We collaborated with the Solvay Brussels School for Economics and Management (Belgium) on a research paper regarding Corporate Innovation in the field of Biotech / Pharma.Continue reading
Recently, I have been invited to speak at the Fintech meetup in Ho Chi Minh City. The theme of the event was “Bankers and Fintech Startups”, a perfect ground to present the findings of our research on banks open innovation and corporate venturing activities in Southeast Asia.
Open innovation, and more specifically outside-in innovation, refers to corporate practices of including outside stakeholders in their innovation processes. An increasing number of industries is coming to realize that innovation is not confined within their organization boundaries and thanks to accessible knowledge and capitals, outside players could pose serious threats to their businesses.
Within the banking industry, emerging fintech companies are changing the way consumers expect to be able to receive and consume banking and financial services. Quoting Bill Gates, we are directed in a future where “we need banking, but we don’t need banks anymore”.
Bankers started to worry about the situation as well. Antony Jenkins, who until July 2015 was CEO of Barclays, warned in a speech that as much as half of banking jobs could be replaced by apps and algorithms over the next 10 years. Francisco Gonzales, Chairman and CEO of BBVA, warned that up to half of the world’s banks will disappear over the next few years.
With such constantly increasing wave of disruption, banks are often left with no choice but to adjust to the digital revolution sweeping the industry. One of the approaches to do so, is to start seeking partnerships and collaborations with Fintech startups, which can normally innovate at much faster rate also given the much less regulatory pressure to which they are subjected.
Banks outside-in innovation activities
While seeing banks tapping into the startup ecosystem became common in mature markets such as Europe and US, the practice is still at its early stage in Southeast Asia. With the aim of supporting banks in this transition, we decided to map the existing activities in the region as well as compare them with the ongoing ones in mature markets.
Based on our primary research, Banks in USA and Europe launched a similar number of programs engaging with startups and the startup ecosystem in 2015-2016/Q1. Following Middle East, Southeast Asia + Hong Kong, with Africa also growing in terms of banks activities.
Types of banks’ outside-in activities vary based on the underlying corporate strategy that initiate them, and they can be grouped in the following categories:
- Events / Sponsoring: Fintech events organization or sponsoring, including conferences, hackathons / meetups / startup weekends / talent competitions etc
- Resource Sharing: providing coworking space, training and information on fintech trends, startup friendly financial services
- Business Support: Bank-owned accelerators, Idea incubation / pre-accelerators / challenges and call for new solutions, startup awards
- Partnerships: collaboration with startup to provide new services to clients / to be part of the service delivery, collaboration with startups for proof of concepts, partnerships with fintech associations, research centers, co-research (eg on blockchain)
- Investments: venture capital, spot investments, venture debt financing scheme
- Acquisitions: Acqu-hiring, strategic M&A activities
Banks activities in Southeast Asia
Events are the easiest and less capital intensive programs to be initiated, and this is reflected in such events to be the most common type of activities launched by banks in Southeast Asia. On the contrary, investments require a strong understanding of the market as well as a large of capital to be dedicated and investing, thus making such practice the less common in the market.
In terms of countries, Singapore has been working hard to position itself as the key city in the region for startups active in this space. While overtaking Hong Kong as third financial center in the world, Singapore is also showing its strength in programs run by banks, with a total of 24 identified programs run by Citigroup, DBS, HSBC, OCBC, Standard Chartered, UBS and UOB. Hong Kong follows with 11 programs run by Standard Chartered, DBS, Citigroup and seeing the involvement throughout the Accenture Innovation Lab APAC of Bank of America,, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, UBS.
We expect the involvement of banks to become more extensive in the next five years in Southeast Asia. One of the key element is transferring the know how of more mature countries to the region for banks to select the most suitable programs for their strategies and shareholders. At Fast Forward Advisors, we are therefore organizing the first Executive Seminar on Corporate Innovation in Vietnam, aiming to bridge such gap and provide tools to local and regional banks to tap into their startup ecosystems successfully. This will be a unique, first of a kind opportunity for Vietnamese banks to dive into the strategies and implications behind outside-in innovation activities, learning how banks at global and regional level are working to be active part of the disruption of the banking sector.
On the cover
The cover of this article is a picture taken at DBS Mega Hackathon in 2015, in which the Singaporean bank brought together 150 DBS employees and startups from around the region to tackle business and societal challenges. This made DBS the first organisation in Singapore to build hackathons into its talent development programme, with employees creating prototypes alongside startups. Read more here