Debbie Bianucci
Debbie Bianucci Jul 25, 2016

Digital takes innovation to the next level

Since its inception, the BAI Global Banking Innovation Awards has recognized innovation excellence that delivers actionable results in financial institutions across the globe. Each year, there has been an increase in the level of innovation in terms of the volume of new initiatives, the sophistication of approaches and the impact on consumers. Innovation doesn’t happen overnight after all, innovation is a journey. Now in its sixth year, the 2016 Awards program reflects the industry’s revolutionary transition from branch transformation to focus on digital transformation, including the increasing use of remote devices for customers to access information and conduct transactions seamlessly.

This year, program judges reviewed hundreds of submissions from all over the world. They were excited to see so many breakthrough offerings, including innovations around the application of digital technology, real-time analytics, robotics and artificial intelligence (AI). These innovations can be seen in action as financial institutions look to take customer experience to a new level of personalization and convenience. The submissions also included some fresh approaches to expanding products for key segments, particularly with Millennials and women.  However, regardless of the approach or technology being leveraged, it is clear from the submissions that financial institutions are moving more quickly to innovate, because of the pressure and impact of new FinTech companies, as well as the fast-paced influence of social media and changing customer needs. 

There are so many ideas and actionable insights that can be gleaned, not only from the actual submissions, but also from the discussions that the judges had as they spent countless hours poring over the nominations. I think these perspectives are very valuable and I’d like to take a moment to share some of them with you. As such, the following are some highlights from several fellow judges: Matt Calman, director, Innovation Outreach Program, Microsoft, Redmond, Wash.; Ed Carrell, head of Commercial Transformation, London-based Barclays; Miranda Hill, vice president, Wells Fargo Digital Labs Manager, San Francisco-based Wells Fargo; Jan Hendrik Kraus, former general manager, Group Strategy, Emirates NBD, Dubai; Adrian Li, deputy chief executive, The Bank of East Asia, Hong Kong; and Paul Steenkamp, head PBB SA Innovation Capability, Standard Bank, Johannesburg, South Africa.

Q: Given what you’ve seen in the nominations this year, what can you say about the evolution of innovation in financial services? Where are we headed in the future?

Calman: For the first time in years, we have moved beyond the initial transformation of banking services from branch to digital. Nominees are excited by their developments of new and different product experiences in the digital space. This year’s entrants also brought along a whole new set of solutions based on more advanced data analytics, AI and decision support. It’s exciting to see these advanced elements being applied to customer experiences.

Li: The trend towards omnichannel retail banking has continued, and this year we’ve seen some exciting developments that will take this to the next level.

Institutions at the forefront of the industry are adopting the latest technology to revamp traditional channels, enhance security and improve the customer experience. We’ve seen the emergence of biometric authentication in mobile banking, and increasing use of digital technology and even robotics in branches.

Institutions are also integrating advanced technologies including AI and real-time analytics to upgrade their internal operations, maximizing productivity and efficiency. Straight-through processing allows banks to offer one-to-one personalized services, increasing customer satisfaction and stickiness. Meanwhile, payment innovations have focused on peer-to-peer transfers, and we expect Blockchain to be the next big disruptor in this field.

Hill: It’s interesting to see how technology has evolved exponentially throughout the last several years. Intuitive online and mobile experiences are now table stakes and the market is becoming more responsive to what we all want as customers: simple experiences that are relevant, contextual, and seamless.

To that end, emerging technologies like application program interfaces (APIs), machine learning/cognitive banking, and digital capabilities that facilitate omnichannel interactions are being incorporated in new and meaningful ways.

Carrell: Intelligence/Machine Learning and Cognitive technology are beginning to be applied across a range of banking activities. Put together with artificially intelligent robot tellers, for example, I think we can be confident that the machines are coming!

Kraus: Financial institutions keep pushing the innovation agenda. Banks are further building on technology trends and increasing their capabilities. Examples are the use of AI and machine learning to make products and services more tailored or using biometric information to enhance processes in order to make the customers’ lives easier.

Steenkamp: Banks are now firmly in the habit of innovating to better serve their customers, rather than for the sake of ‘doing something cool.’ 

However, better service and customer experience through innovation does not seem to be translating into significant business benefit for banks. Banks are going to have to aggressively pursue ‘new-to-sector’ revenue streams and challenge their existing business models, rather than wait for FinTechs to do so. They are going to have to figure out ways in which other digital businesses can ‘sweat’ their core banking platforms/investments.

Partnerships with FinTechs are critical, but not enough.  Launching FinTechs internally will help banks experiment with, and adopt new ways of working, including Open Innovation, Design Thinking, Lean Innovation and Agile.

Q: Any notable new trends this year? Are financial services companies targeting new demographics or enhancing offerings for particular customers in a way that surprised you?

Carrell: We saw a number of previous-year themes re-appear related to omnichannel, mobile apps and small business products, but this time with more meaningful impacts associated with the innovation. This re-enforces a truth of the ‘observer’ approach to innovation –you will be premature until you are too late.

Li: Many institutions are heavily targeting Millennials, who tend to be highly tech-savvy and value mobility. As well as advanced technologies such as AI, biometrics and robotics, there has been a noticeable trend towards social network banking this year. Some institutions are even introducing branchless/mobile-only models, and we expect this movement to grow providing that technological requirements for security and reliability can be satisfied.

Steenkamp: I found it refreshing that systemic innovations related to core banking platform renewal is gaining momentum. For too long, innovation in banking has been associated with new-to-market products and services. It’s very important that banks also invest in, and leverage, their ‘plumbing.’

Targeting Millennials continues to drive innovation in banking. However, there is also an acknowledgement that customers are living longer and new banking models will need to cater to the aging demographic that is increasingly moving to more urban environments. Also, there’s a growing appreciation for the role of women in managing financial resources in the household, as well as driving economic growth through their entrepreneurial flair. This is tremendously exciting, especially in emerging markets. It’s great to see banks responding to these regional, niche markets, in ways that are mutually rewarding and commercially pragmatic.

Calman: Another new trend seems to be a willingness to take risks in exploring new technology categories. For example, in-branch robotics or AI integrated into digital customer experiences don’t drive higher revenues by themselves, but rather enhance the customer’s experience and the bank’s reputation.

Hill: Banking in non-traditional channels seems to be emerging, indicating that banking services are getting integrated into new territory – whether it’s on a new device like an Apple TV, or on non-traditional sites like Facebook. Some of the societal- and community-based innovations were quite impressive, from using bank login credentials to access e-government services to providing resources and financial services to certain populations to empower them and help them succeed. There was a deliberate focus on applying new technologies and capabilities to niche markets and needs that seemed notable this year.

Kraus: The offerings for particular segments, based on this year’s nominations, are getting more sophisticated, e.g. through leveraging data and analytics. For example, banks using very granular, non-financial geographical and market data (in addition to their own customer data) to identify market opportunities and needs in specific niches, like the agricultural sector. And of course, a lot of banks focusing on the Millennials, developing banking solutions (often mobile only) that cater for their particular interests and behaviors and integrating them closely with social networks so that banking becomes an integral part of their daily networking.

Q: In what ways did you observe forces outside of the financial services industry influencing the types of innovations that organizations have brought to market?

Kraus: First is the further commoditization and price reduction of technology products like tablets and mobiles, which allows the banks to cost-effectively provide services to all segments, especially the lower-income segment.

In addition, you see governments pushing for digitization across industries leading to common platforms like payment systems. And lastly, you have non-banking FinTechs and technology players that try to get their share of the banking market by leveraging skills and applications that have already been developed for other industries.

Li: The biggest outside influence has probably come from payment technologies. China has been a particularly fast mover in this field, and is leading the way with innovations in P2P lending and payment systems such as WeChat Wallet and Alipay.

Global tech giants are now moving into the payment arena, with a focus on financial apps. With more technical expertise, lower development costs and less stringent regulatory requirements, they have a number of advantages over traditional financial service providers.

Of course, FinTech startups are also challenging the dominance of traditional industry players.

Elsewhere, social media provides a vast source of information that financial institutions can leverage to enhance their service provision. Meanwhile, integrating developments from the Internet of Things with financial technology has a synergistic effect which will take banking innovation into a new era.

Hill: The exponential speed of innovation within society as a whole is putting pressure on the banking industry to move faster. To that end, many financial institutions seem to be adopting API-based platforms to bring together new experiences faster. On the note of doing things faster, many of the nominations focused on helping banks and customers do things faster and be more efficient – whether it’s shortening the home financing process, to receiving real-time credit (under 2 minutes!), to smarter and faster debt collection processes. There seemed to be a push for speed and efficiency.

Q: What do you hope to see from the Awards nominations next time around, in 2017?

Li: We hope that the nascent trends we have seen this year will come to maturity in 2017. We expect biometric four-factor authentication – where your identity is confirmed by the device you have, a password or piece of information that you know, your biometric data, and your location via GPS or IP address – to become the mainstream for online banking.

Financial services will become increasingly personalized, driven by advances in artificial intelligence, big data, real-time analytics and other technologies. Meanwhile, the customer experience will be further improved by innovative P2P and P2M payment methods, with Blockchain applications playing a driving role in disrupting traditional services.

Finally, we expect to see new trends in regulatory technology that will revolutionize the governance of banking and financial services.

Hill: I’d like to see more use of cognitive capabilities to enable customers to get their financial needs met, whether that’s to help detect fraud, or to assist with financial advice and guidance, or to even help employees be better at their jobs. There’s so much happening with respect to machine learning and AI, it’s a matter of applying the technology to the right use cases to create powerful experiences.

Calman: I was pleased to see more U.S. major banks participate in the competition this year, and hope to see an even greater showing in 2017. Additionally, I’d like to see more community banks take the opportunity to participate. Their closeness to their customers and nimble size makes for some really interesting innovations yet their size also restricts them from running a robust innovation agenda. How might we better extend our reach into those really interesting credit unions that are making new things happen?

Kraus: It seems innovations have been more incremental this year, with banks making better use of technology to enhance processes and overall the customer experience across channels. A few non-banks with less legacy baggage are more radically challenging the status quo, in terms of their business models and approaches.

I am curious to see how far the big banks use their huge amount of customer insights in combination with AI to really revolutionize the customer experience, e.g. proactively anticipating needs to tailor the customer solutions and interactions in a one-to-one relationship.

Steenkamp: I’d love to see more entries from massive banks who have successfully overcome legacy challenges. Overcoming legacy requires serious innovation in its own right, because it is all about infusing ways of doing things better and differently, and it requires committed leadership, tenacity, bravery and stamina.

BAI Global Banking Innovation Award finalists were recently announced and winners will be showcased at BAI Beacon 2016, BAI’s new immersive conference experience, scheduled October 5-6, 2016 in Chicago.  For more information, visit https://www.bai.org/globalinnovations.

Ms. Bianucci is president and CEO of BAI and publisher of BAI Banking Strategies and BAI Banking Strategies Daily.

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