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BMW runs first Innovation Lab for financial services division

Five startups take part in luxury car manufacturer’s first “innovation lab” to develop financial technology solutions

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BMW has completed its first experimental Innovation Lab for its financial services division which aims to find innovative technology for the fintech sector.

The lab, run in partnership with corporate innovation firm L Marks, took place at the luxury car manufacturer’s UK headquarters, where the five startups involved had full access to all BMW’s departments and team members for 10 weeks.

Mike Dennett, CEO of BMW Financial Services UK, said this open access was important for the lab, both to ensure the startups got the mentoring they needed and to help the business benefit from having people with a different way of thinking embedded into it.

Dennett said the aim of the lab was to “change the mindset in our organisation, to be open to innovation, to ask questions but not be afraid to be asked questions, and to be criticised so we can start a new way of thinking”.

He added: “If you’ve got a culture that’s not with you all the way, then you never get anywhere, and unless that is driven down from the top, then you never get the momentum going.”

Dennett pointed out that all industry sectors, including retail and other areas of finance, had been disrupted by technology, and it only a matter of time before the automotive finance industry was affected too.

The Innovation Lab is one of the ways Dennett is using to ensure BMW is ready for any change heading for the automotive finance sector.

“Customer behaviours are changing, but we’ve not changed the way we do business with them,” he said. “We need to find out what we don’t know.”

Working together

Many startup accelerators will announce a winner at the end of their lab, but the BMW Financial Services Innovation Lab will not announce a winner or rewarding funding, but instead may partner with startups if both parties would benefit from working together in the future.  

Dennett said startups could easily obtain funding from elsewhere, but the BMW lab was more geared towards mutual mentorship, helping both BMW and the startups gain insight into different ways of working.

“We’ve been really excited by what the startups have produced,” he said. “Partnership would probably be the way forward for us.”

The application process for the accelerator began in October 2016. The initial 127 applications were shortlisted to 25 before the final five participants were chosen.

Although no strict outcome for the lab was decided in advance, the participants pitched to BMW Financial Services and L Marks officials during a demo day in December 2016 in a bid to secure an ongoing commercial relationship with BMW.

Participating startups

The startups that took part in the accelerator were:

Divido – offers customers a 0% finance option for financing their car servicing to make it easier to split the cost of purchase over a longer period of time.

Customers can apply for flexible payment plans via their smartphone if they are hit with the cost of unexpected part replacements when their car is serviced.

David Backshall, commercial director of Divido, said this could make the service experience a lot more positive for BMW customers, taking out the stress of huge unexpected servicing bills or funding application processes.

“The key thing when looking at wholesale consumer finance is the companies that are doing it don’t do it very well in terms of the customer journey and the number of steps it takes consumers to apply for finance,” he said. “We saw an opportunity in the market for how we can make the customer journey for applying for finance frictionless and seamless.”

Wrisk – an application that enables customers to apply for bespoke insurance policies that can be managed online.

The Wrisk application allows customers to enter their details, including job and lifestyle, which enables them to create a tailored insurance package for car, home or travel.

Darius Kumana, co-founder of Wrisk, said this model was first created in early 2016 to disrupt the insurance industry, which he said had not changed much since technology began disrupting other industry sectors.

“From the perspective of the customer, insurance is so much a grudge purchase – there is almost an antagonism between the customer and provider,” he said. “There is distrust. The industry has lost its way in delivering on its promise.”

During the programme BMW and Wrisk were working together on creating a prototype for possible future use cases.

Cazana – previously known as UK Vehicle, Cazana has labelled itself the “Zoopla” for buying and selling cars.

The service uses big data to help customers and insurers better understand the value of secondhand cars, as well as the buying patterns in the used car market.

The full history of a vehicle, as well as its current market value and an estimate of how that value will change over time will help customers make better purchasing decisions and help insurers provide more accurate cover.

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Tom Wood, director of Cazana, said the project first arose from his personal interest in the vintage car market, and his frustration at the lack of databases for secondhand vintage cars.

“If you look at the way the market deals with car pricing and car history at the moment, it’s kind of old school,” he said. “They are buying little snippets of data and taking a partial view of the market, whereas we just take everything.”

Warwick Analytics – a predictive analytics algorithm designed to assess customer behaviour and help businesses offer more accurate and tailored services for customers.

By targeting specific customers based on behavioural data, firms can understand customer preferences and needs, and retain more customers by providing a better service.

The firm hopes BMW could use these customer insights to offer opportunities tailored to particular customer groups that may previously have chosen to shop elsewhere.

Drover – an application that allows customers to rent their vehicles out to other drivers when they are not using them.

Drover is already used by ride-sharing platform Uber to enable its drivers to rent cars flexibly for short periods when the cars are not being used by their owners.

BMW could use the platform to rent out its unused cars for cash, provide its consumers with medium-term rentals or allow its existing customers to rent out their cars or test-drive newer models.

Change from the top down

Jonny Combe, general manager of product and channel development at BMW Financial Services UK, was put in charge of the accelerator.

Combe said he was both surprised and pleased with the effect the accelerator had had on the business, and emphasised the importance of having the CEO on board with the project.

“Having that CEO sponsorship was a key factor in the whole thing because I felt that on the ground in the organisation,” he said. “I have genuinely been amazed by how much the business has been engaged by that. If that sponsorship was from someone who was of a senior level but not necessarily the top, you might get part of the business engaged, but I have literally had people stop me in the corridor saying they want to be involved.”

L Marks worked in partnership with BMW Financial Services on the Innovation Lab, advising on how best to help the startups during the accelerator process.

The company also works with John Lewis on its J Lab accelerator, which also has the support of its c-level executives to oversee the project each year and ensure the best outcomes for the business and the startups.

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