A modest-sized Boston bank is starting to incubate fintech startups.

Eastern Bank, a $10 billion bank, is about to launch its first separate company, which was incubated and developed within the bank itself, Bank Innovation has learned.

In early 2014, Eastern Bank, a mutual bank based in Boston, hired entrepreneur Dan O’Malley, a former senior director at Capital One best known for founding now-defunct debit rewards product PerkStreet, to head up its innovation lab. Actually, it might be more correct to say O’Malley brought himself aboard — he was pitching several banks on the concept that eventually became Eastern Bank Labs.

O’Malley had a conversation with the board and C-level executives at Eastern about the need to change the business model and become a more tech-driven organization. Both groups were so receptive that he was convinced to settle at Eastern and build out his idea there.

The lab employs 110 people to develop not just products or campaigns within the bank, but actual separate companies, which, if deemed successful, will be spun off as bank-owned companies. This is an aggressive approach that requires significant resources. O’Malley pointed out that the bank, as a mutual bank, has no shareholders to report to, and can take a longer view on investments, perhaps as long as five or ten years.

O’Malley described to Bank Innovation the process of the lab’s work, which began more than a year ago. “We ran an experiment per month for five months,” he said. “Two of the tests went really well, and we platformed this in the lab. We ran a pilot of one of them last month.” If all goes well, the company — which O’Malley did not detail — may launch in the fall.

It is not an experiment — it is an investment.

“This is being done because expect the companies to perform,” O’Malley said. “Investing in technology tends to have a really good return.”

The 110 people in the lab are from a combination of groups within the bank. The core of the innovation team, O’Malley said, is about 15 engineers and entrepreneurs. There were primarily “nonbank people, with a fair number from fintech,” O’Malley said, and included five ex-PerkStreeters.

PerkStreet was a FinTech darling during its 2009-2013 run, but eventually fell victim to caps on debit fees and the inability to fund debit rewards. The company did not lose any of the funds deposited with it, since those were held at FDIC-insured banks, but they did have to tell customers they would not be able to honor all the rewards they had promised. This experience did not sour O’Malley on the possibility of building cool things, but it convince him it was safer to do within an institution than outside the walls.

“I am happy to be doing this at a bank,” O’Malley said. “I am an entrepreneur and I like building things. Building FinTech companies inside a bank gives you a number of unfair advantages,” he said, referring specifically to access to capital, customers, and data. “And you don’t need VC funding.”