A good deal of the current conversation around the fintech trend focuses on disruption. The story is, young fintech upstarts are coming for the incumbent banks, hellbent on stealing their customers and eating their lunch, with better, more convenient digital services for customers.
It’s a compelling narrative - but the broader picture is more complex. For a start, the fintech label is pretty widely applied. While it’s true that many start-ups that fall under this umbrella offer competing services to the established banks - think of Transferwise in foreign exchange or Wealthfront.com in wealth management, for example - others are technology providers, working on products that take advantage of new thinking on new artificial intelligence (AI), cybersecurity or blockchain and could enable established financial services companies to offer new services to existing customers and attract new ones.
At the same time, there’s arguably as much collaboration as there is disruption in financial services technology, with large, established banks investing heavily in and partnering with start-ups. That makes perfect sense when you consider that, for many fintech companies, the liquidity events longed for by investors won’t be big, splashy IPOs, but trades sale to existing players in the market.
With that in mind, diginomica spoke to Bipin Sahni, head of R&D and innovation at Wells Fargo about the fintech space in general and the bank’s Startup Accelerator programme in particular. First launched in 2014, the program now has eleven companies under its care, says Sahni, with the latest recruits being two companies based in Singapore. They are:
Alpha Payments Cloud : the company’s payments-as-a-service platform, the Alphahub, enables banks, merchants, payment service providers and independent sales organisations to “access any payment type, any solution provider, anywhere iin the world”.
Jewel Paymentech : a developer of intelligence risk solutions, that enables banks and payment service providers to research and analyse merchants with a view to reducing transaction fraud risk.
These are just two examples in Wells Fargo’s broad-ranging effort to work with innovators in areas that include analytics, mobile technologies, cybersecurity, payments, lending, UI/UX design, artificial intelligence and virtual reality, among others.
It’s a mutually beneficial process, says Sahni. The bank pairs each start-up with a mentor from within the bank, who helps them figure out how to sell and deploy their technologies to larger companies and understand the regulatory pressures these enterprises face. In return, it gets an equity stake but, more importantly, a close-up view of new technologies and new ways of thinking.
We learn so much from start-ups about how we can build a better experience for our customers. And we get early access innovation - I live for that stuff. If I can work with a small start-up and do a small proof of concept, pilot or prototype and get some early customer feedback on that, then that’s a big win for Wells Fargo, in my mind.
I give a lot of credit to the fintech disrupters: smaller start-ups that are just starting out have actually helped us. We learn from them, we partner with them, but in return, they get a good experience of working in an environment of our size, because we do have stringent policies and procedures when it comes to deploying new stuff. So they learn how to deploy in an enterprise environment, which helps them in conversations with other customers.
That’s important, because the Wells Fargo Startup Accelerator Program isn’t an exclusive arrangement: in other words, participants aren’t restricted to only working with Wells Fargo, says Sahni:
The reason we announced the program back in 2014 was purely about getting early access to innovation. If you look at our portfolio of companies, they’re all in different areas and when we started looking at them and investing in them, we were a little early in certain areas - but some of them are now prime, like AI and virtual personal assistants.
It’s now getting pretty exciting for us because some of those companies are now getting investment from other banks, which we see as a great validation of our approach. They've gone on to raise more money, they've gone on to acquire new customers - that speaks for itself. It's a great value exchange.
Nor is the accelerator program Wells Fargo’s only innovation channel, he stresses. The bank also collaborates with universities, venture capital firms and other third-party accelerator programmes. Most importantly, it does so on a global scale, in recognition of the fact that the brightest ideas are not always to be found in Silicon Valley.
All of these activities have served to get smart minds thinking ahead in Wells Fargo’s own R&D operations, says Sahni. One idea that has been “cooking in the labs for some years”, according to Sahni, is about to make its debut: the Wells Fargo Wallet.
Announced in May this year and designed in-house, this mobile wallet enables holders of Wells Fargo debit and credit cards to make purchases by tapping their phone at NFC-enabled payment terminals, as well as check their balances within the app before and after making a purchase.
They’ll also be able to conduct ATM transactions without using a physical card, with more than 40 percent of Wells Fargo’s ATMs due to be NFC-enabled by the end of this year. The Wells Fargo Wallet has been tested extensively by bank staff across the world, with a view to launching the product later this summer.
According to Sahni, the bank’s focus on innovation through this variety of external and in-house approaches:
... has changed our culture. It’s helping to drive a very different approach within the bank. Connecting and bringing in new technologies from outside has really changed how we look at things. It’s got us thinking differently.