Banks Dive into Technology, Mobile Services

Daily Herald (Arlington Heights, IL), November 2, 2014 | Go to article overview

Banks Dive into Technology, Mobile Services


Byline: Abha Bhattarai The Washington Post

Banks dive into technology, mobile services

WASHINGTON -- There is a policy at Capital One Labs in Arlington, Virginia that if a team needs more than two pizzas for dinner, the group is probably too big.

Staying small has been a top priority for the two-and-a-half-year-old technology incubator, a spinoff of the McLean, Virginia-based financial giant. Unlike its much larger parent company, Capital One Financial, the Labs operates much like a startup -- albeit a well-funded one -- in an office dotted with beanbag chairs, throw pillows and an arcade machine built by employees.

Keeping teams small allows Capital One Labs to be nimble and move quickly. The company's recent mobile wallet was born out of Capital One Labs, as was its recent partnership with Apple Pay. About 50 employees work on a dozen projects at any given time.

Banks and credit unions are reinventing themselves as quasi-technology companies, coming up with new branch prototypes, payment systems and security protocols. With cybersecurity breaches becoming a major concern that costs the industry hundreds of millions of dollars, executives say the need to keep up with the latest technology has become not only important, but vital.

PNC this year opened new "universal branches" in Rosslyn, Virginia and Washington's Tenleytown neighborhood, where teller lines have been replaced by tablet-toting employees. Wells Fargo, which is experimenting with applications for Google Glass, has taken similar measures, picking the District of Columbia for its first high-tech locations. Even smaller community banks are taking note: At Eagle Bank in Bethesda, Maryland, the technology team has quadrupled since the bank's opening in 1998.

"The whole philosophy around technology has changed dramatically in the last 10 years," said Susan Riel, chief operating officer for Eagle Bank. "At one time, banks controlled what technology people used, whether it was ATMs or credit cards. In today's world, the customers are the ones telling us what they want."

Increasingly, what customers want is easy access from their phones.

At Capital One Labs, tucked away on the eighth floor of an office building above a Trader Joe's market, employees clad in jeans and sneakers have spent the better part of 2014 developing the company's mobile wallet, which offers real-time purchase information and rewards balances, and integrating the bank's credit and debit cards with Apple Pay, a payment system that allows customers to pay for purchases using their iPhones and Apple Watches.

Capital One created the Labs spinoff in early 2011 and opened its Arlington location a year later. (There are also offices in San Francisco and in New York.) The idea, executives said, is to create an in-house incubator for new technology that can be fed directly to the parent company.

"At Capital One, we're embedding technology, data and software development deeply into our business model and how we work," Richard Fairbank, founder, chairman and chief executive of the company said in a call with investors two weeks ago. "Banking inherently is a digital product, and digital will transform banking over time."

In 2012, Capital One paid $9 billion for online bank ING Direct as part of its efforts to beef up its Internet presence. The company continues to add engineers, product developers, designers and data scientists, and earlier this month, it acquired Adaptive Path, a San Francisco design consulting firm.

"The momentum around digital is building across financial services," Fairbank said. "Ultimately, the winners in banking will have the capability of a world-class software company."

-- -- --

Need a credit card? Well, Navy Federal Credit Union has an app for that.

Two and a half years ago, the Vienna, Virginia-based credit union scrapped its third-party mobile apps and decided to start anew. …

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