Banking innovation has been a major industry trend in recent years, but as with any key trend steering investment in the future, it’s hit a potential roadblock. As the world reels from the effects of the COVID-19 pandemic and the ensuing economic recession, additional demands on resources threaten to de-prioritise parts of the banking innovation agenda.
This would be a significant missed opportunity, now is the time to double down on digitisation.
Where Is Banking Innovation Right Now?
Significant strides have been made on implementing technology across the banking sector to drive efficiency gains. For the most part this has been successful in achieving its objective, primarily as a cost reduction strategy.
Now institutions are turning their focus towards the other side of that strategic coin, where technology is being looked at not as a cost saver but as a revenue generator. And this is arguably the point at which banking innovation becomes a critical point of commercial differentiation.
There are a number of avenues to consider:
- Firstly innovators can look to take market share from traditional rivals who are lagging behind them in their digital transformation efforts. As the digital generations age, the opportunity to win new customers through a slick digital offering increases.
- Secondly, technology opens up a myriad of opportunities to create brand new products and services, diversifying the bank’s core offering and providing greater opportunities for revenue generation from the existing customer base.
- Finally, innovating with technology provides a smoother and more accessible route into diversification into new lines of business that are adjacent to the banks’ core offering. This opens up entirely new markets and revenue streams, de-risking the business model and providing a broader selection of routes to growth.
Why Smart Banks Will Double Down On Innovation
There are three main arguments for letting your bank’s innovation programme continue apace in spite of the pressures applied by the current crisis.
Firstly, evidence points to the fact that sustained effort and investment are essential to see the true value of any innovation programme. Pressing pause on the programme due to the COVID-19 outbreak will put a break in that sustained effort, slowing the realisation of the promised value and could in fact put banks at a significant competitive disadvantage in the future.
Secondly, it’s not just other banks that need to be considered when looking at the competitive landscape. Classic banking institutions have seen inroads into areas that had traditionally been their sole territory by fintech firms who use their relative agility to steal market share. As one analyst said, “As we saw in the last recession, if you take the pedal off, you can wake up in a couple of years and have a lot of fintechs nibbling away at your business”.
Lastly, the current market conditions are acting as a natural driver for innovation and it would be remiss not to take advantage of it. A few examples of this include:
- The move to complete remote working banks, previously considered to be unthinkable, has become the new normal in a matter of weeks.
- The provision of new capabilities for both staff and customers through technology.
- The necessary expansion of self-service adoption and digital sales through the creation of seamless digital experiences.
If your hand is being forced, it makes sense to try and turn that to your competitive advantage. The direction of travel for the banking sector has not changed, and digital innovation will still:
- Enable hyper-personalised, intelligent real-time banking
- Help banks deliver seamless customer experiences; embed banking in customers’ lives
- Allow banking to become more open and transparent, as well as secure.
But the fact of the matter is that the conditions that are going to play out across 2020 will actually force banks to double down on their digital innovation initiatives, rather than sideline them in favour of more traditional crisis management approaches.
How Banking Innovation Will Secure Your Future
We’ve identified 8 key areas of banking innovation where we see the greatest commercial benefit being realised:
- Upgrading customer experience. This has already come a long way but it will continue to serve both as a retention tool and as a means of powering a bank’s growth.
- Always on, omnichannel engagement will move from the realm of the progressive to the expected norm and serve as a bulwark against incursions by more agile fintech rivals.
- Digital agility will enable an increase in responsiveness and drive customer acquisition, engagement and ongoing brand loyalty.
- Innovations in banking operations will be fundamental to making a truly customer-centric world possible.
- The personalised digital experience will evolve to be able to deliver bespoke problem solving, with the resulting product innovations offering financial wellbeing.
- Debt management and financial fitness products will be embraced by customers, who will start to see the bank as being more “on their side”.
- At-scale banking innovation will be delivered fastest through partnerships, enabling faster delivery of innovation programmes and a quicker realisation of their value.
- Further scale and speed benefits will be realised by tapping into existing technology platforms and using them both to widen your bank’s innovation ecosystem and speed up change.
A Last Word On Banking Innovation In 2020
The typical response to any kind of major global crisis, be that financial or otherwise is to start looking for things that you can stop. To cut costs, be lean and hunker down to try and weather out the storm. As we have seen, in the realm of banking innovation that could well prove to be a serious strategic faux pas and the unique pressures produced by our current situation are forcing even the most die hard traditionalists to enter new realms of possibility and press for a greater pace of change.
The firms who will stand a head and shoulders above their peers once the dust settles will be those who both wholeheartedly embraced the need for banking innovation and, most importantly, made the right choices in order to execute it truly effectively.
Want to learn more about how your firm can stay ahead of competitors? Get in touch with us to hear more.