More large incumbents are establishing in-house teams that mimic the culture — and, they hope, the success — of the increasingly prominent startups they compete with.

At its development center, "Deutsche Bank collaborates with clients to develop apps … under the old system at banks, technology has been built in a vacuum and had its own unique workflow," says Graham Warner, head of client access for trade finance for Deutsche Bank Global Transaction Banking. 

The development center, located in Cary, N.C., employs people with backgrounds in tech startups as well as people from larger companies such as Google.  Elavon recently opened a similar center called The Grove, which operates out of Atlanta.

"There's so much innovation in payments right now…there's Square as well as new innovations in payments from big companies like Google, Amazon and Facebook," says Wally Mlynarski, vice president of mobile commerce solutions for Elavon.

The Grove will develop new mobile payments technology and expand other Elavon products. Its larger mission is to help Elavon attract new merchants and maintain relationships with existing clients that might otherwise be enticed by rivals' new payments options. The short development cycles for mobile commerce create pressure to use new research techniques and talent pools to keep pace with consumer expectations.   

Elavon will emphasize areas such as mobile card acceptance and making implementation easier for merchants. "We're looking for the compelling reasons for consumers to make mobile payments at merchant locations," Mlynarski says.

For larger companies, the lab will build integration techniques to tie new services to existing products. For smaller merchants, Elavon will expand delivery techniques such as software-as-a-service to minimize deployment friction.

EMV chip-card compliance—a scarcity for mobile acceptance in the U.S.—is another possibility. The company's European Mobile Merchant offering is EMV-compliant and uses a separate keypad and card reader to handle chip-and-PIN acceptance. The Grove will be focused on developing with the payments market as it shifts, and EMV in the U.S. is one of these shifts, Mlynarski says.

Although the Grove does not work exclusively for US Bancorp, "we are working with mobile development teams at US Bancorp to drive ideas across channels," Mylnarski says.

Elavon will hire staff in the coming weeks, with a focus on skills in development, quality assurance and product management. It also plans to open another lab in Europe. 

Card issuers such as Capital One have also opened labs; and Visa and MasterCard have operated dedicated development units. MasterCard Labs, for example, offers an application programming interface and has developed payments tech that leverages QR codes for payments.

At its development center, Deutsche Bank works on user experience for treasury management, corporate payments and online products, which are part of the bank's Autobahn App Market, the first 'App-based' electronic offering for clients in the financial services industry. Autobahn App Market offers more than 150 applications across payments and other financial services. 

In corporate payments, for example, representatives from the bank visited dozens of clients to ask about design, functionality and navigation tools. The bank's development center uses those findings to inform the development of user interfaces and other functions for mobile and Web applications.

"Meeting client needs depends not only on what is delivered but how it is delivered," says Warner. "Clients are judging Deutsche Bank's user experience not just against other banks, but also against Facebook and eBay and Google."

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