UBS won't like reading this: the money Switzerland's biggest bank spends on its innovation lab in London is a waste – an expenditure for PR purposes, as finews.com editor Andreas Britt writes.
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Level 39, fintech incubator – words that mean little to ordinary citizens, yet institutions that carry weight among the tech savvy. Level 39 is UBS' way of showing that it is taking the challenges posed by digitization seriously and that it is willing and eager to give customers want they want in a digital age.
Obviously, UBS isn't alone in doing so. There's hardly a bank remaining on the sidelines, be it the small cantonal bank, a traditional private bank in Geneva or global giant, the search for the best solutions for internet-based banking is a common feat.
«The innovation labs are PR pure,» says Mike Laven, fintech guru and head of London-based CurrencyCloud. The provocative thesis convinced his audience at Web Summit in Lisbon this week. «For structural and cultural reasons, big banks are incapable of implementing the innovations produced by their labs.»
«The picture also used by Blockchain CEO Peter Smith in connection with the big banks was the one of a supertanker»
His own firm, CurrencyCloud, operates a so-called Payment Engine allowing companies to manage their payments globally. Thanks to the application, customers are able to launch a multitude of payments simultaneously, monitor them over a period of time and pass on some of the common compliance issues to CurrencyCloud.
On stage with Claire Calmejane, the innovations director at Lloyds Bank, Laven was keen to emphasize that he didn't mean to disqualify the solutions designed by fintech specialists on the labs. However, he is taking issue with the ability of big banks to implement the solutions provided by the labs, radical as they sometimes seem.
The picture also used by Blockchain CEO Peter Smith in connection with the big banks was the one of the supertanker, which is very slow in reacting to new impulses from the bridge. Laven believes that the traditional banking institutes merely attach the new solutions to their old systems and don't actually try to change fundamentally.
«The Danish manager is convinced that sharing solutions for specific banking tasks is the solution»
This is not that surprising either. Banks spend at least 85 percent of the resources dedicated to the systems on maintenance, Kim Fournais, the founder and CEO of Denmark's Saxo Bank told finews.ch in an interview. That leaves only little for true innovation.
The Danish manager is convinced that sharing solutions for specific banking tasks is the solution, because it's crazy if everyone is doing everything. Buying custody solutions or compliance software frees up the resources needed to do properly what these firms know best, and that is advising their clients.
Before the banks can do so, they need to unbundle the value chain, make transparent the various tasks a bank has. The management then has to identify which of the various tasks can be done using external solutions.
«CEO Tidjane Thiam recently made clear that it will seek to pool some resources with other banks»
Credit Suisse will be heartened to hear the opinions voiced at Web Summit. The much-maligned management under the leadership of CEO Tidjane Thiam recently made clear that it will seek to pool some resources with other banks in a bid to cut costs. Reducing costs is what any bank has to think hard about given the zero or negative interest rates and difficult economic situation.
Buying solutions from external providers and forging partnerships versus the development of your own solutions – Laven's provocative opinion didn't unsettle Calmejane for one second. «Labs are key elements as catalysts of innovation within banks.»
«If you can work at a lab – great. It is good for you. But will it help them?»
For her there's no question about whether banks have to develop their own systems, sometimes in cooperation with fintechs, but also independently at the innovation departments. «The biggest innovation of the last decade was mobile banking. Who brought it to you? The banks.»
Be it as it may, the good news for the 50,000 nerds attending this week's conference is that there's no question anymore whether digital banking will make it or not. It's about how. And the well-funded labs at the big banks obviously present a great opportunity to some, Laven said: «If you can work at a lab – great. It is good for you. But will it help them?»
Andreas Britt is a writer and editor at finews.ch. He studied political science at the London School of Economics. Following his studies, Britt started his writing career at «Bloomberg News» in Zurich and Stockholm, covering political and macro-economic topics. Before joining finews.ch in 2015, Britt worked for eight years as a political scientist for the Swiss Confederation in Bern.
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