Byline: Mary Wisniewski
To make sure it stays relevant in a sclerotic industry destined for a shakeup, Bank Leumi plans to launch a six-month accelerator program for financial technology startups this fall.
The Israeli bank is seeking to groom up to six young companies in its home country that aspire to improve the customer experience in areas like personal finance management (PFM), security and payments. Companies chosen will spend five months in Israel and one month in the U.S., where they'll get money, work space, and access to mentors who will help them develop their ideas.
The news comes on the heels of Citigroup (C) announcing in July its plans to start an accelerator program in Israel.
Banks are warming to the idea of hosting startup programs to get access to entrepreneurs' ideas, mold them into what they need, and potentially buy their products once commercialized. Another motivation is to get recognized as having innovation street cred. Young companies, in turn, get the connections -- and insider knowledge -- they require to turn their dreams into realities quicker.
Bank Leumi's move also underscores a growing trend among financial institutions worldwide to move more quickly with their IT efforts. Banks, infamously sluggish when it comes to technological upgrades, are acknowledging the need to scout out for innovation from outside their organizations and are actively courting developers. In recent months, opening up APIs, hosting coding competitions, and crowdsourcing mobile app ideas are among the strategies banks have tried to solicit fresh thinking.
"The banking world is on the edge of a new era, and we think many services and products the banking industry is selling to customers will be completely different in a short time," says Nir Inbar, business development manager in the high tech sector of the commercial banking division at Bank Leumi. "The banking sector was somehow left behind in terms of disruptive technology when looking at other industries."
Regulations, a protracted process for buying technology, and tight budgets are among the reasons for the industry's glacial pace of change.
"In order to be relevant, not just number one, you need to get innovation in-house from brilliant minds ... working on fintech," says Inbar. "It's very hard to do innovation in house. Big companies need to go out and fetch these outside companies and accelerate their programs. ... The financial world needs big changes in order to adjust to the Internet and the way people think about financial products as commodities."
Bank Leumi partnered with Elevator, an Israeli firm that creates accelerator programs and invests in startups, on the forthcoming Fintech Innovation Hub, which requires participants to spend 30 days in New York, which, along with London, is widely viewed as one of the main cities where fintech handshakes happen. …