Inside First National Bank of Omaha’s seven-person innovation lab

First National Bank of Omaha's footprint reaches Nebraska, Colorado, Iowa, Illinois, Kansas, South Dakota and Texas.

First National Bank of Omaha (FNBO), with $20 billion in assets and 5,000 employees, is building out its seven-person innovation group within the bank’s namesake skyscraper in Omaha, Nebraska. The 162-year-old bank is remodeling the group’s workspace to resemble a startup, with open, collaborative offices and Apple TVs adorning the walls. The goal is to build a”raw, industrial feel,” emblematic of the cultural shift that FNBO wants to implement.

Marc Butterfield, senior vice president of digital and payment solutions at FNBO, said the group is focusing on making the bank’s consumer and business-facing transactions faster. It’s worked on speeding up loan underwriting through machine learning, automating compliance and simplifying account transfers, as well as the fundamentals of digital banking and payments — features that would be considered table stakes for any forward-looking institution.

However, the significance of the group’s launch is about affecting cultural changes internally, including an enabling environment for startups with which it would like to partner. “We’ve been on a lot of excursions talking to fintechs,” Butterfield said. “As part of our big-picture philosophy, how do we show that we’re easy to work with?”

FNBO launched the innovation group in July 2017 and spent the entire first year training and exploring startup partnerships. Seven employees and two student interns make up the current team, and three of the employees are new to the bank. Butterfield said their job titles can be described as “product owners,” or people who identify problems the bank wants to solve. The group doesn’t have any developers yet, but he noted that the bank hopes to hire some in the near future.

The current team isn’t the first attempt the bank has made to introduce innovation through a dedicated group, Butterfield noted. Although previous iterations focused on creating new products, those groups didn’t convince senior management the innovations were worthwhile.

“It wasn’t that what they were doing was wrong; it was that the bank wasn’t prepared to digest that yet,” Butterfield said, speaking of prior attempts to build similar teams. “It’s innovation theater versus innovation practice. Innovation theater is, ‘Lets build a cool space and buy a bunch of hardware, and people will see that and think it’s really cool.’ But you’re not really embedding that into the culture of banking.”

Apart from its in-house innovation efforts, the bank has used external partnerships to enhance its product stack, including a tie-up with Bill.com to launch a digital accounts payable and receivable tool for business customers. It’s also worked with personal loan finance company Upstart and has invested $50 million in equity to advance its product efforts. Meanwhile, FNBO was an early mover in online checking and savings accounts, which it launched in 2007.

The goal of the innovation group, according to Butterfield, is to build an employee culture that integrates an agile, startup-style product development path. To do this, the bank has hosted weekend-long hackathons and pitch competitions for students with cash prizes. These moves also have PR value to attract new talent.

“We want to do more of those things: employee challenges, companywide competitions,” Buttefield said. “Not only does it help get our name out there that the bank does these things, but it also helps internal employees that have an itch and want to do some of that stuff.”

The group’s creation comes as more and more regional banks are investing in technology to keep up with startups and big banks’ massive technology budgets. A 2019 Deloitte study estimated that banks have spent about $12.3 billion improving digital banking, more than they spent on call centers ($9.1 billion), ATMs ($9 billion) and branches ($10 billion).

FNBO isn’t an outlier among legacy financial companies building in-house innovation labs; indeed, every major institution seems to have one. The question is whether these initiatives are more about marketing than results. Brian Wolfe, professor of finance at the University of Buffalo School of Management, said the challenge is matching new technology to legacy banking systems.

Butterfield acknowledged these hurdles and said his team is working with the bank’s CTO to navigate issues regarding FNBO’s next-generation tech stack. As for avoiding innovation theater, he said his team is guided by a practical approach to problem solving. “Anything that the team is going to work on in the big picture is about improving our customers’ financial lives and doing that through speed, simplicity and security,” he explained. “I view this as a multi-year process, and we’re still in year one.”