Eastern Bank Shows It’s Not a Newbie in Fintech Innovation

While it may be more than 200 years old, Eastern Bank is not a newcomer to innovation. 

The $11 billion bank is headquartered in Boston. Its first in-house innovation lab developed helped incubate Numerated Growth Technologies , a small business lending program that lets banks make a loan commitment in minutes. The program earned the bank a Celent Bank of The Year Award for 2016.

“Eastern has accomplished a significant feat in building an entirely new loan origination system from scratch in 14 months, using internal resources, and showed game-changing results on par with anything that the most disruptive fintech company has achieved in this space,” said Dan Latimore, senior vice president at Celent, in announcing the award.

Numerated Growth Technologies attracted more than $9 million in backing from FIS and several community banks to spin off. It is now located in Boston, MA, and the bank retains a minority equity position.  

Bob Rivers, chair and CEO of Eastern Bank, is fully committed to innovation and helped Eastern develop its approach to participating as an initial sponsor in the MassChallenge fintech program.

You are active in MassChallenge. What was the bank’s goal?

Bob: We were looking for interesting ideas in business challenges, in better serving customers, especially in the small business space. And we were looking for any ideas that would be supplemental to what we do.

What did you find?

Bob: We really connected with two start-ups. One, Pinkaloo, led to our Give for Good product. (The bank’s website describes it as “a new way to donate to causes and charities you love with Eastern Mobile and Online Banking.”) 

Basically, it’s an add-on to your checking account that facilitates donations to nonprofits.

We have another pilot in the small business space that we haven’t announced yet.

After Numerated spun off from Eastern and took all its innovation staff along, the bank launched a new lab and tapped Ashley Nagle Eknaian from State Street’s Emerging Technologies Center to head up Eastern Labs.

Ashley, what does your team look like for Eastern Labs?

Ashley: My team is small — about four people. I report to the CIO, who heads up all of the technology.

What’s your reaction when someone says that sounds a little under-sized?

Ashley: When I came in thinking about how to set this up, what we came up with was having a Lab team operate on a very lean staffing structure. 

I wanted to avoid hiring a bunch of engineers and have them only work on Lab projects. We wanted to leverage the technology teams already within Eastern. It creates great camaraderie because our people get to work on Lab projects, which might be a little new to the bank, while they’re running the bank day to day — so they also get to test out new technologies and develop new skills.

How has that worked?

Ashley: We did a lot of work in the last two years with engaging employees. Innovation is everywhere and everyone can take part in it. Innovation can run from quick process improvement to a new product with new technology no one has ever heard of. We bring in people from all the corporate functions and business units from day zero and say, “Help us design something. How would you like to see it? What concerns do you have?” It’s a great team-building experience — and it works both ways. I am not a risk or compliance expert and need their expertise.

“WITH NUMERATED, WE WERE VERY MUCH EXPERIMENTING; WE CAN’T EXPECT TO HAVE THAT KIND OF A HIT RATE ON A SUSTAINED BASIS, SO WE WANT TO GO BROADER IN THE SECOND ITERATION OF OUR LAB AND TAKE MORE OF A PORTFOLIO APPROACH, TURN PARTNERSHIPS INTO TANGIBLE ACTION. WE WANT TO BE A GOOD PARTNER BUT NOT THE SOLE ONE.”

Does Eastern see itself spinning off another company?

Bob: No. With Numerated, we were very much experimenting; we can’t expect to have that kind of a hit rate on a sustained basis, so we want to go broader in the second iteration of our lab and take more of a portfolio approach, turn partnerships into tangible action. We want to be a good partner but not the sole one. 

We can also clearly learn from what other clients ask of the start-ups, so we benefit because that makes the overall product better. Engaging with others is going to work much better than building a proprietary solution and trying to scale it.

Obviously modern banking demands a lot from technology. What tech are you using to run the bank?

Bob: Our core banking system is FIS. We have added onto it in a number of ways — with our online mobile partners, and another partner for the larger commercial space — and we have engaged with a number of other partners for different things in a blended approach. 

Our CIO, Don Westermann, has rebuilt the architecture to make it much more of an open platform that we can plug into.

How important is technology to Eastern?

Bob: For our size, our spending on tech is outsized — it’s almost like an R&D budget. What we do in innovation relative to the bank’s size is clearly unique.