Coca-Cola is not the first name that comes to mind under the heading of bank innovation. But in Asia, the soft drink giant has teamed up with Citigroup to build a digital payments engine.

Coke was part of a Citigroup-driven development and launch of a consumer-to-business mobile collections solution in India, Korea and China. The work included the collaboration of banking, technology and business experts at a recently opened Citigroup innovation lab in Singapore. The lab, which is operated by Citi's global transaction services unit, is an example of how banks are increasingly turning to sources outside the information technology shop — such as clients, academics and experts with startup experience — to develop technology-enabled products and services.

The digital innovation lab concept dates to a collaboration between Bank of America and the Massachusetts Institute of Technology to form the Center for Future Banking in 2008. Such centers can serve as a branding opportunity or as a way to expand relationships with corporate clients by making them part of the development of solutions. Nilesh Vaidya, a vice president at Capgemini Financial Services, says he's seeing more development coming from these dedicated innovation units.

"There's a significant focus right now on growth and where that growth will come from," says Bob Contri, who leads the banking and securities team at Deloitte Consulting. "These innovation centers are critical places for banks to experiment and to focus on another objective, which is client centricity and giving a voice to clients."

Citi's Singapore innovation lab uses Web, mobile, supply chain and analytics technology to engage Citi's institutional clients to create solutions that best match those clients' and the bank's business objectives. In the lab, the bank's innovation lab team develops and demonstrates transaction banking solutions that clients can "test drive" via live demonstrations, followed by situation analysis and discussions with GTS' product experts that result in further tinkering.

"We engage with customers early in the innovation process by getting them to contribute their pain points and ideas, mobilizing their own teams to work with us and our technology partners, academics and at times regulators, in jointly developing ideas and conducting prototypes before we bring the ideas to market," says Keng-Mun Lee, head of the Citi innovation lab in Singapore.

The Singapore lab, which runs parallel to similar Citi facilities in San Francisco and Dublin, is staffed by 12 people, a combination of bankers from various parts of Citi, in Asia and other regions, who are loaned to the lab for 18 to 36 months, supplemented by interns from the National University of Singapore for about six months and tech pros from outside finance. While focused on Asia, the product ideas are designed to be scalable and portable to other regions.

"New hires have technology, consultancy, marketing and other industry backgrounds. Other [labs] adopt a similar approach, but the composition of bankers versus nonbankers can differ based on the projects being pursued," Lee says.

About a dozen clients collaborate on the generation and testing of ideas for solutions such as working-capital calculators, cash forecasting, investment-decision engines and instant reconciliations.

Like other financial innovation centers, such as units opened by Deutsche Bank in the research triangle region of North Carolina, the new Citi lab borrows heavily from the local academic community. Partners include the National University of Singapore and the Infocomm Development Authority of Singapore.

"The choice of Singapore is due to its strong talent field, supportive government programs from IDA, academic alliance with NUS, technologically savvy and progressive society, good infrastructure, major financial center and closeness to our regional clients with treasury management centers," Lee says.

Capital One Financial's new innovation center in Arlington, Va., which is near a number of other tech firms, has hired about 10 people, including veterans from Google and other startups.

"We hire people with entrepreneurial and digital experience and bring them into the lab," says Mark Jamison, who manages the Capital One innovation lab. "We see it as a tool for change management for the organization as well."

Capital One's innovation center launched its first pilot test over the holidays, a promotion with Klout, the social media analytics firm, to develop Klout Scores, or a rewards program that uses measurement of a customer's Twitter and Facebook activity. "It's a really good example of how you can use the lab to gain insights for a business through testing," Jamison says.

The labs don't come without challenges, particularly to corporate culture.

"There can be jealousy between departments and the lab when people who implement the product haven't been involved and don't have ownership of a project," says Brad Strothkamp, a vice president at Forrester Research. "The innovation lab has to be chartered around well-known and well-understood business objectives. Innovation for innovation's sake will miss the mark."

Lee says the innovation lab is separated from IT because the functions are separate — the IT department is deploying new products and maintaining the networks while the innovation centers are client-guided research.

"We are physically located separate from the 'normal' line of business so we are not encumbered with day-to-day running of the business," Lee says.

Both Lee and Jamison say the innovation labs, while distinct departments, are aligned with the goals of business units and IT. Lee says the lab leverages the IT organization's experience to identify best-in-class vendors to ensure the technology deployed is secure, compliant, scalable and in line with the bank's overall IT strategy.

"We call on their existing vendors who understand the bank's current IT infrastructure whenever we need to integrate new innovations and commercialize across geographies," Lee says. At Capital One, Jamison says the innovation lab is responsible for developing and testing ideas to forge a digital banking agenda. "The innovation center is seen as a speedboat rather than an aircraft carrier. We supplement what they do," Jamison says.