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.
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 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.
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.”