
At BCG Digital Ventures—the innovation, incubation and investment arm of the Boston Consulting Group—roughly 1,000 people work at 13 innovation centers around the world, including at primary sites in New York City, London and Berlin. Their goal is to help their market-leading clients to innovate better.
Charles Gildehaus, BCG Digital Ventures co-founder and partner, believes that incumbent market leaders often have a problem with innovation. Entrenched business processes and legacy technologies leave them creaky, unable to deploy technologies to quickly respond to changing market conditions.
“Silicon Valley people are good at embracing the attacker mindset, good at making creative leaps, good at the art of the possible,” Gildehaus says. “They can reimagine broken supply chains, reinvent the customer experience. They can also run out of money and go bankrupt.”
The major incumbents sit on the opposite end of the spectrum, Gildehaus says. “These companies have more cash, more customers, more brands. They have all types of resources, but they’re bad at creative leaps. When you bring startups and these institutional clients together, you should be able to crush any traditional startup.”
At BCG Digital Ventures, business people, strategic designers, software engineers, product managers, user-experience professionals and others work to solve problems identified by BCG clients. Each solution emanates from a team of BCG Digital Ventures employees selected to solve the specific problem identified. Gildehaus calls each of these teams a “startup in a box.” Solutions are typically integrated as wholly owned subsidiaries of the initial client. BCG Digital Ventures have launched 120 of these ventures, 30 of which were developed for financial services clients.
Asked for some of his favorite innovations, Gildehaus points to a large automobile manufacturer that wanted to make car buying more consumer friendly. It worked with BCG Digital Ventures to develop an app that allowed consumers to shop for car loans from a variety of different finance companies before walking into a showroom. A second innovation focused on risk. When bank risk-management officers wanted to be better informed, BCG Digital Ventures developed a machine-learning program with natural language processing that scans roughly 30,000 news articles every night to bring to the app the top 10 stories covering stocks in the banks’ holdings. “The app tells the banks what they need to be worried about,” Gildehaus says.
Deloitte offer several program geared toward fintech innovation. Operating in the US and Israel, Deloitte Catalyst consists of Deloitte innovation teams striving to create technical solutions for the company’s institutional clients. The financial services team was founded about nine months ago, joining teams already working to serve the needs of life sciences, industrial and governmental clients, among others.
Financial services teams operate in United States cities in Silicon Valley, New York, Chicago, Austin and elsewhere. In Israel, financial services teams are based in Tel Aviv. These teams are comprised of strategists, developers and architects who design and test solutions in support of client engagements at large financial institutions.
Catalyst personnel prototype and extensively test solutions before presenting them to clients. “We take these prototypes as far as we can go without direct access to client data,” says Alaina Sparks, United States Fintech leader for Deloitte. “We want to make sure we have dug into the solution enough that we know that it will work in our clients’ environments.” Catalyst occasionally works with outside startups to solve specific client challenges. According to Sparks, the capabilities most sought by Deloitte clients include AI, workflow automation, onboarding, customer service and improving the efficiency of work processes.
Deloitte also hosts a more traditional fintech accelerator in London, which offers a co-working space and funding in exchange for a stake in the company.
Synechron is an IT and consulting company based in New York and operating in 18 countries worldwide. Synechron helps financial services and insurance companies implement digital transformation strategies. Its FinLabs component consists of 13 labs globally. Acceleration programs focus on blockchain, AI and wealthtech, among other topics.
Best Financial Innovation Labs 2020
|Alior Bank: RBLStart||Warsaw|
|Bain & Company||Boston|
|Banco Bradesco inovabra habitat||São Paulo|
|Bancolombia Innovation Lab||Medellin|
|BNY Mellon Global Innovation Centers||Multiple|
|boostLAB Powered by BTG Pactual||São Paulo|
|Boston Consulting Group||Boston|
|Capital One Labs||Multiple|
|Citi Innovation Labs||Multiple|
|Commerzbank Group/Main Incubator GmbH||Frankfurt|
|Copenhagen Fintech Lab||Copenhagen|
|DBS AsiaX (DAX)||Singapore|
|Deutsche Bank Innovation Labs||Multiple|
|DIFC Fintech Hive||Dubai|
|Fidelity Center for Applied Technology/Fidelity Labs||New York|
|Fintech Innovation Lab||Multiple|
|OTP Bank Innovation Lab||Budapest|
|PayPal Innovation Lab||Multiple|
|RBI (Raiffeisen Bank International)||Vietnam|
|Tatra Bank/Elevator Labs||Bratislava|
|Wells Fargo Startup Accelerator||New York|
Note: This year, the Global Finance list of worthy innovation centers expanded from 25 to 35. The honors include an entirely new category—innovation labs run by consultancies. In our writeups this year, we devote more space to our new honorees.