Banks tell fintech talent: No need for Shoreditch switch

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Big banks are getting better at nurturing innovation in their battle to hang on to talent

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By Yolanda Bobeldijk

Banks are trying to stop senior staff from defecting to fintech companies by allowing them to work on their ideas in-house in a bid to keep pace with technological innovation.

JPMorgan has opened up its externally focused innovation programme to entrepreneurial staff inside the bank’s four walls so that they can start their own fintech company.

Employees will work with the bank’s innovation team and figure out whether the product or software in question could be beneficial to JPMorgan. If that is the case, they could become full-time CEOs of the new ventures, which will be allowed to grow and develop within the US institution, the bank confirmed to Financial News.

Oliver Harris, head of JPMorgan’s In-Residence programme — which is designed to bring innovative new technologies or ideas to the bank — said the bank wants to “actively encourage the entrepreneurial spirit” of its employees. He said: “The programme is designed to take early stage ideas into production, often with JPMorgan as the first customer.”

However, the bank expects staff that take this route to be fully committed. It cannot be considered a holiday. “The employee in question has to have ‘skin in the game’. If the idea doesn’t work out or the individual changes their mind after six months, their previous job may not necessarily be there anymore, so they have to think seriously about it,” Harris said.

Many capital markets-focused fintech firms have been established by former traders, and one person familiar with JPMorgan’s thinking said “it would be foolish to rule out credible business propositions from [existing] employees”.

JPMorgan is allowing two members of staff to work on their own fintech ideas, one of which involves processing data, the person added. However, the bank does not expect this number to rise significantly.

At UBS, any member of staff can apply to the bank’s innovation board, which consists of 22 senior business and IT representatives, that will evaluate and potentially fund innovative ideas. The employee must have a board member who is interested in the project as a sponsor, however. Line managers then need to agree that this person is “set free” to work on the project, in which case the member of staff becomes an “intrapreneur”, according to a person familiar with the matter. A spokesman for the bank declined to comment on how many of its employees have chosen this route or how many products have been adopted through this process.

BNP Paribas is also in the process of developing a method of keeping entrepreneurial talent inside the bank. Philippe Ruault, chief innovation and digital officer, said the company is currently working with three employees to see whether they can be given a different contract to work on a specific fintech idea for a six month period. It allows the employee to take a risk but to keep some form of job security, in terms of still being employed by the bank.

‘They want to build a fintech company and become a millionaire — why not? We want to help them.’

BNP Paribas will help them with their project and potentially take an equity stake in the company. Ruault said he wanted to help entrepreneurial people: “They want to build a fintech company and become a millionaire — why not? We want to help them. If we have a stake in the business and we are able to help clients, it’s also good for us.”

While it can be tempting for bankers to keep their current pay package and the financial security that it provides, there are downsides to developing software within a bank. At UBS, the company will own the intellectual property of the idea, according to a person familiar with the matter. The product and the unit creating it will be part of UBS — it will not be a separate entity, and the product’s use within the bank, or its sale or licensing to external clients, will not necessarily result in a share of the revenue going to the person or people who worked on it.

READ An audience with Spencer Lake: Goodbye HSBC, hello fintech

At JPMorgan there are no set rules about who owns a product created as part of this scheme — it entirely depends on the situation, according to a person familiar with the matter. If the project incorporated JPMorgan intellectual property and created something new out of that, then the ownership may be a shared arrangement. The person added that if the project achieved something the bank would otherwise be forbidden to do, such as for regulatory reasons, the bank likely would not even be able to own it even if it wanted to.

However, former senior bankers who have swapped their old jobs for careers in Shoreditch are skeptical as to whether these programmes actually work. Spencer Lake, chairman of Fenergo and former vice-chairman of global banking and markets at HSBC, called the idea “interesting” but added: “I think most banks are far away from having the right culture to retain on that basis. Goldman [Sachs] and JPMorgan may, [but] many others are still like ostriches with their heads in the sand.”

‘ Banks are getting better at nurturing innovation, but if you want to do something big, if you have a good idea, a good network, it’s often better to do it outside.’

Fintech evangelist and former CIO at UBS Oliver Bussmann said that when you are trying to build something within a bank, there is a lot of administration involved due to the regulated nature of a financial institution. Banks often just don’t have the right culture, he said.

“During my time at UBS a lot of people were excited to join the innovation programme. There were people with some radical ideas. But while some of the innovation projects were incremental, they were not game changers. You need senior leadership to back your idea. It’s still a bank.”

Making the jump to a startup is often much easier than working within a bank, he added. “There’s a lot of funding out there, a lot VC money, or token-based funding — you don’t need to rely on the bank to fund a project. Banks are getting better at nurturing innovation, but if you want to do something big, if you have a good idea, a good network, it’s often better to do it outside.”

Additional reporting by Tim Burke

Naija247news
Naija247newshttps://www.naija247news.com/
Naija247news is an investigative news platform that tracks news on Nigerian Economy, Business, Politics, Financial and Africa and Global Economy.

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