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Experimenting in innovation labs

Banks and insurers juice up with ideas that can travel the world in the fintech space.

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Standard Chartered's innovation lab, eXellerator.

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Citi's innovation lab

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OCBC's innovation lab, the Open Vault.

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PayPal's innovation lab.

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BNP Paribas's innovation lab in Singapore has developed five out of the ten digital solutions announced this year by the bank.

AT a time of technological advancement, the old adage that change is the only constant rings true for many financial institutions today. But more than 20 banks and insurers have stepped up to the challenge in Singapore by setting up innovation labs to test ideas with partners and among staff.

Amid calls for financial institutions to offer products that are responsive to customers' needs, banks and insurers are trying to reinvent the wheel by having technology as an enabler, rather than a force of crippling disruption.

And it is here that innovation labs can help in refining customers' needs, so that financial institutions can figure out ways to solve various pain points that are not limited to this city-state.

HUMAN TOUCH

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At Standard Chartered, its innovation lab - SCB eXellerator - brings together business units across the globe. Chang Wea Meng, global head of eXellerator said: "Although the eXellerator is physically based in Singapore, it is managed by a global team of business, technology, data analytics, and design specialists, who support innovation across multiple geographies, running workshops and accelerator programmes."

These locations include Singapore, Hong Kong, India, South Africa and Kenya. The bank also has its established listening post in Silicon Valley, SC Studios, he said.

"While banking may be complex, our goal is to simplify and digitise the process with 'a human touch'."

MUFG's innovation centre is also actively involved in the bank's fintech projects with partners such as Hitachi and IBM to digitise cheques and contracts using blockchain technology. Such innovation, while done in Singapore, has wide-ranging implications given that it can be rolled out to the global network.

MUFG is a part of major initiatives across the world, said Hirofumi Aihara, general manager of the company's digital transformation division. These projects include being part of the global steering group for cross-border payments led by Ripple, partnerships with fintech firms such as Coinbase and Chain in the US, as well as nurturing startups in Japan through accelerator programmes and hackathons.

With the Bank of America Merrill Lynch and the Info-communications Media Development Authority of Singapore, HSBC announced in August last year a prototype solution built on blockchain technology that would redefine global trade. Developed in Singapore, the prototype mirrors a letter of credit transaction by sharing information between exporters, importers and their banks on a private blockchain.

HSBC's innovation lab in Singapore was set up to globally drive innovation to help improve businesses' payment and cash management. Since 2015, the bank has spent more than US$1 billion as a group for global digital investment, said Jennifer Doherty, HSBC's Asia head of innovation for global liquidity and cash management.

Citi's recent Global API Developer Portal advances their open innovation approach to bring about more collaboration and partnerships with fintech companies and consumer brands across the globe.

"We see APIs (application programming interfaces) as the new digital economy, and believe that such partnerships will enable us to drive business models and exploit disruptions to their advantage," said John Hogue, head of global consumer innovation labs, Citi FinTech.

There is also cross-collaboration between innovations from the East and from the West. Mathieu Altwegg, vice-president of innovation engagement at Visa, said the payments giant looks to its London Innovation Centre when thinking about cashless public transportation and how it might apply lessons from London's contactless-enabled transit networks to other cities. At the same time, "Asia-Pacific is a hotbed of innovation in mobile payments, from QR codes to digital wallets", he said. In addition to their Singapore lab, they have innovation facilities in San Francisco, Dubai, London, Miami and New York.

BNP Paribas's innovation lab in Singapore has developed five out of the ten digital solutions announced this year by the bank. This includes myOnboarding, a mobile application that guides clients, prospective clients and private bankers through the client sign-up process, and MyWealth, an online and mobile application that allows clients to access the latest portfolio information, and view past transactions as well as equity research reports. There are plans to eventually combine certain digital products into a single platform.

INSIDE OUT

To be sure, banks and insurers note that building innovation is also about changing the corporate culture from inside out. For some institutions, having an innovation lab has helped to drive down bureaucracy. At OCBC, the bank's fintech and innovation unit known as the Open Vault, reports directly to the CEO, to cut the red tape that can slow down the pace of implementing new ideas.

Altona Widjaja, vice-president of the fintech and innovation group at OCBC, said: "We run smart experimentations with various business units within OCBC, established new processes - such as involving our compliance and risk-management team early in the process of onboarding fintechs for experiments - and we set up a data sandbox, which has been critical for our experimentations by enabling us to experiment with new technologies within a 'safe' space using the bank's anonymised, real data."

To inculcate innovation in corporate culture, financial institutions are also turning to collaborate with fintech organisations.

PayPal launched its first innovation lab outside of the United States last year in Singapore as a means to collaborate with the Singapore fintech ecosystem, including government agencies, industry associations, small-and-medium enterprises, startups and universities, said Anupam Pahuja, general manager of PayPal Singapore's development centre.

Mastercard has global startup partners and works with them through Start Path, a programme that provides access to the company's global ecosystem, expertise and customer network to tap into new markets. Launched in 2014, Mastercard Start Path has worked with more than 100 companies across 24 countries, and 20 per cent of companies have gone on to work with Mastercard in commercial engagements, said Tobias Puehse, vice-president of innovation management, Digital Payments & Labs Asia Pacific at Mastercard.

With its so-dubbed "digital-first" strategy, Aviva  now invests £100 million (S$179 million) annually in digital transformation such as testing ideas via digital garages in the UK, Canada, and Singapore.

The company has led a £5-million series-A funding round in Neos, a London-based insurtech firm. Chris Wei, executive chairman of Aviva Asia, said Aviva also teamed up with Hillhouse Capital and Tencent Holdings earlier this year to develop a digital insurance business in Hong Kong, with the objective of disrupting a market that has traditionally been dominated by agency and bancassurance channels.

UOB has run an innovation lab programme The FinLab that supports the growth of promising young startups since last year. The collaboration has led to UOB MyKey - a mobile keyboard that allows peer-to-peer payments while on social messaging apps, and UOB Mighty Secure - enabling mobile phones to become security devices.

The work does not end here, with Singapore keen to establish a strong pipeline of talent in the fintech space.

DBS has created its DBS Hack2Hire programme to identify developers skilled in emerging and disruptive technologies through an online coding challenge and hackathon. It also caters to the new generation of innovators through its flagship internship programme, DBS UNI.CORN. This is hosted at DBS Asia X (DAX), its innovation lab launched in November last year. Unlike conventional internship programmes, the curriculum for the DBS UNI.CORN internship programme enables them to develop prototypes to address specific business problems, said Annie Ye, head of DAX.

Having a constant thrum of fintech activity may keep the city ahead of the pack, ensuring that its fintech pursuit is not a footnote in the annals of Singapore's history, but a key chapter that carries through Singapore's aspirations as a global Smart Financial Centre.

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