Digital Innovations Labs: A new source of ideas for Financial Firms, esp. Retail Banks

Digital is future and Innovation is key to survival. Many financial firms are beginning to understand that now is the time to invest in Innovation. Firms are setting up digital arms or labs to experiment to generate new ideas, fund innovations, and leverage disruptive technology for advancement.

Why now?

If financial firms don’t invest in Innovation, then tech companies like Apple, Google, Square and others will eat their lunch sooner or later.  Traditional retail giants are more worried about tech players than small startups.

Why separate “Digital Labs”?

Many financial firms are muddled in legacy systems/tech, legacy customer journeys making it difficult for them to be nimble, agile and experiment faster in this age of customer-centricity. Additionally, addressing security, legal and regulatory compliance has been the top priority – which too large degree prevents faster experimentation as every decision needs regulatory approval. Setting up Digital labs provides flexibility and freedom for creative minds to explore freely.

Establishment of Innovations arms or Digital labs helps firms with many things –

  • play with new technologies, fail faster, explore alternative efficient
    ways of doing business
  • instill Design Thinking (human/customer centered design)
  • develop Agile ways of working with 2-4 week release cycle (speed,
    flexibility, adaptability to changing requirements)
  • new product/service creation
  • create customer journeys that map to what’s happening now
  • experiment w/o worrying about legal/regulatory issues all the time
  • help develop startup type culture and thinking
  • create new business models

Instead of boiling the ocean i.e. changing everything at enterprise level, firms
are taking a step approach to identify biggest problems, prove out the
concepts first in Innovation labs before taking it to senior management for broader
acceptance.

Few examples of Innovation labs …

Many firms are focused on solving/innovating in retail banking sector
for retail customers. Iam yet to see labs innovating for Institutional
sector i.e. Mutual Funds, pension plans, hedge funds, etc., which
constitute a huge markets for these firms.

Most of these look like startup digs, check out below –

1. Capital One Labs

  • Experimenting with Mobile Banking
  • MakerBot for modeling things like pay dongles and an Oculus Rift for
    augmenting banking interfaces of the future
  • “Cafe” to engage with customers in friendly way. Feels to me that
    Capital one is emulating Starbucks model to engage customers, but in
    this case Iam quite not sure what the business outcome they want to
    achieve

2. Fidelity Labs

  • Artificial intelligence
  • Robotics
  • Wearables (experiments with Google Glass)
  • Pervasive video (help Financial Advisors connect with their customers)

Fidelity Labs has strategic partnerships with MIT and the Design Thinking practice at Stanford University.

3. MasterCard Labs

4. Visa Innovation Center

  • Experimenting with Mobile Payments, Digital Wallet
  • Visa Checkout

5. Wells Fargo Digital Innovation Lab

  • Mobile banking. Real-time account alerts. Person-to-person payments.
  • Making an appointment online with a banker.
  • Some of the ideas being tested at Wells Fargo Digital Labs include
    banking with a smart TV or in a connected home and video banking
    technology.

Conclusion

Iam loving all the experimentation and while critics might say innovation has to be part of core company culture and not separated as innovation labs, I still appreciate the bold moves these firms are taking. A great start – I believe this will eventually form company’s DNA. Great times ahead!

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