The following is an edited transcript of a conversation between Steve Ellis, Head of Innovation for Wells Fargo and Michael Halloran of The FinTech Blog.
MH: Your have a new role as Head of Innovation for Wells Fargo. Given its record as an innovator, in areas like online and mobile banking, why do you think the bank is not as well known as it should be for innovation?
“Creating the Innovation Group puts an even larger focus on creating the products, services, and technologies that will allow us to stay competitive and allow our customers to do their banking when, where, and how they would like.” – John Stumpf, CEO of Wells Fargo
SE: I’ve seen different waves within the bank and across the broader industry. Right now there’s tremendous interest in innovation.
Innovation has always been there: It’s just sometimes the case that other messages stand out. Take the financial crisis of 2008. During that time, a lot of the energy was put into risk and controls. Or the integration of Wells Fargo and Wachovia. It took a lot of effort. But the innovation story is real.
We have been innovating for a long time. There is remarkable creativity in our organization. There is no lack of ideas. I see our role as to give a voice to ideas, which come from all areas across the bank – as well as outside the bank; it’s so easy to focus on what’s internal and miss what’s going on outside that’s interesting.
MH: How do you see Wells Fargo’s Innovation Group compared with other models? e.g. CitiVentures has a mission, beyond its venture investing, to bring innovation to Citi. Capital One Labs’ mission is to deliver products with big impact, but gets involved in acquisitions (e.g. LevelMoney).
SE: Our team is 150 team members strong. Our initial focus is on 5 areas: R&D; innovation strategies; payment strategies; design & delivery; and analytics.
We want to bring focus to the great ideas within Wells Fargo and serve as a catalyst to foster innovation in areas ranging from business models to user experience. We want to innovate across the entire organization — at a time of increased risk and regulatory focus.
We also want to encourage our team members to sit up and look outside the organization for innovation and ideas.
An example of this is the new Wells Fargo Startup Accelerator.
Our Startup Accelerator expands our vision of the future of financial services beyond the boundaries of Wells Fargo and banking, and introduces us to innovators who want to shape how our customers handle their financial needs in the future.
MH: When Morgan Stanley’s Technology Business Development Group put on its CTO Summit, our focus was on innovation, as well as team building and business development. Is that true for Wells Fargo?
SE: Yes. There’s an advantage for us to have early interactions with the startups in the space. The accelerator gives us an opportunity to get involved and connect with the brightest startups from around the world.
MH: What innovation areas are critical to you now? Given Wells Fargo’s current focus on growth in credit cards and wealth management, investments and retirement (WIR), is it in areas like analytics?
I can see us going in a direction of offering identity as a service…
SE: Analytics is a great example of an area rich in innovation opportunities. Others are security and identity management. We’re good at security; as a bank, you have to be strong there. It’s fundamental to our business. The Innovation Group also owns initiatives like mobile wallet services to propel innovation in this important area for Wells Fargo.
We have a lot of good ideas. We literally have received hundreds of good ideas from team members across the company since forming this group. I see it as part of our mission to drive focus and execution on a reasonable number of focus areas, so we’re working on five big ideas vs. five hundred.
MH: I know the innovation group at Bank of America struggled with issue of mission creep by expanding its mission from ‘innovation’ to execution in areas, e.g. social media and mobile, that put it in conflict with areas of the bank that owned those efforts. Is that a risk?
SE: We are a small group by design, and we have to clearly understand our mission and purpose for the company. I was invited to speak at Wells Fargo’s companywide Town Hall with our CEO last week. We talked live with team members across the country about the mission of the Innovation Group.
Internal communications is important, and we want to clearly articulate how we will give a voice to innovation and ideas across the wider organization. Our group will stay focused on our customers – and I’m confident the ideas and solutions will follow with rapid execution.
MH: You mention the Innovation Group is a small organization. Do you think you will bring in individuals from outside to help the team?
SE: We have a lot of interest from Wells Fargo team members in joining the group, and we’ll grow. Would we hire some talented technologists or those with other skills who don’t know banking and teach them about banking? Yes.
MH: As someone who’s worked at a startup and a bank, it frustrates me to hear VC’s say ‘Banks haven’t done anything innovative in the last ten years’ and have people believe them. How do you feel about that?
SE: I’ve been around long enough to recognize that a lot of people who are driving the conversation are pushing an agenda. I’m accustomed to it. We maintain a good relationship with the venture world along with startups.
We think we can innovate with the best. For instance: biometrics. There’s a lot of seriously cool stuff that’s happening in that area.
If you think about it the area of identity management and authentication is one in which the banks are really exceptional. I can see us going in a direction of offering identity as a service, for example.
I think the predictions about what is going to happen in 3-5 years are not as interesting as what’s going to happen in 20 years.
MH: Despite the success of Bloomberg ‒launched with Merrill Lynch as a minority owner – there hasn’t been a lot of consortium offerings from banks. Why is that?
SE: To drive a program through a large institution, you quickly need to get a lot of specific people in meetings who have decision-making power. A consortium, to me, makes the whole process much more difficult. With the right idea, of course, anything is possible.
MH: What do you see when you look ahead?
SE: I think the predictions about what is going to happen in 3-5 years are not as interesting as what’s going to happen in 20 years. There are things we can do using APIs, however, that will be interesting to watch unfold.
In terms of the big picture, I think change happens slowly and steadily. It’s easy to miss, including changes that can have tremendous impact on the industry. I’m not a big believer in Bitcoin or the related technologies. They seem more like solutions looking for a problem.
MH: Wells Fargo has been a leader in online and mobile banking on both the retail side, as well as wholesale banking side. Wells Fargo’s Virtual Channels Group has done great things, yet many startup pundits seem to say that big banks ‘don’t get it.’ How are you proving them wrong?
SE: We do not want to become an Innovation Group that publishes white papers and just does R&D. We are about being a catalyst for rapid execution.
One example is a California-based corporate client that asked if we could build a new technology solution for its customers. They were considering working with a startup. Wells Fargo built a custom solution within the timeline and exceeded their expectations. That’s what it’s all about: delivering benefits for your customers.
SO: Sure. I graduated in 1999, during the dot-com boom period when the Bay Area, like today, was an exciting place with a lot of startups. I worked at a place called Ingenio.com that was acquired by AT&T.
SO: That’s right. My brother, who was now at Zynga, and I were talking about expanding access to financial services. To take what I’d learned at Grameen and seen was hard to do at places like Citi. Jake again told me I had a software problem. So we decided right then to start LendUp.
MH: What are the goals of LendUp?
The FinTech Blog 