Banks, like any business, need to defend and grow their market share. That can only happen through innovation, which for a lot of banks means moving away from being a processor of transactions. That said, just because a bank once did something innovative, it does not mean they are an innovative bank. Just because they churn out press releases announcing innovations, it does not mean the innovation was any good or that they are good at innovating. Several of the banks I have worked with to launch ‘Buy Now, Pay Later’ told me that it was their first new product at this scale in over 10 years. It is hard to get good at something when you do not do it very often. All the more reason to make sure you do your homework and prepare to make sure you get it right the first time when you do decide to innovate. For some bank executives, delivering an innovation can make or break their career. Even those who innovate more often say that everything tends to take longer than they like, costs more than they had budgeted for and the end result does not transform the bank or excite the end‐users. In conclusion, there seems to be room for improvement all around.
Through a series of case studies you are invited to meet and learn first‐hand from the people and teams that have delivered a number of very different innovations successfully across a diverse group of banks. Banks featured include: Bank of America, BBVA, Citi, Crédit Agricole, Danske Bank, Deutsche Bank, ING, J.P. Morgan, Lloyds Bank, Metro Bank, N26, National Australia Bank, Royal Bank of Canada, Santander, Standard Chartered and Swedbank.
If you are looking for a silver bullet, you have come to the wrong place. This book will, however, equip you with ideas, tools and actionable hands‐on advice to challenge, inform and validate your own thinking. You will learn how these particular banks delivered new solutions to consumers and businesses, products as well as services, across the spectrum of buy, build and partner. There is even a bonus section talking about changing ways of working, creating a better foundation for enabling innovation in the first place. The banks have been chosen based on their size, location and type of innovation to give you the broadest breadth of reference points.
Whilst a lot of care has been taken to ensure consistency in detail across all chapters, you will notice slight variations because different banks were comfortable sharing different information. I have done my best to tease out the learnings for you, but in cases where it is not as obvious, I challenge you to read between the lines. If you want to dig deeper into any specific case, there are over 100 hours of additional interview material that I could not fit in the book, so register on www.howbanksinnovate.com to access more material from the banks featured, with full‐length interviews and videos.
If you have a successful innovation case you think we should profile on our website and share with our community, get in touch via www.howbanksinnovate.com.
Christer Holloman
Chapter 1 Lloyds Banking Group: Investing from the Balance Sheet
Case: Thought Machine
Executive Summary
In 2018, Lloyds Banking Group (LBG) announced the next three‐year phase of their strategy, designed to set the group up for success in a digital world. In establishing the activities to deliver this strategy, they recognised the potential of investing in fintechs using their balance sheet to accelerate their own transformation and even to unlock new business model opportunities.
They recognised that in order to realise this opportunity they would need to develop the Group's partnering capabilities; for example, creating a shared approach to pipeline development, getting the right tooling in place and building a group‐wide narrative around it. A particular critical part was determining the correct partnership structure for each opportunity.
To deliver their ambition they mobilised innovation working groups in each major part of the Group alongside a central fintech team. Together, these groups adopted a shared language and approach for pipeline management. Whilst this went some way to mobilising their pipeline, this consistent view also allowed them to identify common bottlenecks, which they needed to address to make the aggregate pipeline more robust.
Lloyds also used key pathfinder opportunities, such as their partnership with Thought Machine, to develop, surface and agree some important principles at more advanced stages of their pipeline. This included their equity investment rationale. Here they established two main principles: firstly, to only make investments where they expected to sustain a strategic relationship with a fintech; secondly, they required a clear articulation of the necessary strategic benefits of investment relative to what could be achieved through a commercial contract alone.
Whilst the bank acknowledges that it has more to learn and develop with regards to how to best invest in fintechs, the early results have been positive. Their capabilities in emerging technologies have been significantly advanced through this approach and several new customer services have been launched.
Introductions
Do you want more details about this case? Find additional highlights from these interviews at www.howbanksinnovate.com.
Juan Gomez Reino, Group Chief Technology Officer
Juan has been the Chief Technology Officer for LBG since 2019. Juan joined LBG in November 2014, initially as the COO for Consumer Finance before moving into the Insurance division in May 2016 as Transformation Director. Prior to joining the Group, Juan held a number of senior roles at Santander UK and Banco Santander, latterly reporting to the CRO and COO with responsibility for balance sheet management, liquidity, funds transfer pricing and asset‐backed funding. Juan graduated from the International School of Economics Rotterdam in 1994 (BA in Economics and Business Administration), has an MSc in Finance from Universidad Autónoma de Madrid and a BSc in Mathematics from UNED. He is also an alumnus of Stanford University's Graduate School of Business.
Carla Antunes da Silva, Group Strategy Director
Since joining LBG in October 2015, Carla has led the work on the 2018–2020 Group Strategic Review and, prior to that, the work on the Bank of the Future, which served as the backdrop to the market announcement. She and her teams are responsible for supporting senior management with strategic decisions made at both the Group and Business Unit level and making recommendations to the Group on all areas of major strategic significance, such as mergers, acquisitions/disposals, joint ventures and partnerships. They manage the Group's relationships with shareholders, the analyst community and the wider investment community, and provide coverage of Group‐wide competitor analysis, which drives strategic decision‐making through insightful analysis of the industry and competitors.