With so much change around us, it is perhaps not surprising that banks are sometimes seen as slow, outdated dinosaurs when it comes to adopting new technologies. With a new smartphone-based payment system being announced every few days, it is easy to think that banks and other financial services firms are being quickly sidelined.
In some areas they certainly are, but banks have long been enthusiastic adopters of new technologies. However, they are also intensely competitive and have been slow to recognise there are some technologies that are simply enablers and others which will give a competitive business edge.
Finding the boundaries between the two – the collaborative and the competitive – has been the subject of some intense efforts over the past few years, and these are now coming to a head.
But another drag on innovation that traditional institutions face, and new entrants don’t, is the enormous amount of regulation they have to comply with.
Don Callahan, chief technology and operations officer at Citigroup, witnessed an initial culture clash when Citibank, one of the world’s biggest banks, was working on the Google Wallet with one of the world’s most innovative tech companies.
Mobile technology and digital innovation are the future of financial services because it’s what clients and consumers want
“We looked at what they were doing and it was brilliant,” he says. “Then we asked them about the AML and they said, ‘what’s AML?’” AML is anti-money laundering, for which there are dire penalties for failing to comply, as HSBC experienced last year when it was fined the best part of $2 billion by the US authorities.
“They picked it up pretty quickly, but it shows that banks and banking have strengths that technology companies don’t,” says Mr Callahan.
It is becoming clear that operating in the collaborative space provides a way for financial services firms to hitch those strengths to tech innovation and overcome shared issues such as regulation.
To find where this is going on, look no further than Level 39 at 1 Canada Square, the central tower at London’s Canary Wharf, where the entire 39th floor has been given over to a specially designed financial technology or fintech accelerator, featuring development spaces, testing facilities and the kind of working environment associated with Silicon Valley giants like Google.
Level 39 officially opened last month, but has already been used as the venue for the launch of another incubator project, the FinTech Innovation Lab London. Backed by Accenture, with the support of London Mayor Boris Johnson, the Corporation of the City of London and venture capital firms, this is the first London version of an event that has been held twice in New York, where it is backed by Mayor Michael Bloomberg, himself a fintech billionaire.
The 2013 London event has picked seven candidate firms spanning a range of innovations, from Kiboo, a personal financial management platform aimed at teenagers, to an infrastructural innovation from Dublin-based Waratek that promises to save banks millions by allowing them to take existing applications, written in the common Java language, into the cloud.
“Mobile technology and digital innovation are the future of financial services because it’s what clients and consumers want,” says Shaygan Kheradpir, recently appointed chief operations and technology officer at Barclays Bank. “It’s so important that we continue to support entrepreneurs and start-ups that can really progress this further.”
Level 39 will also be the base for the Innotribe Foundation, a spin-out from Swift, the bank-owned electronic messaging network. Its showcase work, the Digital Asset Grid, is an attempt to find a way in which financial institutions can become a trusted mechanism for the digital assets of individuals.
Kosta Peric, head of innovation at Swift and co-founder of Innotribe, describes it as a “disruptive innovation”, pointing out that, as people increasingly live their lives in a digital environment, they will need to allow trusted circles to share some of their information.
With so much change around us, it is perhaps not surprising that banks are sometimes seen as slow, outdated dinosaurs when it comes to adopting new technologies. With a new smartphone-based payment system being announced every few days, it is easy to think that banks and other financial services firms are being quickly sidelined.
