Wells Fargo’s Accelerator is Nothing Like Shark Tank

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Braden More
Executive Vice President and Head of Enterprise Payment Strategy

Wells Fargo & Co. is playing venture capitalist with its Startup Accelerator program. It’s a much friendlier version of ABC’s popular reality show Shark Tank, making investments in early stage tech companies and providing business line managers to mentor and offer help in the form of a real-world customer, Wells Fargo, who might use the technology.

The San Francisco-based, $1.7 trillion asset bank holding company recently announced the second round of companies accepted into the six-month program, which provides as much as half a million dollars each for development. Three companies received the funding: one that interprets and predicts mobile application behavior using sensor data on your mobile phone, called Context360;  another that provides affordable communication software for the deaf, called MotionSavvy; and a third that uses the public cloud to run enterprise applications, called Bracket Computing.

In an interview with Bank Director Managing Editor Naomi Snyder, Braden More, Wells Fargo’s executive vice president and head of enterprise payment strategy, describes how the company wants to foster innovation, find great ideas, and share those ideas with the rest of the banking world.

What was the genesis of the Startup Accelerator?
We realized we were doing a lot of outreach to innovative companies but we were missing a lot of ideas that were flowing like a river out there. We wanted to come up with a program that allowed us to connect, and provide a single doorway.

How is your Accelerator different from Silicon Valley venture capital labs?
[We’re like] a friendly customer mentoring you for six months. We’re giving you access to a real world customer for six months. It’s not that they have 45 minutes to pitch their stuff. We sit down with them. We want to know how they can help us, maybe help us with our deaf customers, or help us detect fraud through all the information you can get off the sensors in your phone. A lot of times, we’re not quite sure how this is all going to come together, but we like the fundamental idea and we like having the conversation. Our goal is not to outsmart the entrepreneur and take control of their business, like some [venture capital firms]. We are cooperative. We are not driving the investments, or putting the screws to the investors.

Does Wells Fargo take a minority stake in the company?
Yes. These are very small stakes. There are Bank Holding Act restrictions that suggest we are always taking a less than 5 percent voting stake. If we put Wells Fargo capital into a company, it feels like a special relationship and companies that are small really like the commitment from Wells Fargo.

Are you bringing people into a physical “lab?”
No. The relationship is really based on wherever the buyer/mentor is. If you have a wealth management concept, you might find yourself in St. Louis with our wealth management team, for example. We’re trying to connect people with the real buyers or real customers, and not necessarily have everyone coming to San Francisco.

What has been the reaction of business line managers?
A lot of them have been tickled. I provide the infrastructure and the funding. It becomes a tool they can use. If they and their teams see an idea they want to bring in, they can do that. That happened with MotionSavvy. Someone in a line of business saw them and said, ‘This is an interesting idea, and you should apply into the Accelerator.’  Context360 knew about our Accelerator and submitted an application, which we then read and brought back to a line of business, and said, ‘If you are interested, please step forward as a sponsor.’ I want to make sure [these companies] have someone [at Wells Fargo] who believes in them and buys into the fact that they are going to be a mentor for the next six months. We have lines of business that have made it part of their core DNA to be innovative—they have innovation labs and they have people who have innovation in their titles, and there are other lines of business who are just warming up to this.

You are not going to hold a patent to any of these technologies, right?
Their intellectual property is their business. We recognize they are developing their products. Our suggestions and improvements are becoming their technology. A lot of incubators are chasing future returns, the Facebooks of the world, the big whales. They are looking to do something exclusive. For us, we are trying to be open to the best ideas. We recognize that an entrepreneur with a fantastic idea that is going to change financial services is never going to enter an Accelerator where they can only take the idea to one bank, because there are thousands of banks. As a banker, we have a lot of common problems, such as fraud and security. If, as an industry, we can lower fraud levels for our customers, we think that’s a win for everyone. 

What has been the reaction to the program so far?
We are thrilled with the response to date. This semester, we are expanding and taking a global look. We are looking for great ideas globally. We have been very pleased. I wouldn’t say there is a cultural change for the whole company, but for those people who are responsible inside their lines of business for being the champions and evangelists for innovation, we are starting to connect those people inside Wells Fargo. They have a shared platform to do innovation and engage with these outside companies and be challenged by these ideas. 

How New Technology Drives Sales in Your Bank

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4-3-15-yseop.pngIn this highly competitive and data-driven environment, financial institutions are looking for innovative new ways to drive sales in the finance sector.

For banks, one of the most exciting technologies to explore is the artificial intelligence and natural language generation (NLG) space. NLG is a technology that can write like a human and turn big data into narrative and easy-to-understand content. It serves big data analytics, customer service and sales.

Three Ways to Drive Sales
Artificial intelligence-powered NLG software allows banks to understand unprecedented levels of client data, enhance customer service and ensure regulatory compliance.

  1. Make Sense of Big Data
    Banks need tools that explain what their big data means, what to do about it and why—in plain English (or the language of their choice) and in real time. The challenge is there is too much data, too few data experts and too little time to transform volumes of data into insight. But AI-powered NLG technology can turn data into written financial reports, executive summaries or portfolio analysis, for example, and explain how and why a conclusion is reached.
  2. Provide the Highest Level of Customer Service
    Banks are competing to deliver expert customer service—on the phone, online and in the branch. AI-powered NLG systems, often called “smart machines,” can be programmed with the expertise of your bank, can connect to client data and serve as an interactive expert to guide customer service teams through interactions. These systems can turn customer service agents into top tier sales people. They can even be deployed online to replicate the in-store banking experience and help make selling complex products and services easy.
  3. Ensure Compliance and Autonomy
    The advice-giving space is fraught with the potential for litigation in the face of ever-growing levels of regulations. Financial advisors and bankers must protect themselves by keeping meticulous records. These records, a sort of audit trail in case of litigation, coupled with legal fees and the fear of legal action, cost businesses millions if not billions of dollars each year. But AI-powered NLG can help. Programmed with the bank’s unique regulatory and legal framework, it can ensure compliant, expert advice, as long as the system is kept up-to-date. In case of litigation, it creates what we would call in banking an “audit trail.” The software shows its decision-making process, the advice it gave and explains why (and pursuant to what rules) it gave the advice. Since the software is incapable of human error, it never forgets a rule.

Is AI-Powered NLG Ready for Your Business?
NLG has been around for several decades, but NLG software has only recently been commercially viable, really since 2008. Fast forward eight years and Fortune 500 companies on both sides of the Atlantic are already using the combination of NLG and AI as a single software to make sense of big data, provide the highest level of customer service and ensure compliance and autonomy—all to drive revenue. In fact, these solutions are now fully scalable so banks can build their own applications—with no need to rely on vendors. Additionally, leading vendors of AI-powered NLG software provide configuration environments so easy to use that even non-technical users can build and update their own applications.

Are Your Retail Branches Too Large or Too Outdated? Here are Some Ideas

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12-17-14-Emily.pngWhen it comes to branch innovation, the chatter often focuses on two things: Make it smaller, and load it with technology. But many banks are still left with larger legacy locations, and technology alone won’t drive more customers to your bank. The branch is still seen as a powerful branding tool, and some financial institutions have found creative ways to tap into their local communities, with positive results.

The solution for one credit union was to split their 3,200 square foot branch in half with a local tea house. The space was designed so clients of GECU, a $2-billion asset credit union based in El Paso, Texas, could easily walk over and grab a cup at the tea house—and the restaurant’s regular customers would maybe think of GECU for its next loan. “This shared tenancy approach helps lower costs, and if you can find the right alternate tenant, it will drive in more traffic,” says John Smith, chief executive officer of DBSI Inc., the branch design firm that worked with GECU.

However, a tenancy arrangement with a local business isn’t without its risks. According to the Small Business Administration, roughly half of all new businesses survive for at least five years, and one-third survive ten years or more.

Instead of sharing their branch space with a tenant, more banks prefer to make space available to the community. Even with the rise of digital banking, Portland, Oregon-based Umpqua Holdings Corp., with $22 billion in assets, still values the branch as a way to build client relationships, resolve more complex issues for customers and promote the bank’s brand, says Eve Callahan, senior vice president of corporate communications. As a way to draw in the community, each store hosts events, ranging from Nintendo Wii bowling leagues to an Oktoberfest celebration. For Umpqua’s business clients, Umpqua promotes a local business each quarter and even sells that business’s products within its stores. The program has been popular, with a waiting list of up to 18 months, says Callahan. Decisions on which business makes the cut, as well as which events to host, are made locally by the store manager. “They get to know the local businesses around them, the nonprofit organizations [and] the schools, and program events in their store that are going to reflect what’s happening” locally, she says.

C1 Bank, a $1.4-billion asset financial institution based in St. Petersburg, Florida, designed its newest branch in Miami with the local neighborhood—the Wynwood Art District—in mind. C1 converted an old warehouse into a 4,500-square-foot branch designed with a large, open and adaptable space to host local events, such as art openings. The furniture was designed to be removed for these events, and the bank boasts a kitchen for use by caterers. The space is available for use by local businesses and charities, and the bank itself regularly invites local business owners to network with each other and with C1’s bankers. The unique space—artwork is featured in the branch—makes C1 stand out, and leaves the community with a positive impression, says CEO Trevor Burgess.

In Roseville, California, 120-branch Rabobank N.A., a $14-billion asset subsidiary of a Dutch financial company, worked with DBSI to design a branch that plays on the affluent community’s agricultural roots. A vintage farm truck displays goods from the bank’s customers, such as olive oil, and a glass door opens like a garage to bring the outside in. So far, the bank has used the space for local events, and Kimberly Hval, the bank’s executive vice president and director of channel strategy and support, says Rabobank plans to regularly host a farmer’s market in 2015 as a way to promote the bank’s customers.

Location plays a big role, and sharing space with a coffee shop or hosting events won’t attract more customers if the branch isn’t located in a well trafficked area, says Mark Charette, CEO of commercial real estate design firm Solidus. His firm works with institutions to design for efficiency by minimizing the branch area and relocating another line or channel of the institution—a call center, for example—which creates a cost savings by merging that channel’s location into the redesigned branch.

However, with the right location, a strategy to draw the community in can have a positive impact for the bank. Rabobank attracted its largest depositor through one of its events. “Our community can benefit, and obviously being able to drive in more clients through the experience is certainly icing on the cake,” says Hval.

A Look at what TD Bank is Doing in Mobile Banking

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Toronto-Dominion Bank’s (TD) recent partnership with Moven is a material strategic move to help the bank’s customers advance their personal financial fitness. Moven, along with other nontraditional mobile banking providers like Simple and GoBank, are challenging the financial industry’s line of thinking of what a mobile banking app can be. These types of bank apps offer budgeting tools that can help customers prevent overspending and learn how to more effectively save money.

Moven, the New York-based “neobank” founded by Brett King, brings TD the opportunity to offer customers more advanced financial management tools in their mobile app, including instant notifications about spending patterns and a variety of budgeting capabilities for each purchase. It’s a mutually beneficial partnership for Moven, who will now be granted access to three million TD Bank customers in Canada.

“The TD agreement with Moven offers our Canadian customers access to leading-edge technology with a simple, convenient and innovative way to manage day-to-day financial choices alongside long and short-term financial goals,” said Rizwan Khalfan, chief digital officer, TD Bank Group. “The addition of real-time money management capabilities to the TD mobile app demonstrates our commitment to comfort and convenience and to our growing leadership in the digital banking space. Customers will be better informed on how they use their money and empowered to improve their financial wellness with each spending decision they make.”

TD is primarily located in Canada and in the northern U.S., yet consumers outside of these areas may be familiar with the bank because of TD’s #TDThanksYou campaign video that flooded the Internet this past summer, showing that TD Bank is making major advances in communicating its message in the digital age. The tearjerker video shows real TD customers being surprised by an ATM that has been transformed into an “automated thanking machine.” A voice from the ATM surprises different customers with gifts picked out just for them—a Blue Jays fan gets a personalized shirt, is surprised by baseball player Jose Bautista and gets the chance to throw the first pitch at an upcoming game. A mom of two boys is given an all-expense paid trip to Disneyland because she had never been able to take them. These and other heartfelt stories allowed the YouTube video to get over 6 million views in only one week. The video now has over 18 million views, making it one of the most successful viral videos to ever come out of the financial industry.

TD Bank’s most recent announcement about the launch of Moven is also getting the attention of the banking industry, as the majority of banks are still figuring out how to differentiate their mobile banking, while ensuring each move they make is customer-focused.
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“Can I afford it?” is one of the most important questions people have to answer about their financial lives. That’s why the budgeting categories serve as one of the main features of Moven’s, and now TD’s, mobile banking app, allowing it to become more than just a list of transactions, but instead, a resource for every shopping decision. The categories are used to get people to focus on things they really need and separate that from the luxuries that can tempt people into overspending.

“If you want to get people to save money, you’ve got to stop them spending, so we’re helping them understand where they’re spending money,” said Brett King, founder and CEO of Moven, in a recent interview with The Globe and Mail. “What we start to see, after three to six months [of usage] is that people in certain categories—dining out, catching taxis—start to level off.”

Yet the financial industry may question—is teaching customers not to spend money going against the best interest of the bank? Moven and TD Bank understand that their best interest is helping customers, and one of the most valuable ways to do that is to help people spend money in a smarter way with the type of advanced technology that consumers of today demand.

Leaders In Bank Innovation

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Banks of all sizes are implementing innovative technologies to grow their organizations but which ones are doing it right? Filmed during Bank Director and NASDAQ OMX’s inaugural FinTech Day in New York City, four financial technology providers offer their perspectives on which financial institutions are leading the way with the latest technologies.


What to Look For When Selecting a Technology Partner

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With the rise of many innovative technology companies, financial institutions can find themselves overwhelmed when it comes to selecting the right technology partner for them. Four financial technology providers share some advice for bank boards selecting a third-party vendor. The video was filmed during Bank Director and NASDAQ OMX’s FinTech day in New York City.


Is It Time to Bid Adieu to Passwords?

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10-3-14-biometrics.pngThe humble password could soon be extinct, and biometrics could take its place—a technology that, in the past, was more apt to be found in a sci-fi movie than at your local bank. New uses for biological markers may offer consumers a safer, faster and easier way to make purchases and access accounts.

Passwords aren’t perfect. They’re easily forgotten or hacked. “[It wasn’t] envisioned that it would turn out the way it has, that people would have multiple accounts… all requiring passwords that are long and complex, yet the password is key to security for many people,” says Michael Kaiser, the executive director of the National Cyber Security Alliance, a nonprofit organization promoting cybersecurity.

Some banks and companies serving the financial services industry are working together to change the way we log into our accounts and make purchases through the use of biometrics—identifying a consumer through a certain feature or features of his body. It’s not only easier for the user—no more remembering and keying in a complicated password—it’s safer. Even if the user has a strong password, “that doesn’t do you any good if it’s stolen. The biometric becomes something that you have that no one else can have,” says Kaiser. The recent iCloud hack revealed vulnerabilities in traditional online security, where a group of hackers obtained and released the private photos of several famous actresses. Apple said it was “a very targeted attack on user names, passwords and security questions, a practice that has become all too common on the Internet.”

“Passwords are flawed,” says Kaiser. “What we’ve seen lately [are] some very stark examples of how problematic they can be.”

Michael Barrett is president of the FIDO Alliance, an organization working to create standards to authenticate users with biometrics. “Fingerprint will be one of the most commonly used biometrics,” he says. Fingerprint readers are increasingly embedded in mobile phones and personal computers. Eighty-three percent of iPhone 5s owners use a fingerprint scan to unlock their phone, according to Apple, and the company’s introduction of Apple Pay, which incorporates a fingerprint scan to approve purchases, should make the fingerprint even more pervasive. Apple Pay has partnered with banks such as Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc., and Capital One Financial Corp. But fingerprint authentication doesn’t work well for people with jobs or hobbies that wear on their hands, according to Barrett, and can be problematic for the elderly—an important consideration given the aging Baby Boomer population. In both cases, the fingerprint is less prominent and more difficult to read.

Denise Myers, director of marketing for EyeVerify, a biometric technology startup based in Kansas City, Kansas, also says that because people leave fingerprints everywhere, they’re easier to fake. The chief technologist at EyeVerify managed to make one out of a common kid’s toy: Play-Doh.

EyeVerify scans the user’s eyeball, using the camera available on most mobile phones. The user is identified by matching the pattern of the blood vessels within the whites of the eye. “You are the lock and the key,” says Myers. She says the eyeprint is more secure, since it is stored locally on the phone—not in the cloud, where it could be hacked by cyberthieves. Wells Fargo & Co. was intrigued enough by the concept to invest in EyeVerify, making it one of three inaugural participants in the banking giant’s Startup Accelerator program. The relationship is non-exclusive, leaving EyeVerify free to work with other banks and vendors. Beyond that, it is unclear how the relationship will work and whether Wells Fargo will implement the technology for its customers, says Myers.

The eyeball isn’t the only biometric the financial industry is looking at. Multinational financial services company Barclays, based in London, plans to roll out a biometrics reader, available to corporate banking clients, that confirms an online user’s identify based on the vein patterns in his finger. Barclays also uses voice biometrics to authenticate wealth management clients who use the bank’s call center, which it plans to make available to retail clients early in 2015.

Kaiser doesn’t see any downside to the use of biometrics, but says some customers may need to be persuaded that this new form of security is safer. With most biometric solutions, the financial data is stored locally, reducing the likelihood that a hacker could steal the biometric, along with the person’s identity. And unlike some Hollywood movies, a villainous rogue won’t remove a body part to access an account. Many forms of biometrics detect whether the blood is circulating, ensuring that the user’s eye or hand is attached to a living person.

Staying Relevant While Standing Out

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During the inaugural FinTech Day sponsored jointly by Bank Director and NASDAQ OMX, Declan Denehan, BNY Mellon’s managing director for strategy and innovation, and Al Dominick, president of Bank Director, discuss innovation and technology products and services to stay relevant in today’s banking environment. The event was held in September at the NASDAQ’s MarketSite in New York’s Times Square with over 40 participants from 30 financial technology companies.


Becoming an Innovator With a Research Lab

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One of the most innovative companies on the planet, Google, is allowing researchers to spend their entire days dreaming up big ideas that have little immediate connection to making a profit—like inventing driverless cars. Research is being done in a lab near headquarters called Google X with an idiosyncratic cast of characters, according to Fast Company magazine. Google X is different from a lot of innovation labs. Two of the criteria for any project are that it has to affect millions or billions of people and it can’t be an incremental improvement.

It’s a great idea, if not for the fact that few American companies bother with such basic research innovation labs. You have to spend money that is hardly justified from a shareholder perspective without any clear goal of making a profit, let alone accomplishing a result in a specific timeframe. Gone are the days of Bell Laboratories, which for decades invented things that would transform the world such as the transistor in the 1950s, which later became the basis for the computer chip, not to mention inventions that were also useful for AT&T. For proper perspective, Google X, as awesome as it clearly sounds, employs 250 people. Bell Labs during its heyday employed 15,000.

“Those were the days of pure research,’’ says Bert DuMars, a former Forrester Research analyst who has gone on to become vice president of digital marketing at Bi-Lo Holdings, the grocery store company. DuMars wrote a report in December 2013 on “The Costs and Benefits of Marketing Innovation Labs.” Many large companies now run these labs, albeit with a clear financial goal and a way shorter timeline than Google X does. They might have a two-year window to implementation, not a 10-year timeline. “No business wants to create another white elephant because they become very expensive and unusable,” DuMars says.

Companies with marketing innovation labs include Wal-Mart, Comcast, Chick-fil-A, Capital One and Wells Fargo & Co. Wells Fargo has a separate space near its San Francisco headquarters that employs more than a dozen people. The company calls it “WF Digital Labs,” and says it is a test-and-learn platform for new, innovative concepts on the digital experience for customers. The mission of the lab is to spark new ideas, re-imagine existing “experiences,” and enable innovation, including developing demos and prototypes for the bank and beta testing those ideas in front of customers and Wells Fargo employees.

This year, the lab’s goals included exploring Google Glass and other smart wearables (such as Samsung Watch) as well as new forms of authenticating customers using biometrics. The lab also worked on creating seamless experiences across digital platforms for the bank, such as online and mobile banking. So unlike Google X, Wells Fargo’s lab is very much focused on improving the basic customer experience with the bank.

DuMars says that companies that succeed with these labs establish clear goals, budgets and venues, with a C-level leader responsible for their success. You have to decide if your company really has the organizational culture to foster and help innovation succeed, otherwise, don’t do it. Innovation labs require:

  • Significant investments in talent and technology. You could start with as little as 5 to 10 people, but keep in mind, the average annual cost per lab employee is about $228,515 based on an average office lease rate of $400 per square foot in Silicon Valley. Rent might be cheaper elsewhere in the country, but you still have to attract the right talent to your designated location.
  • Specific goals. Decide what they are. Most labs do not execute their innovations, although some, such as Comcast’s, do.
  • A calculated decision on whether your lab will be housed in a city known for its innovation such as Silicon Valley or co-located with your headquarters office. Chick-fil-A has two full-sized experimental restaurants where headquarters employees can go test the latest projects, such as using iPhones at the drive-through. Capital One has an innovation lab in San Francisco that allows people to walk in off the street, sip coffee made by baristas and test out new banking ideas and apps from the researchers in the lab.

Many game-changing innovations that transform the world may not be hatched in these laboratories, but they are a start to staying competitive in a changing world.