It takes two


Having spent the past five years as CEO of a FinTech start-up working with the world’s largest banks I can safely say that the zero sum game of banks vs FinTechs debate has moved on – both sides have matured in the way they deal with each other. Today conversations are much more about partnership, collaboration and enablement.  Both realise they are better off together.

A kind of magic

So, most banks, when thinking about innovation, have deployed specific initiatives to help them bring in some of that FinTech magic from outside, whether in search of cultural change, investment returns, or simply cutting-edge technology. There’s a wide range of different models, ranging from:

•    incubators and accelerators (and by the way those two terms are very frequently confused) where established firms provide infrastructure, expertise and sometimes also capital to grow concepts into business plans and business plans into companies;

•    corporate venturing and principal investment, where firms take equity stakes in – in the first case – early stage, and in the second case –  more developed and generally profit-making companies;

•    and labs, for both research and development and technology transfer. 

The key is that innovation does not happen in a vacuum, it happens relative to something, and so the model chosen must fit with the reality of the organisation you’re trying to change. 

Demand driven

In the specific case of Deutsche Bank, we opted around two years ago to establish a global network of innovation labs, with presences in New York, Berlin, London and Silicon Valley and it is hugely gratifying to see the cross-pollination between the labs.

Thinking about the innovation ecosystems themselves, the Silicon Valley ecosystem was arguably the first, and emerged because there was critical mass of technology-focussed universities conducting leading-edge research and producing entrepreneurial graduates. Because of that, companies came with money to invest in new ideas. While of course there will always be tech entrepreneurs to be found anywhere in the world, hubs can generate a positive innovation cycle that becomes self-sustaining. 

In general, we find highly localised ecosystems bring together entrepreneurs with customers and, critically, sources of funding.  This seems to be the key to success in areas such as Silicon Valley, Tel Aviv, Beijing and Berlin, as well as in more established financial centres like London and New York. Asia in particular is a rapidly growing centre of entrepreneurial activity. Frost & Sullivan research indicated that the region is seeing more venture capital FinTech investment than the US or Europe.  Why? Because of proactive government involvement in building new FinTech hubs. 

Ajay Sunder, Frost & Sullivan’s VP of Digital Transformation noted, “Digital payments will remain the largest segment, primarily driven by mobile payment solutions, while blockchain will not remain limited to financial services.” 

Applied innovation

Our job in Deutsche Bank Labs is to catalyse the adoption of new technologies by the bank. We do this by identifying and bring on board companies and solutions that would not otherwise have reached us. You could call this applied innovation. So in practice our innovation labs do three things:

•    We are the ‘eyes on stalks’ that help Deutsche Bank understand how technology is developing and infer likely future development.

•    We act as connectors between the FinTech ecosystems – hence the locations of the labs – and the bank itself.  

•    We are an offline environment where concepts and technologies can be rapidly tested and iterated. 

So why does this model make sense for Deutsche Bank?

•    It delivers near-term results and has a relatively high hit rate, although by definition, not every project we take on in a lab will succeed. 

•    We’re positioned across Deutsche Bank’s business divisions, allowing us to identify common demand and leverage.

•    We have global reach in close proximity to start-ups, so that we can bring a start-up from almost any location in the world, to the relevant part of the business. 

I’m often asked which areas of technology we’re most focused on and it’s fairly easy to trot out the usual list, including blockchain, cloud technology, cyber security, RegTech, artificial intelligence and machine learning. Of course we are working on all of these areas, but I dislike this listing of technologies as a driver of the strategic agenda as it fails the test of being driven by the business. What I’d prefer to say is that we have a strongly demand-led agenda; we focus on the application of technologies that have the biggest impact on Deutsche Bank’s bottom line. Innovation is not in itself a customer. 

Working together

As I outlined at the beginning of this article, FinTechs and banks can ‘meet in the middle’ to make it easier to do business. My ambition is to make Deutsche Bank the first place a FinTech company would think of going to partner, and to do this we are focusing sharply on what we can offer as a value proposition to start-ups. 

Elly Hardwick is Head of Innovation at Deutsche Bank. The above text is extracted from a longer article, titled ‘A kind of magic’, in the H2 2017 issue of flow magazine. Published twice a year, flow magazine provides insights into the world of transaction banking in both e-magazine and print formats. For more information and to register to receive your future copies of the magazine, please visit