What the 5 best financial innovation labs are doing in 2021

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Financial institutions of all shapes and sizes in today’s world are judged on their ability to innovate. Ten years ago, the banking game was pretty straightforward. Now, however, the industry demands creative thinking and broader ideas.

To facilitate their work, many banks and credit unions play the partnership game, recruiting fintechs who are already talking about technology to build their back-end and front-end systems. Some of the best mobile apps and websites are no longer designed by a financial institution’s tech team – they use predefined or custom APIs from an external company.

On the other hand, other institutions continue to invest in their financial innovation laboratories. Granted, these labs aren’t getting the same attention they used to be – in fact, in some circles, they’re seen as a dying trend. Certainly, there was an element of fashion in the launch of certain banking laboratories. However, many of these innovation hubs continue to produce products or help startups create the latest fintech technologies.

In 2021, many innovation labs look different from previous years. Some are from mega-companies like Amazon, many from the big banks around the world, and still others are working quietly in the background at smaller institutions, trying to solve the unnecessary problems and friction that consumers complain about. Here’s what some of the innovation labs The financial brand noticed font:

( Read more: 7 financial institutions that take innovation labs to the next level)

Amazon’s Fintech lab

You could say that Amazon over the past decade has been at its “peak” when it comes to innovation. Not only has the retail and tech giant mastered e-commerce and in-person commerce, it has also broken into the financial industry and is fueling the fintech movement.

At the end of May 2021, for example, Amazon Payment Services launched its latest fintech innovation lab in Dubai, the chic and ultramodern city in the United Arab Emirates. The new lab is a hub for disruptive neobanks vying for space in industry. Its goal is to find new ways to innovate in digital payments.

The digital payments space has enormous growth potential. The transaction value of the global digital payments market was $ 5.44 trillion in 2020, according to ResearchandMarkets.com, and this is only expected to increase. The research firm expects it to reach $ 11.29 trillion by 2026.

Dubai is a perfect site for a payments lab. More than three in five consumers in the UAE expect their country to be cashless in the next few years, according to a Standard Chartered survey. The Arab country has been a key market for a wave of new digital-only fintechs and neobanks, many of which have payment-driven strategies.

Executives who run Amazon’s Innovation Lab said the new Dubai Lab, located in the Dubai Future District, “will host workshops for start-ups and other organizations from different industries such as e-commerce. , insurance and travel to understand the payment issues they face. “The National reports. Amazon says it will also partner with other payment technology software companies, such as Visa and Mastercard .

( Read more: What banks can learn from the head of Mastercard’s innovation lab)

Alloy laboratories

On the other end of the size spectrum, Liberty Bank of Middletown, based in central Connecticut, does not have a traditional innovation lab. As a community bank, it is difficult to launch your own technology center. Instead, in August 2021, he joined Alloy Labs, a consortium of community-based financial institutions across the United States seeking to pump money into the fintech industry.

CEO Jason Henrichs heads Alloy Labs, which works with nearly 50 small and mid-sized banks across the country. He says community institutions like the ones he works with are at a disadvantage compared to large financial institutions that have the resources to support advanced technologies.

“Small banks haven’t raised hundreds of millions of dollars in venture capital to finance the development of FinTech and they don’t have the balance sheet, the technology teams and the incubators like the bigger ones do,” Henrichs.

The main objective of Alloy Labs upon exiting the Covid-19 pandemic, explains Henrichs, is to invest in “automation based on artificial intelligence and integrated financial experiences”, in order to keep pace with challenger banks that are primarily mobile.

“When we get to the third wave – the transformation of the business model – we’re going to see some very interesting things,” he says.

Takeaway meals:

Every innovation lab is different, but financial institutions of all sizes can find ways to invest in the latest financial technologies.

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Citi Innovation Labs

2020 has turned out to be an exciting year for Citi’s Innovation Labs, which have evolved from face-to-face labs in Dublin, London, New York, Singapore and Tel Aviv to fully virtual environments. However, despite the setback, labs in 2020 “facilitated more than 950 startup meetings and presentations in 35 markets,” according to GFMag.

To show off Citi’s tech skills, the bank designed a website for its innovation lab, which includes a 360-degree virtual building with rooms showcasing details about the lab’s new initiatives.

Citi Virtual Innovation Lab

The first two “rooms” have a welcome video and a “Meet the Team” setup. The third room delves into the emerging technologies in which the bank invests while the fourth and fifth rooms are devoted to Citi’s current fintech partnerships and a showcase of how it innovates globally.

So far, 2021 has also been a productive year for the bank’s innovation lab. Citi recently teamed up with the Inter-American Development Bank (IDB) to help initiate cross-border payments between people in the United States and countries in Latin America and the Caribbean, via blockchain and token money, according to IBS Intelligence.

(Tokenization, in this context, refers to the scattering of blockchain “tokens” that represent assets that can be traded.)

Simplified, the system works like the IDB deposits dollar funds into a Citi account, where they are held, tokenized and transferred with digital wallet technologies. Then the funds can be converted to a local currency as determined by the Citi exchange rate.

( Read more: Bank OZK Hones Edge with Innovation Lab Highlighting Practical Change)

Morgan Stanley’s Multicultural Innovation Lab

Morgan Stanley does not only invest in fintechs in its innovation lab. The lab is designed to encourage technology companies of all kinds. Its summer 2021 cohort consisted of eight companies, two of which were financial start-ups: Cognicor and Lifesaver.

What is unique about Morgan Stanley’s Innovation Lab is its multicultural component. The bank conducted a survey in 2018, which found that investors “reported that multicultural, female-owned businesses are 80% less capitalized than businesses as a whole.” As part of the company’s Multicultural Client Strategy Group program, the lab is designed to promote financial inclusion by providing tech startups with access to investors and tools.

Definition characteristic:

Innovation labs can certainly have a theme. What sets the Morgan Stanley lab apart is its strategy of inclusion, as it seeks out multicultural technology companies in which to invest.

Cognicor is a digital assistant platform for financial institutions, supported by artificial intelligence software. Lifesaver creates universal mobile banking apps for banks and credit unions that don’t have the budgets or the know-how to design them.

Co-head of the program, Alice Vilma, says admission to Morgan Stanley’s lab is “more difficult than being accepted at Harvard.” Once admitted, companies enter a five-month program, which looks at managing financial and business strategy, marketing and branding, according to the program’s website. At the end of the five months, companies present their products to investors and customers in what Morgan Stanley calls their “Demo Day”.

This was the program’s fourth year, and Morgan Stanley’s Innovation Lab now has 51 alumni with valuations exceeding $ 450 million.

Wells Fargo Starter Accelerator

One of the early entrants into the world of innovation labs, Wells Fargo offers a program similar to Morgan Stanley’s, but devotes more time to its fintech partners. His program also lasts another month – six months. It offers a similar range of services and opportunities, including eligibility to receive up to $ 1 million in funding.

The Wells Fargo lab, now in its seventh year, claims 29 companies in its portfolio to date. This year, the mega-bank program was completely virtual.

In November 2020, Wells scored two more fintechs for its program – Extend and Oliver. Extend is digital payment infrastructure software that banks and credit unions can use to upgrade their card products. FinTech products include aggregated virtual card APIs and a tokenization service.

Oliver is a legal services platform that enables all parties involved in financial transactions to collaborate on products and adhere to compliance guidelines.

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