Most Innovative

Summary Analysis

W.pngho would have thought 10 years ago that banks would develop their own chatbots using artificial intelligence? Or that all the big banks would be investing tens of millions or billions per year in startup companies?

Competition from outside the world of banking is putting a lot of pressure on the biggest banks to keep up, spurring innovations unimaginable a decade ago. The emergence of marketplace lenders, with newer technology and quick loan approvals, person-to-person payment systems such as Venmo and other non-traditional financial technology competition is making the industry justifiably nervous. “Banks spurred by fintechs and innovation have made a lot more progress than people thought they would,” says Dan Latimore, senior vice president of banking at the research firm Celent. “You could argue they wouldn’t have done that if they weren’t being pushed by these fintechs.”

Sure, banking is rarely hailed as the most innovative industry in America. Still, some of the biggest banks clearly are making huge strides in the area of technological innovation, which is the focus of this ranking. Bank Director ranked banks based on the size of their investments in fintech companies and the size of their investments as a percentage of revenue. Banks got extra points if they had purchased fintech companies. But since innovation ought to be measured by results, the scoring was more heavily weighted toward mentions by experts and the bank’s work through innovation labs, including innovations that had been publicly revealed.

Dan-Latimore.pngJPMorgan Chase & Co. won the innovation category on the strength of its broad strategy for innovation, including an in-residence mentorship program for fintech companies, and the second highest level of investment in the fintech sector, after Citigroup. JPMorgan invested more than $2.1 billion in fintech companies in 2016. The bank also committed $30 million over five years to the Center for Financial Services Innovation’s Financial Solutions Lab, whose goal is to improve the financial health of Americans.

Wells Fargo & Co. was ranked No. 2 and is a strong player in technological innovation. Its labs recently moved into a 1,700-square-foot facility in San Francisco. The bank works directly with startup companies, including a six-month accelerator program that connects the startup with Wells Fargo mentors and executives and offers up to $500,000 in funding for each. For the long term, Wells Fargo and other banks are working to develop natural language processing programs that will recognize speech patterns and tones of voice. They are investigating virtual reality and blockchain, the latter promising to reduce costs associated with payments and transactions of all kinds. Wells Fargo also is working on predictive analytics, which could help banks anticipate customer behavior and make better, more targeted offers.

Other banks are studying similar technologies in their innovation labs. Capital One Financial Corp., the third most innovative bank in Bank Director’s ranking, founded Capital One Labs in 2011 and has teams in San Francisco, New York and Washington, D.C. Capital One also has purchased the most fintech companies of any big bank, five in the years 2014 through 2016, including design firms seeking to create better, more intuitive experiences for customers.

Citigroup, the fourth best innovator among the large banks, has labs located throughout the U.S., Mexico, Ireland, Israel and Singapore, in keeping with the company’s global bent. Aside from being the largest funder of fintechs among the big banks, at $2.7 billion in 2016, it also is known for its open APIs, or application programming interfaces. Although APIs have been in use for over a decade in financial services, primarily for speeding up internal connections between software programs and systems within the bank, Citi was the first global bank to make APIs publicly available to improve cash management and treasury services, according to Celent, which gave the company a Model Bank award this year. Citi launched a massive API project last year called API Developer Hub to connect with developers outside the bank, granting access to areas such as account management, peer-to-peer payments, money transfers, Citi rewards, investment purchases and account authorization.

In fact, the largest banks in the country are growing partnerships with fintech companies to offer their clients better technology, rather than attempting to develop it all in-house or buying fintech companies. For example, JPMorgan has a partnership with, which will allow JPMorgan’s small business customers to use’s platform to pay and keep track of invoices electronically, starting in early 2018. Banks may have been spurred to innovate by competitors outside the banking industry, but they are well on their way to delivering modern technology that competes with the best of what customers get elsewhere.

How They Ranked

1 JPMorgan Chase & Co. 2.40 $2,126,770 2.22%
2 Wells Fargo & Co 2.53 $1,785,790 2.02%
3 Capital One Financial Corp. 2.73 $205,000 0.80%
4 Citigroup 3.40 $2,659,330 3.81%
5 Bank of America Corp. 4.60 $134,733 <0.01%
6 U.S. Bank 5.90 $125,000 <0.01%
7 TD Bank U.S. 6.40 $57,000 0.22%
8 PNC Financial Services Group 6.50 $183,600 1.21%
9 SunTrust Banks 7.40 $70,000 0.81%
10 BB&T Corp. 8.60 N/A N/A

Did You Know?

W.pngill robots take care of all our banking needs in the coming decade? While it might be too soon to answer that question quite yet, some of the biggest banks in the country—and more than a few tech companies—are working on ways to do just that.

Bank of America Corp. is launching Erica, its artificial intelligence-powered chatbot via a mobile app sometime this year. (Bank of America had not specified a release date by press time.) Capital One Financial Corp. is launching Eno, a digital assistant that customers can chat with via text message to check their balances or pay their credit card bill. Capital One and U.S. Bancorp customers can now talk to Amazon’s Alexa, an AI-backed voice service, to check account balances, transaction history and payment due dates, or to pay a credit card.

No one is quite sure where all of this is going, but it seems clear that AI has the potential to substantially change banking as we know it. Artificial intelligence refers to technology that makes inferences and decisions that used to require human involvement, according to the research firm Celent. Some form of artificial intelligence, or machine learning, has been in use for many years, especially in the area of fraud detection, but now banks are experimenting with it for much broader purposes.

Analysts say it could reduce costs, improve revenues and mitigate risk. IBM’s Watson supercomputer, for example, is using artificial intelligence to help banks with regulatory compliance and know-your-customer authentication, as well as shifting through tone and language to alert compliance officers when traders appear to engage in illegal behavior. Artificial intelligence offers the possibility not just to read through thousands of pages of regulatory documents and guidance, but to “reason, deal with imperfect information and deal with conflicting information,” says Marc Andrews, a vice president in the Watson Financial Services Solution group.

Hari-Gopalkrishnan.pngWhen you talk to Bank of America’s Erica, it should understand what you mean when you say, “How much money do I have?” rather than just “What’s my balance?” It can make better decisions and interpretations over time as it “learns.”

Artificial intelligence could be used to generate financial reports for customers or for internal purposes, for example, or to make better underwriting decisions. JPMorgan Chase & Co., the No. 1 bank on Bank Director’s innovation ranking, is planning to use artificial intelligence to execute trades at a faster speed without moving market prices, after a successful pilot project this year in Europe, according to news reports.

Bank of America is taking a risk for a consumer-facing company by launching a chatbot that communicates with customers. It will start with basic functionality, like checking account balances, and evolve over time, perhaps offering money management. “It’s the start of the journey,” says Hari Gopalkrishnan, chief information officer of consumer-facing platforms and technology at Bank of America. “It’s where mobile apps were 10 years ago, where you might have started just checking your balance. The sky is the limit.”

U.S. Bank’s Chief Innovation Officer Dominic Venturo has a similar expectation, and believes it will be customers who shape the bank’s technology in the future. Both banking leaders think that voice-based services will vastly improve the customer experience, especially as mobile apps become increasingly congested with menu items that are hard to fit on a five-inch smartphone screen. “You will see more from us over time in voice interaction”, says Venturo. “Whenever you have to use a keyboard to do something, you’re doing something that is inefficient.”

But the potential challenges are real. For example, artificial intelligence- based underwriting or authentication can’t be a black box that hides the decision-making from the bankers and regulators. Bankers have to be able to show regulators why they rejected a particular loan or denied a customer for a checking account.

Dominic-Venturo.pngSecurity also is a concern. U.S. Bancorp offers customers a variety of security features through Alexa to protect their bank account, and customers can’t transfer money out of their account using Alexa, at least for now. “The use cases are somewhat limited and part of that is we have to understand how it all works in the real world,” Venturo says.

Bank of America chose to develop its artificial intelligence solution in-house, rather than use Amazon’s Alexa, but that could change. “At this early stage, we are more comfortable with our customers interacting with us directly,” Gopalkrishnan says. “Safety and security is how we earn our right to do business with our customers.”