Innovation; the NatWest way
How does a 300 year old institution do innovation? That’s the challenge that John Stewart, Global Head of Scouting and Research at NatWest grapples with each day.
The journey began 5 years ago. John was tasked with setting up a small outpost in Silicon Valley to figure out whether there was value in having “boots on the ground” for a UK centric bank in the hottest innovation hub in the world. The answer was an overwhelming “yes”. “I came across companies and people that would never have come across our radar,” explains John.
Returning to the UK 8 months ago, he now runs the global scouting operation, covering every area of the bank, Personal and Commercial banking to support functions including Payments, Data, Security, Finance, Risk & HR and more . His team looks out for disruptive technologies in the US, Israel, the Far East and Europe. Reporting to Kevin Hanley, Director of Innovation, John also runs the Research team whose remit is to brief the Board and senior executives on medium to long term technology trends.
“My team has to identify companies that can solve problems that we and our customers have today. The innovation team has around 70 people split in 3 ways: front end scouting & research; Ideation where we run sprints & hackathons to brainstorm the use cases; and Delivery – basically engineers and project managers to get things over the line,” explains John. “It’s been such an interesting journey, because from nearly nothing a few years ago, today, NatWest has innovation people in each of the business areas. Our role has evolved to connect with those teams, and understand what they are looking for, and see where the match could be. We’ve seen innovation teams formed in all parts of the organisation!”
Although there are close to 50 examples of technologies passing through John’s team and being adopted by the bank, some stand out. Keeping customers safe from cyber attacks and fraud is a critical imperative for banks. The scouting team found BioCatch, a technology firm from Israel that provides added security for customers, that NatWest has implemented. “It’s unlikely we would have found this company through our traditional channels if we didn’t have our scouting network in place.”
How did quantum computing come onto the banks radar?
“Ross McEwan, our CEO, came for a field trip to Silicon Valley. This is a really intensive couple of days where we showcase interesting technologies and companies to him. One of the companies that presented at that trip was 1QBit, a quantum computing start up. The CEO, Andrew Fursman, stood up and said ‘imagine a world where every bit of data you’ve ever created or will create is publically accessible. That’s what quantum computing will do to your encryption’. That obviously made a deep impression on Ross. We continued talking to Andrew and the 1QBit team, and in 2016 we decided to invest in the company. This was really unusual for us, but it keeps us at the cutting edge of the technology & science and the development of this nascent industry.”
“In 2018 we realised it was viable to start doing POCs and pilots to figure out commercial use cases for quantum. We engaged with 1QBit and Fujitsu and did some work inside the bank to ID areas that might have applications for quantum. In Q3 last year, we ran a test with very interesting results.”
First the team had to try and define the problem mathematically, and write the code in such a way that quantum could tackle the problem, a tough challenge in itself. Then, there’s the possibility that classical methods using performance computing can solve the problem more efficiently.
“We discovered that the time advantage provided by the quantum experiment was significant” says John. “The use case we chose was an asset portfolio that requires us setting aside capital for potential degradation of those assets. Obviously, if you can optimize the amount of capital you set aside, that is beneficial. We found in this test case that the valuation using the quantum method was more accurate, resulting in lower capital allocation.”
“This was a real world scenario, but we tested it in a controlled, lab way. We’ve now got funding to ‘productionize’ this, as well as test other use cases. There is so much written about ‘quantum isn’t ready’, or ‘its years away from being practical’ but our approach is “lets use it where and how we can. Let’s learn about where we can apply it”.
In terms of exploring other promising areas to apply the technology within the bank there are plenty of options. The bank’s data team is excited about the potential for quantum to help with anomaly detection. In addition, the team is exploring how to deploy in the security space.. Another interesting potential area to explore is better prediction of defaults in loans books.
“To really take off though, the hardware needs to go through a hockey stick moment where the processing power starts to grow exponentially rather than at a predicable pace. I feel we are really close to that happening. We’ve seen how the internet took off from 1992-1995, or how mobile took off in the 2000’s and we want to be ready for that lift off in quantum. We want to be there at the birth of a new technology paradigm.”
With the innovation team embedded within the business, NatWest is well prepared for a quantum future, whenever it may arrive.
For questions or feedback, please contact:
Amit Das: amit.das@alphaevents.com