’Tis the season for 2018 predictions, and numerous financial industry practitioners, observers and experts (including my colleagues at FICO) are getting in on the fun. I don’t have a concrete prediction for the next 12 months (which makes it much easier to avoid being held accountable to the accuracy of that prediction this time next year). I do, however, have an observation around banking innovation.
In The Financial Brand’s impressively well-researched and very informative annual “Top 10 Retail Banking Trends and Predictions” piece, an interesting statement caught my eye:
Interestingly, with the exception of one trend (testing and use of blockchain technology), the trends and order of these trends were the same as last year… The fact that the list of trends identified by the financial services industry has remained relatively consistent could be a symptom of a greater problem. The banking industry is moving much too slow, and legacy firms are failing to differentiate themselves.
The fact that the majority of The Financial Brand’s 2018 top 10 trends were unchanged from 2017 was taken, by The Financial Brand, as evidence of an ongoing torpor that continues to grip the financial services industry and hold it back from innovating.
I see banking innovation a different way.
What Thomas Edison Would Say About Banking Innovation
While it is true that the financial industry has, traditionally, lagged behind other industries when it comes to the adoption of innovative new technologies and business models, I believe that the consistency between The Financial Brand’s 2017 and 2018 trends is actually a sign of positive progress in this respect.
There’s an important distinction between innovating and looking like you’re innovating.
The latter is actually quite easy. You create a new group or C-level position (fintech accelerators and Chief Digital Officers are the latest ones en vogue). You scatter all the newest technology buzzwords throughout your annual report. You brief your Board of Directors on the state of “innovation” in your institution a couple times a year. You announce a few high-profile hires from Silicon Valley and a few high-profile partnerships with big name fintechs. And, crucially, you keep running 98% of your business the same way you always have.
The former is much harder and much much less glamorous. You have difficult conversations with your business and IT leaders about banking innovation, all of whom have operated out of independent silos for decades. You embed new roles and skillsets (like digital CX) across all your departments. You make massive changes to the way you build and deliver new products and services. You rethink business processes rather than just papering over them with new technology. You immediately and forcefully challenge anyone who casually tosses out an industry buzzword in a meeting by asking them how your customers will benefit from it. You map out a mature, scalable approach to partnering with start-ups and you put serious money behind it. You invest your time and enthusiasm in millions of detailed, pain-in-the-ass conversations with your compliance, infosec and procurement teams. And, crucially, you show the patience required to fundamentally transform the way your business operates, even if it means telling journalists that your strategy for next year is the same as it was last year.
Thomas Edison (who knew a thing or two about innovation) said “opportunity is missed by most people because it is dressed in overalls and looks like work.”
I believe that 2018 will mark a new state of maturity for many financial institutions’ approaches to banking innovation. This will be the year when we really get our hands dirty!