Market GravityFinTech vs. Banks: ways to play nicely.

December 2015

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Barely a day goes by without an announcement by one corporate or another as they launch their new startup ‘labs’, ‘incubator’, ‘accelerator’… For a corporate, playing with startups has never been more trendy.  Everyone is on the hunt ‘for the next Uber’ and we now have former heads of global banks talking about ‘the Uberization of Financial Services’, as banks struggle to implement new tech at the same pace as startups like Lending Club, Betterment, Simple, Funding Circle, Currency Cloud, Ripple, Stripe et al.

Part of the struggle is that banks have many different lines of business across retail and business banking, checking, payments, various forms of lending, insurance, savings and investments etc. Meanwhile, startups focus on a core use case causing the ‘death by a thousand cuts’ as this screenshot illustrates just some of the startups disrupting Wells Fargo.

HOT TOPIC | FinTech startups are one of the most talked about features of the financial services industry, and everyone wants to play….

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On a recent project engagement, Market Gravity facilitated a global study tour of 30 incubators, accelerators, startup gurus…whatever you want to call them. There are many different models and approaches to working with startups from having dedicated resources scanning the market for startups, the studio model of finding interesting problems then hiring entrepreneurs to solve them, building your own incubator program / curriculum, partnering with another commercial provider, running open innovation challenges etc.

They won’t all be right for your business objectives but we’ve pulled out some of our favorite examples from the likes of Barclays, MasterCard, Target, Wells Fargo and more for you to consider. What does your business really want to achieve from working closer with disruptive startups? 14 ways your organization can work with startups.

MODELS | …but there are lots of different models out there that may not all be right for your business

CHALLENGE SOLUTION EXAMPLEFrom a corporate perspective, startups often seem like a solution looking for a problem.

Create your own internal start-up focused on your problem.

Idealab identify opportunities, then recruit a CEO entrepreneur and form a new jointly-owned start-up.

CHALLENGE SOLUTION EXAMPLEWorking with startups is a leap into the unknown without the required resources in place.

Start small and build out. Getting everything in place to do it all is hard so start small, build towards a goal and learn along the way.

Bank of Ireland engaged local startups whilst they established the tech capabilities to engage with FinTech specialists.

CHALLENGE SOLUTION EXAMPLEBig businesses have 000’s of employees working on many internal projects that lack visibility to startups.

Learn the internal networks. Hire an evangelist who creates internal and external networks connecting startups with internal project teams.

The Barclays Rise team can identify the right stakeholders out of 130,000 employees and make personal introductions for startups.

CHALLENGE SOLUTION EXAMPLEYou have money to invest in startups but you are not a venture capital company.

Invest in relevant startups on your terms, e.g. less risk, more equity, place a team member on the board, organize secondments.

British Gas Ignite only invest in energy businesses with a social impact, taking more moderate return expectations than typical VC’s.

CHALLENGE SOLUTION EXAMPLEYou’re a globally diverse business trying to innovate at scale with subsidiaries facing multiple different challenges.

Set up a global framework for incubating startups and roll out local centers operating autonomously to make it real.

Telefonica set up Wayra, a global incubator program with 14 hubs in 12 countries, funding over 400 startups in the process.

CHALLENGE SOLUTION EXAMPLEStartups may have very little experience of what is required for a corporate to innovate or how they can work together.

Create a relevant mentoring program with the right individuals / companies to provide advice, help and introductions to startups.

Startupbootcamp provides a roster of 400+ mentors across financial services to provide sector leading expertise and introductions

CHALLENGE SOLUTION EXAMPLEYou don’t have the skills required to build something with a startup.

Create a mini hit squad that can quickly work out the do-ability of an idea.

Pearson created mini teams with startups using a product owner, designer and developer working in tandem.

CHALLENGE SOLUTION EXAMPLEIt’s expensive to get into bed with startups and develop talent.

Tap into existing startup hubs and base some of your teams there. Have them observe, interact with and learn from their neighbors.

WeWork have an international network of co-working hubs where corporates locate and interact with startups.

CHALLENGE SOLUTION EXAMPLEYour brand is not recognized as one that is prepared to work together with startups to drive innovation.

Host an open innovation event or hackathon to engage developers in your products, e.g. APIs

MasterCard host a global hackathon series where developers compete for a grand prize to help make their big idea real.

CHALLENGE SOLUTION EXAMPLEYou want to work with startups to drive innovation but local support networks don’t exist for them.

Nurture local startups to develop your own innovation ecosystem.

Communitech has worked with universities, startups and companies in the Waterloo region to develop Canada’s biggest tech hub.

CHALLENGE SOLUTION EXAMPLEYou need to stay in touch with the biggest trends disrupting your customer’s lives.

Create a tech showcase to try out new products hitting the market that you and your customers can learn from.

Target created the ‘Open House’ to build an environment to demo connected homes products where customers can learn.

CHALLENGE SOLUTION EXAMPLEThere is so much new technology out there, how do we know what will work for us?

Focus a product and development team around solving problems with a range of new technology

The team at Wells Fargo Innovation Lab create new solutions using everything from Oculus Rift to Smart TVs.

Dan Taylor, Managing Director, North Americadan.taylor@marketgravity.com

Iain Montgomery, Senior Consultantiain.montgomery@marketgravity.com

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