Deutsche Bank opened an innovation lab in New York Tuesday morning.
In so doing, it joined the latest fad among large international banks: courting fintech companies with trendy digs in the so-called Silicon Alley. Barclays opened Rise, an exposed-brick-high-ceilinged-big-windows loft space in the Flatiron District, in July 2015. BNP Paribas opened a similar space in its Manhattan office in September. And Accenture and Deloitte, the international consultancies to banks, have recently opened fintech innovation labs in New York, too.
The banks want to bring in new ideas, technologies and ways of doing things. They want to hire people from fintech startups, buy the fledgling companies outright or invest in them.
Deutsche’s new lab, in the Fulton Center in lower Manhattan, will explore new technologies in areas like artificial intelligence, cloud computing and cybersecurity. It’s the fourth lab the bank has launched in the past 18 months; the existing three are in Silicon Valley, London and Berlin.
The labs have already produced technology the bank has adopted, according to Elly Hardwick, head of innovation at Deutsche Bank, who was previously CEO of a fintech startup called Credit Benchmark.
One example is software that helps credit risk analysts run scenarios faster and more efficiently. Another helps with network risk management. A third, which came out of the Berlin lab where Deutsche has its retail bank, improves the look and feel of a customer-facing application.
The New York lab’s mission is to connect the Big Apple’s fintech ecosystem to business units within the bank, which has 7,000 full-time employees in the New York area.
“We always work in partnership with business,” Hardwick said. “It’s not our mandate to go out and find technologies for which there is no customer within the bank. If we haven’t found a docking point within the bank for a technology, then we haven’t done our job.”
The labs will likely skew toward capital markets businesses and investment banks given the amount of such activity in New York, she said.
All the Deutsche labs provide sandbox environments in which the bank can try out new technologies without risking any harm to their production systems. Some sandboxes are provided by vendors like IBM and Microsoft, and some are internally developed, depending on the application and the types of data needed.
“When a startup brings us an interesting piece of technology, you can imagine that for very good reasons there are a lot of processes that have to be gone through before we can run it on our systems or introduce it to customers,” Hardwick said. “To have the sandbox environment, which is offline from production systems, where they can demonstrate the potential of that technology, is really powerful.”
The labs are not places for early-stage startups to set up shop, like accelerators or incubators. “We don’t have a formal accelerator program,” Hardwick said. “There are dedicated accelerators that do that perfectly well.”