1012. Insights: How Lloyds, Santander and NatWest are shaping the future of banking innovation

27:51I think that's such a critical point. And actually, now I'm sort of sitting here and I'm kind of like, it's taken us a little while to get to this, but I'm really glad we have. You know, I think when big organizations tend to think about a sort of innovation agenda our strategy around innovation and what the next few years look like. I think we often sort of up weight, you know, the sort of technology and what that can enable and maybe some of the ways of working and those types of things. But actually, we almost underestimate the value of a really clear purpose and mission. And I think that's often where this stuff falls down because you just don't have that clear sort of steer or direction to follow.

28:32I wonder if maybe we can wrap this section sort of, I suppose, in a similar vein as to how we started it and just sort of ask each of you, you know, what are the sort of signals or the data points you guys are looking at that sort of help you identify areas where innovation can make that real impact and not just a cosmetic one. Sarah, shall we start with you again on this one? Yeah, I think data is really important. I think I alluded to it earlier. It's kind of the feed in to finding those brilliant pockets of ideas, but specifically on helpful data points. I think listen to what customers are telling you, what are they contacting you about, being able to see how many customers are using, which features, when, in what order, and then who are your customers, what products do they have.

29:19So I'd probably describe it as a bit of an enriched analytics suite that you can carve out at multiple layers. So it's relevant at Exco and Board, but equally you can start to cut that through journeys end-to-end to see that whole experience. I think that links back to my point I made earlier on having that holistic view over the end-to-end for your customers, because that's how they are going to interact with what you're delivering at the end of the day. So yeah, I think a few of those would be good. Love that. What do you think, Cam? Yeah, fully agree. I had very, very similar points. I think talking to the frontline staff is always super helpful because they are interacting with customers day in, day out.

29:59And just looking at some of those insights from them and just looking at things like your complaints data, like what are the things customers are complaining about, right? How do you solve for those? there's things like you know if you're losing significant market share in particular segments or products just you know looking at some of the data around the payment outflows like where are customers moving their money to and why are they doing that and there's also the external data points around competitor data so how are competitors growing share what are they doing and how does that help identify gaps that you may have in your business model?

30:38So those are just some additional elements. Over to you, David. What do you think? You know, I fully agree with that. I think they're all very valid internal signals. We also look sort of quite widely outside the bank. So we undertake primary research into some of the tech trends in the markets. we've got people in the US and in Asia who are feeding what they see from the technology world and the startup and fintech ecosystems there. And we also, as I said earlier, this principle of the macro signals from what entrepreneurs are doing in this space are super important to us as we orientate for action as well.

31:22So I think I would pair up the external, potentially with more of a horizon two uh implication with all the things that we've already talked about internally love that um what are your reflections tim i think lots of good discussion yeah no 100 percent um i think someone said to me that uh innovation is not an outcome it's a process um and i think when you're looking at data it's how you then judge the success of the process rather than just saying hey look we have innovation now because we have some people under the age of the 30 not wearing a suit and then when you look at innovation as a process you can start to look at certain KPIs around you know there's this idea of idea to launch times which is how long would it take a randomly selected idea in the organization to deliver to market and the reason that's interesting is that I don't actually think traditional banks are bad at innovation certainly not a product development they're just very slow and it's certainly when you compare it to fintechs but then as I'm sure we'll talk about in the next section.

32:22That then comes back to how you balance risk and innovation, which is the heart of any innovation process. Love that. You're doing my job for me. You've already teed up my segue into the next section, so that's great. Yeah, look, we talked about what innovation should look like. I think now we want to really start to focus on actually how do you make it happen, particularly inside big banks. Do you stick with us? Don't go anywhere, because after the break, we'll be diving into the challenges of executing innovation at pace, building the right teams, and driving real change.

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34:14All right, welcome back to the show. In this section, we'll be diving into some of the challenges. particularly in large organizations and trying to deliver innovation at pace and at scale. Cam, maybe if we start with you, I guess, what are some of the biggest challenges you've seen internally when it comes to trying to drive that meaningful innovation and deliver it at scale? Yeah, sure. So I think probably two or three big ones. I think firstly, not having the right operating model is really difficult. So with that, what I mean is having ring-fenced tech, having ring-fenced UX, having ring-fenced research labs.

35:00All of this is really important when you're trying to do innovation because you're trying to learn quickly. You're trying to move fast. You're trying to be agile. You want to get through as many ideas as you possibly can in your pipeline because you want to understand quite quickly if there's a business opportunity. there or not, not having the right processes in place to really bring partners in at speed. And when you don't have that right operating model, what it means is that you're essentially fighting with the same pool of resources across the bank who are trying to deliver all of the BAU as well as the innovation.

35:32And that just does not work. And that's definitely a challenge we've had at the bank I'm at, whereby, you know, we're a lean organization. We're kind of a challenger bank really I suppose we're not as big as the big banks but we're not as small as some of the neo banks we're kind of in the middle but we're trying to do the big innovation as well as all of the BAU with the same resource pool so that's definitely a challenge that you know I've faced and one whereby if you don't have that ring fence set up and that right skill set it's very difficult to drive that innovation forward and then linked to that I suppose it's around the governance frameworks.

36:13Again, because of the nature of what you're trying to do, you almost need a lighter governance process. You almost need that kind of, you know, quick sign off approval, you know, and often what we find is that you're, again, you're taking your initiatives through the same bank-wide BAU governance. So whether somebody's trying to launch a completely new product to millions of customers the governance is no different to whether you're trying to run a pilot with 10 customers right so that really slows things down and what it's meant is that you're testing ideas which take six to eight months for you to get any real outcome maybe even longer at times and you can only really get through two of those a year at the most and that is not moving at pace and trying to learn quickly so those are just some of the challenges that I've come across in in my experience of innovation.

37:08It's really interesting because, and I can make this admission now that I'm on the fintech side of things rather than at a traditional bank. The balance between risk and innovation is something that I personally probably got wrong when I was trying to drive innovation. And that was because I saw the two halves as almost antagonistic, which was like, I want to innovate. The risk and control functions are stopping me from doing that. I think effective innovation is about establishing that equilibrium between the two and it's process that drives that. And to your point, Cam, that's all about the governance model and getting the risk and control functions, not just as an approval point, but actively embedded, involved and sharing ownership for the process itself.

37:49You know, I've seen some banks that will bring a risk and control function into the innovation department, and then they have some form of light touch or expedited new product approval mechanism, but they have active headcount that is designed to speak to the risk and control functions. I think the other part of that is culture, as we've touched on before. I used to, when I was running an entrepreneurship program, I used to train very excited employees on how to be an entrepreneur inside an organization. And I was like, go forth and go forth and innovate. And I was very surprised when nothing ever happened because no one, you know, there was a lot of effort.

38:27But the problem was that the not that these individuals weren't very talented, it was the fact that the organization wasn't ready to receive the ideas that they'd created, or certainly not in a way that wasn't in a defined new product approval mechanism, right? So I had to spend a lot of time working with the organization on culture as the precursor to actually building an effective governance model rather than actually hoping that it would appear downstream. So I was just going to on that actually because I think that piece about culture for me it's trying to build a culture where proactively teams are willing to work across the traditional product lines and we all work in banks so you think of a bank as like current accounts and savings accounts and credit cards and loans and then you go and talk to other technology companies and they think of products like experiential customer focused and I think a shift in that of aside from how you build something or whose product it is to focus on what you're looking to solve for the customer and with risk and control in that boat as tim was saying um i think like actually making active moves to say our leaders need to role model this behavior we celebrate teams who work together we reward working together and collaborating across those different lines is where you really start to see that culture shift happen and then it's easier for people to maybe reach into areas that weren't so close before.

39:46I think that's really interesting because, you know, innovation by definition introduces risk into an organization because you're doing something new. It's a core part of it. It's about working with the risk and control functions to understand what level of risk they are comfortable with and almost pre-agreeing that and having that managed on an ongoing basis to ensure that, you know, they're comfortable, the process is fine. And that makes everything easier for you in the long run. I mean, fundamentally, when you look at traditional banks, risk adversity and security is part of the value proposition.

40:20So actually, what I learned over time is that I had to be very, very, you know, back to my point earlier about it being a partnership, you know, risk and innovation. The risk functions are doing something that actually adds to the value proposition to the bank from a customer perspective and, you know, have to be very, very appreciative of that all the way through the innovation process. I'd say that our risk and controls people are our closest friends and allies in the bank. And it wasn't always us. We had to work really hard to explain to them why this was important, explain to them the importance of proportionality and the need for us to move quickly in a safe way.

40:57So we have diverse platforms. We have things that are air-gapped from the bank. We use pseudo data. or, you know, we are not in the game of really experimenting with live customers. And that's approved. I think that the trick thereafter is to take those learnings into the live domains, which relies on a bunch of the things we spoke about before. I'd also say, I mean, I think, Tim, you put it really well, culture is the enabler here. And it is the sort of day-to-day job of everyone on my team to evangelize how quickly technology is moving on the outside, what the new entrants into the market are doing really well, and just build a sense of urgency, which really helps us on that proportional risk management side.

41:44I love that concept of proportionality. That's such a good word for it. I think what you've captured, David, for me really well is the sort of shift or the evolution, right? Because everyone's on a journey here. And when you think about what you're trying to do around ways of working and embedding the right culture and the right mindset like we talked about earlier, we have to remember that that's also true for our risk and control colleagues, right? This is a new way of working and actually they need to be brought on the journey and they need to understand why maybe a lighter touch governance model applies in this context where it doesn't otherwise.

42:24Sarah, one thing that you mentioned as well that I think is really worth double-clicking on was the idea of incentives and rewarding the right types of behavior. And I think, again, that probably is slightly different in this sort of like innovation context than maybe it was previously. I'd love to get a little bit more of your thoughts around that as well and how you can set up for success. Yeah, I suppose it's probably an extension of my earlier thought on you can't keep things completely separate. So maybe in earlier innovation teams, there was this idea of being, you know, the superstar individual contributor who has the brilliant idea can build it if they just get a few engineers around them and a few designers and then deliver it straight to the customer.

43:11I think maybe it's unfair to say that, but I think some of the problems that those superstars solve were quite low hanging fruit and they are not then scalable across the kind of complexity that we're working with today in a world where our grandparents are online getting their online shopping delivered post the pandemic, right? Everybody is digital and you're serving such a broad set of needs. So therefore, your kind of setup of your business and your organization needs to reflect that in the way that you reward people. And it seems a little bit obvious, but the most direct way to do that is to tie it to people's bonuses and say, you will be rewarded if you work in a certain way and you deliver these outcomes that are customer focused as opposed to always being directly in your line.

43:55Now, what I will caveat that with because we are a commercial organization is it can't all just be customer experience metrics and earlier we talked about data and insights i think that conversation we had around business cases and being able to articulate the financial value of what you do is just as important as also the collaboration and the customer angles yeah so striking that right balance between you know knowing we're hitting the right points for customers and being able to see that see that feed through into engagement and everything else, but obviously we're also hitting the right point for the business and proving that actually this can be successful.

44:35Cam, I guess, what are some of the techniques or some of the practical steps that help you navigate some of these maybe points of friction internally to make sure that actually you are sort of setting up for success? Yeah, sure. So I think, firstly, I think it's just being really clear on just what is the risk. I know there was some comments earlier around there is always risk when you're bringing in innovation into the organization. But actually, a lot of the time, the innovation already exists in the market. And it's just, it's not new, new innovation. It's just new to the bank. So actually, what are the real risks, right?

45:21And just really understanding those and just being really clear about where maybe other teams or stakeholders see those risks to be. And then actually just being really clear on how can those risks be mitigated, right? And I think a lot of the time when you're looking to validate ideas and you're trying to prove the business opportunity, there's things that you can do to really minimize the risk. For example, you know, there's no tech integration with this. We're just trying to learn and test and see if this concept actually has, you know, any longevity to it. So actually, we won't put our brand on this pilot.

45:58or, you know, we don't need to, you know, kind of do any API integration type work. So actually what are all the things you can do to really minimize that risk and still get all of the learnings you're trying to get? And then once, you know, stakeholders are comfortable, you can start to think about what the next stage might look like after that. So those are just some thoughts on just some of the practical steps, I suppose, in terms of being able to get people comfortable with what you're trying to move forward. I really love that point about being really clear around maybe like the hypothesis that you want to test or sort of the outcome that you want to get to and then figuring out, all right, well, almost what's the path of least resistance that gets you there and gets you to the sort of conclusion that you're looking for.

46:46But also is sort of, you know, acceptable to all of those internal stakeholders. David, I saw you sort of nodding along as Cam was making some of those points. Do you want to come in on that? Yeah, I firmly agree with everything that's just been said. I think in a bank, we can't move fast and break things because trust is at the heart of what we all do. I mean, it's really the fundamental thing. But there are some things that we can, you know, deploy that I think the tech industry has done well. And that is recognizing that failing in the right way is part of the advancement process. And you do that through hypothesis development, through experimentation, through learning lessons for things that don't pass muster, and then feeding them forwards into new ideas.

47:30So I've really tried to instill on my team and on the wider institution that certain types of failure are desirable. They're okay if they're done safely, and if you're learning the right lessons. I also think there's something here about the, we talked about the cultural overlay, but if you're setting the scene in the right way have the right narrative as an innovation function and can tell the story of technology disruption and why customers need this or wanted or why it's desirable, that really helps to, you know, have the conversations with risk and control colleagues or others, maybe the finance team, about why this is super important.

48:06And there's one final point to make, which is, I try to find people for innovation teams that are very much left brain and right brain. You have to have an understanding of the technology, but you also have to make the right case in the right way to the right people. And it's the concept of that smart creative, which was a sort of an Eric Schmidt Google term used for people with, you know, an MBA and a PhD. And that ideal may not be achievable in every institution and every bank, but really someone that understands the business context and the technology and can work the stakeholders are going to go furthest and drive of the most impacts, I think.

48:43A couple of things that stand out for me, Tim, from that. One, I think, is storytelling that I think is such an interesting point, you know, being able to land these things in the right way, particularly with internal stakeholders. But then the other one around hiring the right type of people, again, and, you know, going back to your sort of experience around entrepreneurship and all of that sort of stuff. I'm sure you've seen what What are some of those characteristics that sort of maybe make people a better fit in this sort of like fast paced innovation space and maybe others feel a little bit out of their comfort zone?

49:21I think a mistake that I used to make was thinking that everyone was capable of or everyone wanted to drive innovation inside a company. When actually I think there's research that shows certainly when it comes to intrapreneurship, So people that are able to become entrepreneurial inside a company, it's probably nine to 10 % max of your employee base that have the capabilities and want to do it. Because actually you're taking something on on top of your job in many cases. And some people don't want to do that. It's also about dealing with ambiguity and then actually being able to occupy those sort of gray spaces, that discretionary organizational space, which is between the lines, which has some weird dynamics that you have to be comfortable with.

50:03As an aside, that makes it a really good leadership development strategy because you put people into these stress scenarios and you can see how they perform. The other thing I'd say is that inherently innovation, to all the points that we've discussed, is actually a very heavy sales exercise inside a company. So you are going and you've got an idea that you are selling. You're selling to get resources. You're selling to get finances given to it. And ultimately, you're essentially pitching that idea through an organization in the same way that an entrepreneur will be pitching for like Series A seed round and all that.

50:37So you are, in many ways, that entrepreneur. You just didn't want to quit your job and live in your mom's basement for two years, right? Eating ramen noodles. But all the other things are largely the same, right? You need to be able to pitch and deliver and drive things forward and mobilize a team. And so that makes it actually quite a rare skill set inside an organization for people that can do it. and then people actually want to do it because it is really hard. I think the ambiguity point is really key, actually, because you do have to be really comfortable with that, right? Because often you're starting with a blank sheet of paper and it's just an idea.

51:12And it's just working through what are all the steps that you're going to take now to move this idea into something that you can actually deliver and get some learnings off the back of and do some experimentation with. And how do you kind of move across those stages? And I suppose that takes us back to like the innovation frameworks and how do you embed those into the organization. So there is some structure to how you move ideas forward, even though the idea itself is it could be quite ambiguous. So being really comfortable with that and being able to work in that way, I think, is such an important skill set.

51:45And I've had examples where, you know, people have come into these innovation roles and they struggle with that because some people naturally like process. They like to be told what's the next stage. And this is not that type of role, right? You kind of need to figure out yourself, like, what do you think is the right thing to do next and what decisions need to be made where. So, yeah, I think I've definitely resonate with some of those points. I totally agree. And I think it's an unseen skill set, actually, when people talk about what's the future of banking, what's the future of tech roles. You often hear about data scientists and being the kind of, you know, a lot of the more what I would call technical disciplines growing.

52:23But that kind of ability to be nuanced and shift in the organization is exactly as you've described. The only thing I'd add is probably as a leader, it's really important to protect the team from a lot of the noise when they need to focus and actually get stuff done. Because if you get the reputation for being a great team, all of a sudden you're like a work magnet, right? It all starts flowing your way. You've got high throughput. people want to have all of your team working on all of the projects all of the ideas and I think there's kind of that balance between being able to negotiate around the business and around the organization but also being able to protect the team when it's needed and then probably more specifically in team leadership just ensuring that you're not stifling excellence so for example I can sometimes see it across teams where the strongest performer is expected to somehow hold up a you know an underperforming team or somehow by osmosis get all the new starters upskilled on what they do but they're also the person who's delivering the brilliance in the team so I think there's just that understanding of people dynamics again which doesn't really come out on job specs or job ads in the same way.

53:35Just to add to that Sarah I think absolutely spot on and I think it just talks to this need for people in innovation roles to have that left brain and the right brain together. The ambiguity I think is quite pronounced is where to play. It is how far ahead of the bank do we go. It's that sort of horizon 1.5 to 3 range. And if we go too close to what the business units our franchises are already doing, people are going to ask why the team exists. I mean, you're going to be defunded after a year or two years of incremental improvement. If you play too far out and, you know, working on brain computer interfaces and their implications for banking, you're not going to generate results because it's just too ambitious at this point.

54:13that's maybe six or seven, maybe 10 years out. So the ambiguity of how far ahead of where the institution is and where to pitch projects, because finite resources are a case in every institution, I think is really important to the sustainability of what we do as innovation teams and also to the delivery and the outcomes. And resources are finite, but you're not necessarily, it's not necessarily the same resources that you want that are sort of already running the AU and actually Sarah I think the point that you made that was so nice is that you can't just read a CV and go yes that's the person that's going to thrive in this context it's not that straightforward and I think it comes back to the point that you made because there is so much uncertainty and you just aren't going to know who's comfortable working with that until they're sort of in there and already doing it And I honestly think this segment could go on forever.

55:14But unfortunately, we are at time. I think we've touched on so many of the key things around governance frameworks and talent and mission and purpose and incentives and all of these sorts of things that I think really, I suppose, paint a picture of the complexities of trying to do this. in a large organization. I guess, Tim, look, maybe final word to you. What sort of stood out for you over the course of this discussion? And I suppose how optimistic are you around the fate of innovation in the UK without wanting to sound too grand and sort of moving forward from here? I think when we conceived of this episode, um you know having done one episode with the uh on the fca saying that they wanted the uk um finance sector to innovate more and then another episode on uh from the fintech perspective saying we'd like to innovate a bit more you know the thought was to bring the banks in for this this third part of the the trilogy um uh because to my mind it is if you can get this right if you crack this inside the biggest banks in the UK.

56:36This is how you drive the UK forward. This is the fastest, well, maybe not the fastest, but this is the most effective way to do things at scale because the scale is already there. And if you can change these monoliths to a degree, these huge organizations and pivot them a little bit, the 1 % from the inside, then the ripples that that has, you know, it's that classic oil tanker versus speedboat analogy, right? But I think if all the things that we've discussed today can be applied and getting that balance between risk and innovation right then you know fundamentally that's how we can improve the lives of millions of people across the country and that's a really exciting thing and the last thing that i'd say is if you go too far the other way and you become too controlled as an organization and you don't have any innovation then you're just the company from deliverance so and we don't want that Love that.

57:27Yeah, look, super, super interesting discussion. I'm so grateful to you all for coming on and sharing your perspectives and your insights. That does wrap us up in terms of today's discussion. Thanks again to our panelists for coming on, for breaking down this really interesting, this really important topic. Maybe if we just do a quick round the room, go one by one, and you can just tell us a little bit more in terms of where people can find out a little bit more about you, maybe where they can connect a little bit more about, maybe where they can find your organizations as well if they don't already know, considering how big you guys are.

58:05Tim, let's start with you. I'm on that, it's a small known platform called LinkedIn. So I'm on that sometimes, you know, you might not have heard of it, but I'm there. Excellent. Well, if people can find their way there, you might just find Tim. David, how about you? Yeah, likewise. I mean, LinkedIn, we have a very active NatWest group, innovation-oriented publication called Disruption Watch, which we publish every couple of weeks, which talks about some of the themes. And we advertise our programs on LinkedIn. So there'll be another fintech growth program like the one we ran earlier this year coming soon.

58:41And I'm also on LinkedIn personally as well. It won't be a surprise. Amazing. Right. Thank you, David. And Sarah, how about you? I also use that niche work media platform called LinkedIn. So you can find me there. We also have a launch program at Lloyds Banking Group, which is covered on LinkedIn if you just give that a search. And then if you're interested in some of the more strategic direction, I'd recommend lloydsbankinggroup.com. That's our kind of investor and strategy focused website. There's loads to read on there about where we're going next. Love it. This LinkedIn platform is so niche and yet we all seem to be on it.

59:16It's early adopters maybe. Cam, how about you? And guess what? I'm also on LinkedIn, so you can find me there for sure. But yes, and also on our santander.co.uk website, there's a ton of information on there about innovation and investor relations and lots of articles there as well, which might be interesting to have a look at. Amazing. All right, and you can find me also on LinkedIn, this little known platform. Yes, and look, thank you for listening. If you like what you've heard, And then please do follow our podcast. Don't forget to leave us a review because it really does help us to make the show better.

59:54And it also helps other people to find the show as well. As always, please do feel free to join in the conversation. Find us on social media. Just search for 11FS or FinTech Insider or email our wonderful production team at podcasts at 11FS.com. Thank you very much.