Banks, And New York, Benefit From The FinTech Innovation Lab“We worry a lot about how do we make sure we are listening when we should be listening,” said David Reilly, technology infrastructure executive at Bank of America. “It’s all too easy for a large enterprise to focus on the very effective partners we already have, the very large and effective partners who give us great service. But that can make you sometimes tune out a little bit and not go out of your way to listen to a company with a great solution they they haven’t learned how to pitch.”
The FinTech Innovation Lab, which has completed its third year, is sponsored by the Partnership Fund for New York and run by Accenture. It brings together promising technology providers who want to work with leading banks for 12 weeks of intensive meetings and collaboration to help the vendors learn how to sell to banks and find the appropriate people within the organizations to talk with.
The Lab ended with a Demo Day last week where participating technology vendors presented to the participating banks including American Express, Bank of America, Barclays, Capital One, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan Chase, Morgan Stanley, State Street Corporation, UBS, Ally Financial and New York Life. Investment firms in the program include Bain Capital Ventures, Contour Venture Partners, Rho Ventures, RRE Ventures and Warburg Pincus.
The goal is to increase the number of financial technology companies operating in New York and expand the resources available to banks. Accenture launched a similar program this year in London with many of the same banks participating.
For the banks, which are constantly being pitched by vendors, the FInTech Lab is a way to see new technology that has been vetted through a rigorous screening process. t is also an opportunity to work with promising new providers in New York, without making the trek to Silicon Valley that some, such as Bank of America, do with their executives. Reilly said the bank takes 20 or more executives to Silicon Valley each year for a week’s immersion in hardware, software and the views of venture capitalists there.
“This was our first year mentoring in the FinTech Lab and we saw it as a great additional effort.” The companies the bank worked with were extremely strong, he added.
Bob Gach, managing director for Global Markets at Accenture, said the participants this year were a little more mature than previous years — several had raised some financing and most had products. Banks are still interested in very early stage innovation but they are also looking for immediate commercial solutions. The Lab both last year and this year has had some companies that are coming out of military and intelligence work and want to launch their products into finance.
“The products of Lab participants this year were a little further along, the companies have a customer base, although sometimes in other industries. The banks are looking for innovation but they also want commercial-ready applications.”
In the first year of the Lab the participants were very early stage companies, often spin-outs from financial services. Last year was a mix and this year the Lab had more growth stage firms with products largely developed, although perhaps in need of tuning for finance, agreed Maria Gotsch, president and CEO of the Partnership Fund for New York City. That shifts the Lab experience from product development to helping firms figure out where their product fits the needs of financial services and assisting them in finding the right people in a bank to talk with. The Lab participants from other verticals may also need some help in meeting the security and regulatory challenges of finance. For growth stage companies the Lab acts as a bridge or gateway to finance from other industries, she added.
“By growing the FinTech industry in New York City,” she added, “we will further cement New York’s reputation as the leader of innovation in the financial services sector, as well as reinforce our newfound reputation as a hub of technology development and talent.”
Lab participants in years two and three have been able to learn from graduates of previous years. Gach said that at the kickoff this year, Accenture invited last year’s alumni to come. One of the things they told the new class was that in most cases the benefit of the program cam well after it was formally completed.
“Ten to 12 weeks is short, but most of last year’s participants continued their pilots. They told the new class to do everything they could to get value from the program, but the number one thing is relationships and networking.” The relationships continue to be valuable after the formal program has ended.
The relationships depend on the quality of the selection process. Bank of American’s Reilly said it was important to get the banks investing their time in the program.
“Maria and the team did a great job. They did an outstanding job of selecting the companies; the quality control around picking those eight companies was terrific.”
Mark Harris, managing director at Bain Capital Ventures, one of the VC participants, said the Lab in some ways resembles efforts by other accelerators like YCombinator or Techstars or perhaps a dozen others that provide mentorship. What’s distinctive about the FinTech Lab, however, is that it provides curated access to large financial institutions.
The banks’ trust in the selection process gets participating companies into the same room with the CIOs of major financial institutions, said Harris.
“For a young technology company which has no prayer of getting within three layers of a CTO or a CIO at a big firm, that’s what makes this program so distinctive. The goal of the Lab is to get the very best companies, the ones who can become significant businesses in New York.”
Previous participants have done well. Several continue in proofs of concept with banks. TrueOffice, which turns painful training into playful games, won a $3 million round of funding, brought former SunGard CEO Chris Conde onto its board and worked out a deal with Thomson Reuters. Digital Reasoning continues to work with banks, Gach added.
For Accenture, running the Labs in New York and London has provided the firm with a front row seat at the table of innovation, he added. Like Bank of America’s Reilly, Gach said Accenture is a very large company that typically works with very large technology providers.
“It is hard for us to get into some of the smaller firms, so it is a wonderful experience to be able to work with our clients [and the fintech Lab participants]. As banks select what is important to them, we get to see their priorities, It allows us to be better service providers by understanding more objectively and intensively their priorities and what they want to accomplish.”
For the banks, VCs and Accenture, participation in the Lab is seen as a way to help the city prosper.
“It is an opportunity for us through the Partnership Fund for New York City to really play a bigger role in helping grow the technical workforce in the city,” said Reilly at Bank of America. “In addition, we wanted to get more exposure to some of the companies that would otherwise take longer to hit our radar.”
He was impressed with the way Accenture worked in the program.
“They were very understated in their role,” Reilly said. “There was no element at all of this being your typical professional services or consultative engagement, they were there consulting along with everyone else. It could have been a sales opportunity but not one shred of that through the entire interchange; they were there to support those eight companies.”
Gach said Accenture people found the program exciting.
“They find it exciting to work with the Partnership to be a force for good in New York. We do a lot of things in New York to connect to the community, and a number of our people said they were pleased to be apart of this.”
Photo by Tom Groenfeldt
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