Why Wells Fargo Keeps Adding to Its Innovation Initiatives

Innovation labs, incubators and accelerators have been all the rage among large banks for the past three years, part of their effort to prove that they can compete — and collaborate — with nimble fintech startups.

Wells Fargo has embraced the trend – it now has six innovation labs and a Startup Accelerator to foster entrepreneurs whose products could be used by the San Francisco bank someday; it also conducts hackathons with local universities.

The $1.7 trillion-asset Wells went a step further last week, creating another unit that is simply called the Innovation Group. Steve Ellis, who for the past 28 years has been the bank's executive vice president and head of wholesale services, was selected to run it.

This is back to the future for Ellis, who in 2007 successfully lobbied his boss for $5 million to create the first-ever corporate mobile banking app and last August launched Wells' Startup Accelerator. Ellis explained his new role, the new group and where it will fit into all the other innovation initiatives at the bank in an interview conducted shortly after the news was announced.

Here is an edited transcript of that conversation:

Is the new Innovation Group going to be completely stand-alone and independent — kind of a think tank?

No. We're going to be a catalyst for the bank to change its business models and processes. We support programs that cut across big sections of the company. An example would be biometrics. We've been using voice [biometrics] in four areas of the bank for a couple of years and we're looking at fingerprints. We've been working with a startup that authenticates you with the veins in your eyeballs.

There's no place in the bank to bring all that together with the resources and investment and support needed to make something transformative happen. That's our goal. Take video, whether it's video conferencing or video collaboration: we have a lot of parts of the company looking at that because it's an interesting way for team members to connect to customers. On the website, they click to call. We bring all those people and proofs of concept together, we learn from each other, and then we'll set direction. For instance, we're not going to have more than three video tools. We're not going to have 20 of them. That doesn't work and makes it very difficult to connect. Our goal is to help different parts of the company connect to each other and bring the whole power of the company together.

What about Wells Fargo's innovation labs? Are they going to be under your purview?

Some of them have been for a while. We probably have six of them now. We're bringing them together so they can share ideas and collaborate — but also, hopefully, give some direction. Sometimes you see them go off [course]. We want them to focus on customer experience, security and analytics. Those are big new areas where there's a lot of innovation going on outside the company.

Cathy Bessant, chief operations and technology officer at Bank of America, said recently her bank is not a believer in innovation labs. "The whole idea that we would devote a tremendous amount of money to something with a 10% hit rate is not, in my view, economically viable," she said. What's your reaction to that?

Looking at things that matter to your customer is important. How you do it is what makes you successful or not. We have a well-thought-out program, we are leveraging people in the businesses to help us validate things, and I don't think we're spending enormous amounts of money.

It's true some of them might not work out, and the key is making the decision when you would kill it.

What about Wells Fargo's Startup Accelerator? Will that be part of the new group?

I started that, so that's definitely under my umbrella. This is another way we're getting people inside the company to meet these emerging companies. So we're extending the tent poles outside Wells. We've got more people within Wells knowing what's going on out there.

How do you choose startups for the Accelerator?

First of all, they apply. We do a cursory look with four or five people in my group. When we see things that look even modestly interesting, we go find a business partner and ask them what they think of the idea. Then we make a decision.

What will Wells Fargo be able to do now that the Innovation Group is in place that it couldn't have done before?

It will have more dedicated resources, and there needs to be a place to make decisions and set the rules of the road — how we're going to use video, for instance, and principles around customer experience. We need to have some standards so we can reuse [application program interfaces] in a way that's safe and secure. But long term, when something gets up and running in production, it won't belong in this group. We don't want this to become a production shop.

What are you doing with APIs?

We can push our payments services through those APIs so they sit in [customers' or business partners'] apps. One example is we worked with a big mall down in Los Angeles called The Grove. A lot of people show up there to get their picture taken with Santa Claus. The mall wanted to create a way people could register through its app so they wouldn't have to wait in a long line to register and pay. We had to push those services into their apps.