Lloyds Banking Group and FinTech Scotland have joined forces to create a new fintech innovation incubator, the Launch Innovation Lab.
The project will see Lloyds working with 12 companies over 12 weeks, with companies able to submit applications until 21st October. It will provide support and clinics along with opportunities for startups to pitch to a range of sponsors. The incubator aims to create ready to go proof of concepts in partnership with Lloyds Banking Group.
Speaking at the Fintech2020 Virtual Summit, Lloyds Banking Group Innovation Product Owner David McLeay talked about what the incubator is looking for and what it has in store for successful applicants.
DIGIT caught up with him to hear more, and to find out how the incubator will help Lloyds apply lessons from adapting to the pandemic to help the bank improve innovation.
“The market is ripe for disruption in my view,” McLeay said. “We have an environment where customers’ needs are changing and in parallel, there are a lot of significant new technologies opening up opportunities”
The 12-week Launch Innovation Lab will be divided into two periods. The exploration phase will see 12 fintechs chosen from among all the project’s applicants. They will work with Lloyds to understand the banks strategic challenges, and for the bank to understand the companies and help them develop proposals.
“Together, we’ll work on a proof of concept framework that explains the hypothesis, how we’re going to measure and test the hypothesis, what the key success factors are, and what a future road map could look like,” McLeay explained.
At the end of the exploration phase, the 12 companies will pitch their ideas, with six companies going on to the craft phase.
“We’ll do a more involved process with an additional layer of internal expertise. We will bring in DevOps, infrastructure engineers, coders, UX design people, risk, legal, sourcing expertise – everybody needed to flesh out the idea and create a proof of concept experiment that we can pick up and run with in 2021.”
To end the programme, the start-ups will take part in an internal showcase with Lloyds Banking Group staff as well as an industry-focused event.
Lloyds is keen to ensure that the project is mutually beneficial to all parties so that even the parties that only participate in the first phase gain something of value.
“With this programme, there’s a whole section of activities that are for the fintechs to get something out of Lloyds Banking Group. We’re going to offer classes and surgeries where they can talk to technical architects and cloud infrastructure experts, talk to our risk teams, talk to our finance guys, speak to our design experts, our systems thinkers, our UXers, our corporate finance team – anyone that can help their business develop.
“As a big bank, we have a lot of people in a number of highly specialist roles, and we’re good at a number of big bank functions. However, we accept we’re not as agile, fast and reactive as some of the start-ups at certain things. We want to create an environment where both parties can mutually benefit from the relationship.”
Lloyds is looking for the startups to help with two main challenges – one is to help Lloyds respond to changing customers views on Environmental, Social and Corporate Governance themes. They are looking for ways to help support customers to make a positive impact.
“Increasingly, we’re seeing customers have an awareness of ESG themes, such as climate change, or diversity on boards. Customers are wondering if their money is being invested in places that do good,” McLeay said.
“We may get to a point where a company’s ESG credentials are actually a primary deciding factor in whether people want to use the product or service.”
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The other challenge is to use digital services and technology to help the group better support its customers’ finances. However, David stressed that Lloyds is open to any new idea that offers value to either its customers or employees.
“What we want to do is for our incubator to help these companies grow and develop their ideas together with us and work in a sustainable way. And we want to move faster – we’ve learnt we can do things quickly in response to Covid and we want to keep doing that.”
Ultimately, Lloyds and Launch Innovation Lab will be looking for technology and ideas that are feasible and scalable, with an eye to releasing them in 2021, though this deadline is not a key determiner.
“We might pick something that needs a bit more work that will come along later, but for the most part we’re looking for things that we can deliver quickly for our customers.”
The journey from idea to product can be a long one. However, the coronavirus pandemic has meant that many businesses have had to move quickly to roll out a range of digital services and projects. While this came with many challenges, it also presented opportunities.
“The pandemic opened senior stakeholders’ eyes to the fact that, as a big bank, we can do things quickly, successfully and safely,” McLeay said.
“We had to have a very quick programme to get laptops to everyone to work at home and we did that in three weeks,” he said. “Our customers were not able to go to branches any more – they’re increasingly switching to digital channels. To support that we managed to roll out a chatbot at scottishwidows.co.uk in a couple of weeks.”
This pressing need to adapt meant that projects that might once have taken months or years were suddenly performed in weeks.
“It shows three things – we can move and take decisions quickly. We’ve also proven that we can try new tech at scale. And we’ve proven we can do all this in a way that’s safe and meets the risk appetite of the bank, which is relatively low. And the people are happy with it.”
McLeay said the pandemic has shown that businesses need to work differently. “We’ve shown we can change, and we can do new things to react and get them in front of customers in a safe way.
“Secondly, we’ve realised we need to scale and speed up our innovation – we need to get faster and do more. In a targeted and methodical way, we want to explore a number of ideas in parallel and then test them with customers and colleagues.
“Part of the Launch Innovation Lab is to find a safe way to accelerate innovation and find ideas that people are willing to get behind and go live.”