It wasn’t too many years ago that banking could be considered a local industry, particularly in the U.S. It wasn’t until the 1990s that the advent of interstate banking created first regional and then national financial institutions. Today, banking is clearly a global industry – as the current financial crisis constantly reminds us – with major institutions operating across national borders, money flowing electronically across continents and everyone accessing the same kinds of technology.
If banking is now global, then innovation is as well, as can be seen from the spread of cell phone banking around the world. To help share these ideas, the 2011 BAI-Finacle Global Banking Innovation Awards program was created to encourage innovation in retail banking wherever it can be found. Working from more than 200 nominations submitted from 40 countries, the Innovation Circle Judging Panel recently selected 15 institutions as finalists in the categories of Product Innovation, Service Innovation and Disruptive Innovation. The three category winners and the most innovative institution overall will be announced on October 11 at an awards ceremony at this year’s BAI Retail Delivery.
We recently asked the finalists to discuss the need for innovation in today’s global banking environment. Respondents included Matt Calman, retail banking research and development executive, Bank of America Corp., Charlotte, N.C.; Miguel Carvalho, chief operations officer, ActivoBank, Portugal; Anna Curzon, general manager, Internet Banking, ASB Bank, New Zealand; Maria Dolores Dancausa, CEO, Bankinter, Spain; Isidro Faine, chairman, “la Caixa,” Spain; Michael Jordan, CEO, First National Bank of South Africa; Chris Kay, head of ventures, Citi Ventures at Citibank U.S.; Matthias Kroner, CEO, Fidor Bank, Germany; Chuck Purvis, executive vice president and chief operating officer, Coastal Federal Credit Union, Raleigh, N.C.; Jeremy Soo, managing director and head, consumer banking group, DBS Bank, Singapore; Alex Twigg, general manager, UBank, Australia; and Sonia Wedrychowicz-Horbatowska, Consumer Bank Head, Citi Handlowy, Poland.
As can be seen, innovation in retail banking is viewed as a necessity in today’s troubled economic environment – no matter what language you speak:
Q: Why is innovation important in today’s often difficult banking environment?
Twigg: At UBank, the primary focus of innovation is to drive improvements in the overall customer experience. As the global economy becomes increasingly challenging, it will be those companies who can develop the strongest engagement with their customers who will be successful.
Typically banks are not closely associated with innovation. However, in today’s digital world, people’s expectations are not being met by their relationships with their banks, but by their experiences with a much broader set of organizations. As a result, today’s customers are better informed, less loyal and rightly demand a higher level of service. They expect change to be delivered faster. We recognize that in order to stay relevant, we must continue to be innovative and improve our overall value proposition.
Dancausa: Innovation in banking is increasingly important as margins decrease and new trends in convergence facilitated by emerging technologies arise. The landscape of banking is changing and in the future there will be a whole crop of traditional as well as new competitors from multiple industries. Differentiation and staying competitive tomorrow means being able to timely identify and implement the next wave of “winning” business and customer relationship management opportunities.
Faine: Innovation is essential in order to accomplish our clients’ expectations. The banking sector, as any other, has to work constantly in this direction and search for new ways to meet its clients’ needs and expectative. We think innovation is the key factor to being competitive. It is one of the most useful tools to address changes, respond to the high speed at which these changes occur, and finally, go beyond our competitors and foresee or invent the future.
Carvalho: The changing environment of the banking industry, the pressure from the economic crisis, reduced margins and, almost daily, new regulations are demanding quick and drastic changes for traditional business lines and revenue streams. On top of this, we face challenges from not only the local domestic banking industry but – with globalization and the competition of international players – also from telecoms, retail stores, card processors, social networks, money remitters and many others that are entering the banking business and getting chunks of revenues that used to be captive to banks. The alternatives to our products are coming from less regulated, specialized players with cost structures and business requirements that are not comparable with ours.
Our own customers are also a lot more demanding, less loyal and not willing to accept or wait for their banks to catch up with the newest browser, smartphone, etc. that others can provide immediately. They can just click and move their financial relations to the next in line quite easily. Multi-channel strategy, customer-centric obsessed and no-pain servicing models are basic functionalities that require technological savvy organizations that can adapt their service models, products and presence everywhere and anytime on the fly.
Kroner: Innovation is critical in order to constantly stay ahead of the pack and address evolving customer needs. A “good” innovation is one that improves the quality of life of your customer and, ultimately, has a positive impact on society. As lifestyle changes with new technologies, virtual commuting and globalization, banks must innovate to meet the changing needs of society.
In today’s difficult banking environment, innovation is all the more necessary as banks have to redefine themselves to continue to be relevant for customers and society while also meeting the increased demands of regulators and governments. Innovation provides for a capital-efficient way of maintaining a balance between the two. It also helps differentiate from competitors, particularly older banks at the center of the current economic crises.
Wedrychowicz-Horbatowska: Innovations driven by, but not limited to, new technological ideas are the fuel for global economic development. They are also the source of business competitive edge. Therefore, the drive for innovation is an approach that should also describe the banking sector. Cutting-edge solutions and core innovations make room for productivity enhancement and lower business operating costs. But most of all – which is crucial from my perspective as Consumer Bank Head – they stimulate improvement in the quality of our products and services. They serve as the driving force of development by exceeding customer expectations. Therefore, Citi Handlowy selected innovation as the cornerstone of its strategy for growth. We are the first bank in Poland to open an independent R&D Centre. We know that avant-garde ideas and core innovations will secure our long-term and stable growth – especially now, when the market situation seems unpredictable.
Curzon: Innovation in banking is essential today, as our customers’ needs and behaviors are evolving at a level and pace we haven’t seen in our lifetime. The growth of Internet-enabled mobile devices, along with opportunities to connect to social communities of interest in real time, requires banks to think about building value for their customers and themselves in new and unique ways. This will primarily be centered around designing the best experiences we can through meaningful data, agile technology and a customer-led group of people.
We can’t rely purely on historical sources of value or the repetition of industry patterns to survive. Innovation no longer is a source of competitive advantage in the banking environment; it’s what gets you to the starting line.
Calman: Innovation is revolutionizing the consumer banking experience and empowering customers like never before. Bank of America can offer you the bank on the corner or in the palm of your hand. According to our research, some of the most important characteristics consumers are looking for in their banking relationship today include simplicity, convenience, accessibility and relationship value. In other words, customers want to bank and invest when and where they choose, with experts available when and where they need them, and they want to be rewarded for the full breadth of their relationship. We can deliver on that and back it up with the security that offers customers the confidence they need to bank however they choose. Innovative services like mobile banking and deposit image ATMs are the latest examples of our efforts to provide customers with simplicity, convenience and accessibility when managing their daily finances.
Purvis: Banking is becoming much more costly as we respond to the needs of our members for greater convenience and from the explosion of new regulatory requirements. Rapidly changing technology, such as social media, iPads, mobile banking, etc. is creating greater expectations from consumers and businesses.
The economic challenges of the past three years have shaken the very foundation of consumer and housing finance. It will require greater innovation to stay relevant to changing consumer needs and behaviors, to deliver services through many channels in an affordable manner. Consumer banking products became commoditized over the past 20 years through the development of securitization markets, financial supermarkets and global financial giants. All of the paradigms about retail banking that evolved over the past 30 plus years have been somewhat turned on their head in the past three. We see a great opportunity to use innovative product features and the innovative use of delivery channels, such as video banking, to reduce costs and increase convenience and value to our members.
Jordan: Innovation is the ability to differentiate. As disruptive technologies and business models challenge banks, innovation is no longer just a competitive advantage but rather a competitive imperative.
Kay: It’s critical for banks to focus on innovation. Uncovering and solving our clients’ needs, delivering a great customer experience and creating simple solutions not only insures any business is best-in-class but also enables it to compete in new spaces.
Soo: The ability to innovate and meet fast-evolving consumer needs and expectations is what differentiates an organization from other industry players. Organizations that fail to innovate consistently are often at risk of losing customer loyalty and becoming irrelevant in today’s competitive environment.
Q: Do you think the financial services industry can benefit from an awards program such as the BAI-Finacle Global Banking Innovation Awards, which shares innovative ideas on a global basis?
Soo: Yes. Such platforms are useful for organizations to keep abreast of the latest innovations across industries, learn from the best case studies and network with the community.
Twigg: A global innovation program could actively help promote innovation by providing fresh sources of inspiration and comparison. At UBank we set our benchmarks not just against other banks, but against a selection of leading companies, across a variety of industries. We continually strive to improve our products and services, with customer-focused innovation at the heart of everything we deliver.
Dancausa: Absolutely. In the process of identifying new ideas, projects and trends to convert into future financial services for our customers, it’s very relevant to understand what the best and most forward-looking players are doing. We believe that programs such as the BAI/Finacle Global Banking Innovation Awards are an excellent way to spotlight current leaders in banking innovation and share with participants and the industry as a whole their focus in terms of financial products and services and disruptive banking initiatives.
A second and also valuable outcome of such award programs is that they reward banks who are willing to take the risks, willing to be first movers, even before bottom-line impact is noticed. It is important to encourage these initiatives and the pioneering institutions that invest in them, call attention to their efforts and communicate learnings throughout the industry to the benefit of all.
Faine: First, we think we can learn from everybody and therefore, this award program allows us to discover, be inspired and share from the innovations of all participants. The needs of the future do not exist today nor can we even imagine them. The advances made by others can certainly help us to imagine, and thus create, new products and services as well as build more efficient and satisfying ways to interact and work with our customers.
Carvalho: Definitely, without a doubt. With today’s information society and easy access to data, we benefit more than ever from platforms that promote the exchange of ideas, different approaches to the same old problems or prototypes that after proven can easily be translated and adopted by others. If there was ever a time for the proverb “Necessity is the mother of innovation,” now is that time.
Wedrychowicz-Horbatowska: Such initiatives have at least three key attributes. First of all, they provide incentive for the market to grow dynamically. Second, they provide inspiration to look for new areas of opportunity. And last, but not least, it pays to promote the best solutions. This is how we help to popularize such solutions and introduce them into daily use. This is what we, the innovators, pursue – we do not want to create solutions for the future, but solutions that change the present.
Curzon: Innovation helps organisations to thrive and grow so getting insight into what has worked well for other financial service providers is beneficial. The Internet continues to widen the pool of new ideas, but to turn an idea into a business success, it is vital you know what your customers want, understand the market(s) that you operate in and then select and execute the right ideas, bringing them to market as quickly as possible.
Kroner: Our benchmarks should always be those that stand up on a global basis. For that, we need an exchange of ideas and information that’s as wide as possible to deliver more and higher benchmarks. We cannot rely solely on the regional financial behavior of our customers because new trends and pockets of innovation sprout across the world. An awards program such as this helps us access new ideas worldwide to constantly improve services and products and better meet the needs and wants of our customers.
Jordan: Innovation can be delicate; it needs a protective support system.
Purvis: The major banking innovations of the 20th century developed through collaboration among financial institutions. VISA, Mastercard, ATM networks, credit union shared-branch networks and the securitization markets all became better through the contributions of many participants. In this global world, it is largely impossible to hide good ideas from competitors. The better strategy is to showcase banking innovations in ways that encourages others to explore how to use those innovations and in ways that encourage collaboration.
Kay: Innovation requires partnership and collaboration and scale to be of material impact and relevance. Any mechanism that facilitates that — helps ideas grow and scale faster globally — is invaluable.
Mr. Cline is managing editor of BAI Banking Strategies. He can be reached at [email protected].