At a time when technology and consumer expectations seem to change faster than you can download an app, Canada’s typically staid and conservative financial services sector is looking to bring its operations and workforce into the 21st century. To that end, banks and insurance companies are fostering a start-up mentality through the creation of innovation hubs.

“The reason we wanted to set up [an innovation hub] is we wanted very much to tap into some of the start-up culture that was starting to ferment in the industry,” says Tim Hogarth, vice president, innovation framework and strategies for Toronto-based Toronto-Dominion Bank (TD).

Innovation hubs are the starting point for many of the new tech platforms these institutions have launched, such as mobile banking apps for the Apple Watch and Toronto-based Royal Bank of Canada’s (RBC) MyAdvisor hybrid platform, which lets retail clients discuss their account remotely with an advisor. These innovation hubs are where prototypes for such platforms are built and tested before being passed along to the parent company’s in-house technology team.

The development of such labs is an indicator of the growing interest in financial technology (fintech) and its potential for the financial services sector. Canada saw a record number of deals in fintech in 2016, with investment reaching $138 million, according to a report from Netherlands-based KPMG International.

The report also notes that although investment in Canada’s fintech companies has been less robust than similar investment in the U.S., there are signs that the amount of investment, will grow in the next few years. That’s because places such as the MaRS Discovery District in Toronto, the Creative Destruction Lab at the University of Toronto’s Rotman School of Management, the DMZ at Ryerson University and Waterloo, Ont.-based technology incubator Communitech Corp. are bringing together startups, banks and universities to foster fintech solutions.

Over the past three years, Canada’s Big Banks and other institutions, such as insurance firms, have launched or expanded their own innovation hubs at many of those same locations. For example, Manulife Financial Corp. has the Lab of Forward Thinking (LoFT) in the MaRS Discovery District, as well as two international hubs; Canadian Imperial Bank of Commerce (CIBC) also has a presence in MaRS; RBC has a global network of innovation hubs, including a partnership with Rotman; CIBC, Manulife and TD have a presence at Communitech Hub; while Bank of Montreal has partnered with Ryerson University. Bank of Nova Scotia has its own hub called the Digital Factory. (All companies except Communitech have head offices in Toronto.)

These hubs generally consist of small teams of engineers, data scientists, designers and marketing specialists, with a mix of full-time employees and co-op students. Employees of such hubs tend to work in open-concept offices that are meant to foster collaboration.

“From an innovation perspective, being as open as we are facilitates a lot of creativity,” says Gabriel Woo, vice president of innovation at RBC. “In an accelerator, they call us the collision, the unintended, unplanned.”

As such, these workspaces are often designed differently than the traditionally cubicle-heavy floor plans of their parent companies. For example, the furniture at RBC’s innovation lab is mostly on wheels, making it easy to move tables, chairs and white boards around so as to allow teams to come together and then break apart as they start and complete projects.

Besides sharing office space with co-workers, employees may also find themselves getting a coffee with people from other companies — even direct competitors. For example, CIBC and Manulife share a space in the MaRS Discovery District without any barriers, allowing teams from both firms to speak freely with each other and employees of other companies in the space, including Toronto-based Moneris Solutions Corp. and Markham, Ont.-based IBM Canada Ltd.

“At the end of the day, whether it’s a bank, whether it’s a retailer, whether it’s an insurance company, we’re all focused on delivering really great experiences for our clients,” says Aayaz Pira, senior vice president, CIBC digital, retail and business banking. “Everything we develop in [MaRS-based] Live Labs … is open IT, and I think there’s a lot value that comes from the various organizations, not necessarily collaborating, but learning from one another.”

These work environments not only allow for casual discussions between employees, but are also designed to appeal to a younger generation’s idea of office life. In doing so, these institutions are able to compete for talent that might otherwise be drawn to the unorthodox corporate settings of large tech companies, including Menlo Park Calif.-based Facebook Inc., Mountain View, Calif.-based Google Inc., or Cupertino, Calif.-based Apple Inc.

“If we tell them come into Bay St., wear a shirt and tie everyday and sit in a room and start to figure out how this can work, I don’t think they’d be as excited to do that as they would be to get to [CIBC’s] Data Studio or Live Labs,” says Pira.

This is the first article in a three-part series on innovation hubs.

Up next: A closer look inside fintech innovation hubs.