Banks find big innovation payoff in hackathons

U.S. Bank is the latest in a long line of banks to cultivate innovation through intense coding jams, but some analysts question whether such events yield tangible value.

By Clint Boulton
Sept. 15, 2016

In December, Akana also featured in a "remedial hackathon" to get U.S. Bank’s programmers conditioned in modern RESTful APIs. Previously, U.S. Bank had used SOAP-based APIs, which it would share manually, sending a link and documentation to programmers. Nielson and his cohorts decided it was time to update their process for sharing APIs. "We need to get into the 21st century [and] the way tech companies are exposing APIs.” In March, the bank worked with Akana to host a hackathon focused on building solutions for its retail banking business. At the event, U.S. Bank came up with a new home equity line of credit app that it plans to launch later this year.

Are hackathons are much ado about nothing?

Hackathon has a nice buzzy ring to it and lends some cool credibility to banks, whose bureaucratic and risk-averse cultures foil innovation. “Hackathons are a relatively cheap” way to stimulate innovation and inject new ideas into the business, according to Stephen Greer, a banking analyst with Celent. But aside from an opportunity to burnish laurels, he says, hackathons are mostly marketing exercises.

Greer points to how banks are famous for announcing that they’re investing in fintech incubators or fintech startups but the banks will dial back their investments due to the high failure rate and the considerable resources they require to cultivate. With hackathons, banks have a difficult time figuring out how to integrate what the winners have created into the business. “There’s an argument that can be made that hackathons aren’t necessarily the biggest success stories, other than for PR,” Greer says.

Whether or not large banks are getting anything tangible out of their hackathons remains an open question. Yet some of the world’s largest financial institutions, including Citibank, Barclays, BNY Mellon, First National Bank, and Royal Bank of Canada continue to host them, seeking fresh approaches to software and, quite possibly, fresh blood in the form of talent.

Nielson says that hackathons help employees and external talent understand that the bank is thinking about what it needs to do to stay relevant in the digital economy. But, he says, they also provide a PR benefit, alerting Silicon Valley developers that U.S. Bank has viable APIs to share and is open for business with developers and small financial technology firms. “We may not be at the Google or Facebook level yet but we’re moving in that direction,” Nielson says.

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