To think big, sometimes you’ve got to go small.
Conditioned to using financial might and scale to their advantage, major mutual fund managers and insurers sometimes have difficulty innovating and adapting to change quickly. Executives often need to maneuver through slow-moving corporate bureaucracies and legacy IT systems.
Now, some of the biggest names in Boston’s financial community, including Putnam Investments, Fidelity Investments, and John Hancock, are teaming up with nonprofit MassChallenge to launch an accelerator program for financial technology startups.
Called MassChallenge FinTech, the program also includes Springfield-based insurer MassMutual and Citizens Bank of Providence as founding partners. The plan is to match as many as 30 later-stage fintech startups with much larger counterparts. The program, which will launch in January, will be open to local startups but is also designed to draw fintechs from elsewhere.
In addition to helping with the program’s costs, the sponsors will suggest industry problems that fintech startups can try to solve, and even could consider business or investment deals with the younger firms. MassChallenge, meanwhile, will provide a work space at its flagship location on Drydock Avenue, advice on managing projects, and the opportunity to compete for $250,000 in prizes.
The big guns hope to find new technologies that they would otherwise have a hard time cultivating in-house. The startups who participate, meanwhile, will learn how to work with billion-dollar businesses — and maybe score a career-establishing deal in the process.
“Eight to ten years ago, traditional firms were skeptical about fintech startups. Were they competitors or were they collaborators?” said Devon Sherman, who will oversee the program for MassChallenge. “Now, there’s an understanding on both sides that there’s a real value to partnering.”
And the organizers also hope the new program can elevate Boston’s reputation as a fintech hub. MassChallenge wants other financial institutions to participate as “challenge sponsors,” and already Eastern Bank has signed on.
The program grew out of a similar effort between MassChallenge and the Massachusetts Competitive Partnership to build an accelerator in the Fenway for digital health startups in 2016. The Massachusetts Competitive Partnership, a group of chief executives from many of the state’s biggest employers, sees the fintech accelerator as a way to bolster Boston’s global standing in the financial sector, and is contributing as a founding sponsor.
“I’m excited about putting Boston a little bit on the map,” said Michael Fanning, head of MassMutual’s US operations. “The health care folks have gone global. There’s no reason Boston can’t be that way for fintech.”
Putnam Investments chief executive Robert Reynolds, the Massachusetts Competitive Partnership’s chairman, said the city’s strengths in high-tech, financial services, and higher education have already put Boston in a good position to excel.
“We see a long-term opportunity, not only for us as a company but also as it relates to us as an industry,” Reynolds said.
Research from Deloitte, the accounting and consulting firm, shows that of the 2,800 fintech startups formed nationally since 1998, only 120 hailed from Massachusetts — despite the region’s reputation as a financial hub. Kevin McGovern, Deloitte managing partner for New England, said the MassChallenge program could help Boston compete with New York and the West Coast.
Amy Danforth, executive vice president of enterprise services at Fidelity, said fintechs can bring a singular focus to a particular issue or challenge, while a larger firm often has to juggle multiple and competing priorities.
Fidelity, like the other big financial companies, is pushing its employees to be entrepreneurial. Danforth hopes that working closely with smaller, younger firms will help. “Having been in the company for a number of years, your perspective gets somewhat conditioned by your environment around you,” she said.
It’s not as if these companies don’t have any experience with fintechs; Citizens, for example, has a half-dozen fintech partnerships in place right now, and CEO Bruce Van Saun said he hopes to double that number over the next year.
Small banks, too, are trying to get in on the action. Hal Tovin, chief operating officer at Belmont Savings Bank, said he tries to meet regularly with local fintechs to see how they can help. One such meeting led to a partnership this spring with Digital Onboarding Inc. of Boston, which has created a platform that makes it easier for new customers to activate debit cards and switch direct deposits.
“Good ideas can come from anywhere,” said Reynolds. “Sometimes, when you’re an established business, you do innovation and put a lot of effort into it, but you’re also worried about focusing on doing the job today. There are people out there looking at it through a different lens. To me, it’s important for us to tap into that.”Jon Chesto can be reached at email@example.com. Follow him on Twitter @jonchesto.