Category: Fintech

During the course of my career I have learned that innovation has to be open and collaborative. Gone are the days when companies worked behind closed doors to develop the “next big thing.” Today you need to be part of an ecosystem, to collaborate and partner with the broader community in the area of innovation relevant to your organization. That means being transparent: sharing your ideas, learnings and results with others. And it means being open to those that others share with you.

As a senior executive at two global corporations, I championed the setting up of small innovation labs and teams in order to be able to quickly and efficiently develop, prototype and test new ideas. And I insisted on them being located outside the company, preferably in a collaborative environment with startups or others working on the same topic, so we could foster collaboration and exchange with members of the broader ecosystem.

As an example, when I was Group CIO at UBS we became the first global bank to join the Level39 accelerator in London. This allowed our innovation team to work together in an open and collaborative environment with some 150 other startups, and to be full participants in an exciting innovation ecosystem.

This kind of transparency is not always easy for people to embrace, however, especially in competitive industries. I can fully understand this. But in my experience it is a hurdle I think anyone facing an innovation challenge must get over.

Here is why.

Rubbing shoulders

Firstly, today’s tech environment is both highly complex and very fast moving. That makes it increasingly difficult for people to innovate on their own: there is a risk that you will miss important developments.

Secondly, people increasingly recognize the value of crowd intelligence: the idea that large groups of people make better decisions, or solve problems in a better way, than individuals do. Of course, crowds can make big mistakes too. But it is no accident that, even in our highly interconnected world, industries still tend to congregate in specific locations.

The tech industry in particular has embraced open-source, collaborative approaches, and with great success. We have Silicon Valleys and Alleys among other things because technologists see a clear net positive value in rubbing shoulders, even if they are competitors. Other industries can and should learn from this.

Third, collaboration, especially between companies in different fields, fosters cross-pollination of ideas. We see this very clearly in FinTech, where banks gain insights from tech companies into what is happening with the technology while they enrich technologists with their perspective on banking and finance.

Fourth, working in a collaborative environment with potential competitors provides a natural platform for testing your ideas. Either through direct feedback or observation you will be more quickly able to judge what you are doing if you do it as part of a larger community.

Finally, and in my opinion not to be underestimated: being willing and able to do your innovation in an open way can be good for your organization’s reputation. As members of the ecosystem you can increase your credibility among potential partners or suppliers. You can also demonstrate to your clients your continuing efforts to improve. And if your company gets positively associated with an important technological trend you can increase awareness of your brand among the general public.

So while working in a vacuum may be tempting on some levels, I think it is an increasingly ineffective approach. My experience is that openness can turn good ideas into great ones, and that great ideas benefit all.

This was originally published at FinTech Pulse, my blog post featuring megatrends, digital transformation and innovation in the FinTech industry.  Read more at www.oliverbussmann.com/blog and follow me on Twitter @obussmann.

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“How did you do that?” “What do you need to be successful?”

Since leaving UBS I have been hearing these questions often from people interested in my experiences orchestrating FinTech innovation. Typically the questioner is someone facing challenges similar to the ones I have faced in my career as a Chief Information officer (CIO): not just innovation, but innovation in a complex, global organization, with multiple business lines and geographies.

My answer always runs along the same lines. As a CIO you must first keep in mind that business is in the driver’s seat: innovation is not a tech play, it’s a business model, product and service one. But in today’s tech-driven environment, the CIO generally has the conductor’s baton in his or her hand. That means it’s up to you to orchestrate the change. You need to do so from front-to-back, covering all aspects from generating ideas to going to market.

Having done this several times, I’ve thought a lot about the process. For me, the following stages are essential:

Illustration: Jon D. Harper – Strategy and Innovation Process Improvements

• Find key trends: You need to know what is coming down the pike in tech, and how it may be used in the context of your organization.
• Understand business priorities: You must thoroughly understand where the business is today and, more crucially, where it would like to be in three to five years.
• Decide on the tech you would like to test like a VC fund: Now you can match what you know about technological developments with what you know about the business. Look for developments with the best potential in your context, be it new technologies, methodologies, software, approaches, whatever seems like it might fit and drive the business forward. Based on this, you can decide on a long list of ideas to be tested.
• Validate your hypotheses: This is the key part: Get some funding and put a small team together, preferably outside normal business lines, and test the ideas in a sandboxed laboratory environment. Do it quickly but thoroughly, in a non-bureaucratic way, but always with the business and customers in mind.
• Move validated ideas to the normal investment portfolio: A lot of your initial hypotheses may prove wrong. That’s fine. The ones that make it through the process are likely to be gems. If the expected benefits are indeed confirmed, then move those ideas to your normal investment portfolio, where they can be developed using your regular processes.

There are some other things to keep in mind. You will have to coordinate a number of support services. You need to manage your ecosystem, for instance, from startups and universities through to the regulator. The research, business case and use case selection processes need to be managed as well . You also need to manage and be active on the communications side. And finally, you need to ensure that once new capabilities are available, line managers can easily find out what they are and integrate them into their portfolios.

In other words, you will need a complete framework for your innovation efforts. And whether you work in a centralized way or take a more distributed, federalized approach, you will need teams to manage the overall process.

This process has worked well for me in the past. It’s one of the reasons I was lucky enough to be named among the Financial News’s FinTech Top 40 for the last two years and City AM FinTech Powerlist. While this is a satisfying confirmation of the work, there is really nothing here that anyone else couldn’t do. Just stick to the method, and the results will come.

Follow me on Twitter @obussmann.

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Digitalization is set to transform most aspects of the financial industry. Far from resisting it, banks should be embracing these fundamental changes.

There is no doubt that, thanks to advances in digital technologies, the financial industry is entering a period of radical change. Transaction and settlement, savings and lending, capital raising, investment management, market provisioning: it is difficult to find any area of banking that is not being disrupted by the current wave of digitalization. With the rise of virtual banks, crowdfunding, alternative payment platforms, robo-advisors and the like, digitalization is also spawning significant new competition for incumbent institutions.

In light of these developments, some have been predicting the demise of traditional banks. This is overstating the case. Digital disruption is by no means only a threat. Quite the contrary, it is spurring industry innovation in a number of very positive ways. It is also encouraging collaboration among industry participants, driving cultural change.

Today’s banks are reaching outside their walls, working with startups, joining innovation platforms and collaborating on new ideas in ways that would have been unfathomable a decade ago. They are also collaborating more internally, for example by using social media-like tools to promote direct communication and the sharing of ideas among staff.

UBS and startups – learning from each other

Inspired by the “permission-to-fail” culture found in startups, banks are becoming much more open to experimentation as well. This is certainly the case at UBS. We have put a strong innovation process in place, one which generates lots of ideas internally and has clear gates to let in good ideas from the outside. We also work closely with the technology community in our innovation labs in Zurich, London and Singapore.

By taking our people out of the bank and immersing them in a lab environment, we give them space to think creatively. We also give them the freedom to make mistakes. In this way we can generate – and test – a far greater number of interesting ideas than would otherwise be the case. In London we have opened our lab in a FinTech accelerator, sharing space with some 150 startups engaged in researching and developing new products and services for the financial industry. This lets our experts be part of the larger conversation, staying on top of developments and helping to shape our industry’s future.

Far from being enemies, FinTechs are very much part of our conscious endeavor to embrace change. While some are looking to compete directly, in our experience the majority of FinTechs are more interested in collaborating with banks. After all, there is more to banking than just bits and bytes. Banks are a storehouse of financial and market expertise of the kind most FinTechs lack. Banking also remains very much a relationship business, and here too FinTechs have much to learn.

For these and other reasons, we are confident that banks will not be going away any time soon. In our opinion, digital disruption should not be seen as a danger, but rather a healthy challenge, driving change and opening up exciting new possibilities.

With this in mind, we also feel it is imperative for the Swiss financial center to promote a strong FinTech ecosystem. Only with close cooperation between the country’s banks, its FinTech startups and the regulator will Switzerland be able to keep pace with today’s strong global competition.

Follow me on twitter @obussmann.

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For a long time now the financial services industry has operated under a cloud, criticised (understandably) for a range of failings since the 2008 banking crisis.  It is clear there are still many areas where the industry needs to improve, but as I reflect on my time at SIBOS in Singapore I am very optimistic about the future.

I am very positive, because I believe technology will play a fundamental role in changing the dynamics.  It will disrupt out-dated practices, provide opportunities for new players and above all dramatically enrich the services offered to clients.  For a long time the industry has needed this shake-up and some institutions may be fall behind, but I am delighted to say UBS is taking a leading role in helping to transform the banking sector.

During my time at Sibos, many banking and finance executives voiced to me their concerns around the pace of change.  It is critical to balance the speed needed to drive competitive advantage against the importance of protecting our clients’ assets and complying with a much stricter regulatory landscape.  To those senior leaders across the industry still hesitant about engaging I would say we are at the start of our journey and business involvement is essential to ensure this technology transformation does not become consumed in its own hyperbole. It is important that a good cross section of business executives engage in this period of change to ensure we reflect the needs of all stakeholders.

For example, mobile banking is already making huge progress, but there are many areas to address.  If I look at its adoption rates it is succeeding faster in markets where it is not rubbing up against well-established transaction structures and users are comfortable with the accessibility mobile offers.  In more mature markets we are yet to provide a completely convincing argument for mobile in banking.  The likes of Apple Pay means it is seeping into the communal consciousness, so I expect to see rapid changes, but we need to temper our enthusiasm and listen to our clients’ needs.

Equally digitisation of services means data privacy becomes an even more important issue than it already is for every financial services institution. Recent malware incidents show how fast changing cyber-security threats are and how important it is for any new technology to place data protection above everything else.

The regulatory landscape is also becoming tougher and any new developments must be integrated.  Consequently IT systems need to have the flexibility and agility to respond to new demands from financial authorities.  This is challenging, particularly for smaller entrants to the market, because resources are finite.

Indeed the whole question of skills is a major one for the industry, because the wide range of exciting new technologies demands new skills many of which cannot be found in today’s institutions.  This is a big opportunity for more agile start-ups, but as an industry we have a responsibility to build a future workforce who will have the ability to design and build robust, reliable systems.

I started out saying there has never been a more exciting time to be in banking. I am sure that all the Regional Finalists of our Future of Finance Challenge are going to open our eyes to many more opportunities.

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