Banks Figure New Ways To Work With Start-Ups

London’s fintech sector is thriving so it stands to reason that The City would benefit from its proximity to all of that innovation and that Britain’s leading financial institutions would be leaping at the chance to make use of the cutting-edge technology being developed in their own backyard.

Think again. “We are not seeing a great deal of activity,” says Udayan Goyal, founder of the Anthemis Group, an investment and advisory firm focused on re-inventing financial services through technology.

White: “Two and a half years ago we were vacant in the mobile space and today we are far and away a leader”

To be sure, British banks have started rubbing shoulders with start-ups: Level39, which bills itself as the world’s largest fintech accelerator, regularly sets up meetings between banking executives and entrepreneurs at its Canary Wharf location. Lloyds hosted a two-day hackathon at Level39 in October and has joined Rabobank and MasterCard in backing Startupbootcamp, a global accelerator group that has launched a specialist fintech initiative near London’s Tower Bridge; Anthemis and Level39 are launching an initiative to encourage banks to collaborate on technology development to accelerate some of the innovation; and a few London-based start-ups such as Digital Shadows, a cyber-intelligence service that protects clients from attack, are successfully selling their products into banks — even if the sales cycles remain tediously long.

“But it is still early days,” says Goyal. No British bank (or any traditional bank for that matter) has as yet successfully rebooted itself for the 21st century. That said, among financial institutions in London, Barclays, which has teamed with Techstars to launch a fintech accelerator in Mile End, is making the most high-profile efforts to transform itself, says Goyal.

Barclays has joined forces with Techstars to tap entrepreneurial talent and use it to build a new range of financial services.

Barclays is in the midst of a major overhaul initiated by CEO Antony Jenkins, who is working to repair the bank’s finances, streamline the business and restore its reputation following a series of scandals.

At the same time, Barclays, like every other bank, is figuring out how to stave off up-starts that are cutting into core revenues by offering services centered around big data analytics, mobile and social.

Barclays Banking On TechStars

It’s not surprising that Barclays has created a fintech accelerator in partnership with Techstars. “You only get change from large incumbents when they begin to truly fear what is happening — that’s when people start playing around with innovation and accelerators,” says Greg Rogers, who as Managing Director, Techstars, heads the London-based Barclays Accelerator. “And right now banks are under siege from every angle. My thesis is that it is not the startups they truly fear — it is when companies like Facebook apply for a banking license.”

There is speculation that Facebook plans to use its WhatsApp messaging service for remittance services. If true it would be following in the footsteps of China’s WeChat. A new add-on function allows its 600 million users around the world to send and receive transfers using the bank accounts linked to their WeChat profiles. Some 18 million yuan (about $2.4 million) was sent over WeChat within the first 24 hours after its launch in January, according to press reports.

Banks may be under siege from new media companies but fintech start-ups have issues of their own. It is notoriously difficult to sell into big companies and banks are no exception.

The Barclays Accelerator, a 15-week program in London run by a full-time Techstars team, aims to help both sides solve their problems.

The selection of the first 11 start-ups was announced in early June (see the box). These companies are being offered: first access to Barclays Pingit APIs; access to Barclays’ strategic investment team; introductions to relevant key decision makers within Barclays; insight on how to navigate the Barclays organization as a service provider; mentoring by industry experts and the heads of Barclays business divisions; and the possibility to pitch during a demo day streamed to Barclays offices worldwide. Techstars pledges to: make an investment of up to $50,000 in each start-up; provide workspace in Tech City; offer support in digital, design, marketing and other key areas; provide entry into the Techstars alumni network; and offer $200,000 worth of partner perks.

“We are taking the stakes in the start-ups so we are the advocate for them,” says Rogers. “Barclays does not get first rights of refusal or equity and participating in the accelerator does not prohibit the start-ups in any way from working with other banks.”

As banks focus on current cash cows and struggle to add basic digital services on top of their legacy systems, digital-only banks such as Fidor Bank, Moven and Simple have rushed to cater to digital natives who expect to be able to do their banking anywhere, anytime on any type of device and are looking for much more than just online access to a plain vanilla account. And a burgeoning group of other new entrants is offering innovative, cheaper, more efficient ways to move, manage and exchange money.

Unless they do something radical — and fast — banks are facing the possibility of increased marginalization, leading to a dramatic fall in profitability. Just as telecoms companies risk becoming dumb pipes, banks could be relegated to a role as clearing houses.

Against this backdrop Barclays has appointed Derek White, who helped pioneer Juniper, one of the earliest Internet banks in the U.S., as its “chief design officer responsible for translating customer insights into execution.”

After Juniper Bank was purchased by Barclays in 2004, White, who earned an MBA from the Wharton School at the University of Pennsylvania, was appointed to senior positions at Barclays Africa, the Emerging Markets division and Barclaycard International. But he is clearly not your father’s banker.

To begin with, he says his first question when thinking about launching a new service is, “If we were a start-up how would we do this?” And his professed role model is Apple.

It is no accident that the first product White and his team are credited with designing in-house — Pingit, a smartphone app launched two years ago that lets customers from any UK bank send money to one another using only a telephone number — started out as a product, like the iPod and iPhone, but ended up as a platform, like the Apple app store. The start-ups accepted into the Barclays accelerator in London will have access to Pingit’s API so they can help the bank offer new services.

The process used to develop Pingit says a lot about how the bank is trying to morph into a more entrepreneurial enterprise. Instead of the usual committee of 27 people spending three months studying the business case, White collapsed processes to enable the service to be conceived, designed and launched within seven months.

White assembled a core group of internal experts who met daily at 6 p.m. The meetings were anchored by design thinking — the concept of drawing more and writing less in order to visually understand what the customer does and needs — and adherence to an agile methodology to mirror the faster pace of start-ups.

“One of my favorite quotes comes from TED when Chris Anderson asked Elon Musk, ‘What do you fear the most?’ Musk’s response was: ‘Can we learn as fast as the world is changing?’ Trying to learn as fast as the world is changing is changing the way we work and is fundamentally changing Barclays.”

“Two and a half years ago we were vacant in the mobile space and today we are far and away a leader,” White says, pointing to 30 industry awards for Pingit.

While Pingit began as a consumer service, the bank says the app is responsible for attracting over 20% of its new corporate customers, who use it for payments and settlements in B2B2C transactions.

There have been at least 20 new releases of Pingit since its launch. The bank has received some 100,000 suggestions from users of the service and it has so far implemented about 75% of them, White says.

Going forward Barclays intends to explore many new areas for development, including positioning itself at the heart of m-commerce, says White, and to do that, it will not only have to transform itself internally but embrace innovation from the outside. That is why it started working closely with the start-up ecosystem some 18 months ago and recently launched the accelerator, powered by Techstars.

“We want Barclays to have access to emerging technologies — to work closely with companies that are creating the future of fintech services and the technology that underpins that and take the learnings into our core business,” says White.

But just as importantly Barclays wants to infuse its own business with entrepreneurial thinking. “That only happens when our executives are embedded into the entrepreneurial ecosystem — when we are not seen as a large corporate there to sponsor but one that is helping start-ups and the ecosystem to grow by sitting beside them to co-create things together,” says White. “The impact and playback into the organization of that collaboration is impossible to quantify but is hugely valuable.”

Seven Up: The Foreign Start-Ups In Future 50


Headquarters: London

What it does: Enables consumers who were not considered creditworthy to access financial products through a new type of credit scoring.


Headquarters: Arundel

What it does: Cloud platform for matching and negotiating master agreements for trading over-the-counter derivatives and commodities.

Crowd Estates

Headquarters: London

What it does: Allows borrowers to crowd fund the deposit on a home from external investors who want exposure to the UK housing market but don’t want to own a buy-to-let property.


Headquarters: Stockholm, Sweden

What it does: Provides an in-store experience platform that allows brands to engage with their customers when it matters most.

Market IQ

Headquarters: Seattle, Washington and Toronto, Ontario

What it does: Provides actionable intelligence for investment professionals based on structured datasets (company financials) and unstructured datasets (social, news, blogs).


Headquarters: Barcelona, Spain

What it does: Allows businesses to access the money locked in their outstanding invoices.


Headquarters: London

What it does: Tryum bills itself as “the Oyster Card for the restaurant industry” — a simple way to gain loyalty and pay at multiple retailers.

Virtual View App

Headquarters: London

What it does: Provides augmented reality and full 360-degree images for social and commercial use.


Headquarters: London

What it does: Provides an alternative to payday loans, through wage-backed pay advances.


Headquarters: Utrecht, Netherlands (moving to London in June)

What it does: Offers a cloud- based platform that helps employers compute and deliver salaries to both banked and unbanked employees.

Gust Pay

Headquarters: Cape Town, South Africa but moving to London and Amsterdam

What it does: GUST Pay, which has worked with brands like Adidas and Red Bull, makes music festivals cashless using Near Field Communication (NFC) wristbands and smartphone apps.



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