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Bank innovation is an oxymoron

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I've often said that the phrase 'Bank Innovation' is an oxymoron, a bit like military intelligence and honest politicians.
This is because innovation means taking risks and banks don't take
risks, although I qualify these statements to say that they apply
primarily to retail banks as the innovation in investment banking
technologies is considerable.  Just look at the algo explosions taking place over the past few weeks. 

I've also blogged a while ago about technology and risk being the same thing,
and banks don't take risks.   It's why the latest hot new gadgets
rarely get deployed or used by banks first.  I mean how many banks are
podcasting and blogging, facebooking and videonetworking?  Sure,
there's a few but it's tiny.  That's because they're all waiting to see
these 'experiments' and 'pilots' fail and, should one succeed, then
they'll all get in there.

This is because banks pride themselves on being fast followers
and never leaders.    I mean, no sooner does one bank have an algo box,
than we all have one.  No sooner than one bank starts doing mobile
payments than we all have mobile payments.  It's the nature of the game.

So a report landed in my inbox titled "Innovation 2007: A BCG Senior Management  Survey"
from Boston Consulting Group (BCG).   BCG surveyed almost 2,500 senior
executives in over 50 countries, and the conclusions were that:

  • innovation
    is one of the top three strategic priorities for two-thirds of these
    executives, who are now spending more on innovation in 2007 than in 2006
  • interestingly, half of them are dissatisfied however with the ROI on these investments
  • a
    risk-averse corporate culture, lengthy product-development times and a
    lack of internal co-ordination are the three major barriers to being
    innovative or getting the ROI
  • the five most innovative companies voted for were Apple, Google, Toyota, GE and Microsoft (in that order)

Financial Services, spending on innovation is increasing by more than
10% this year in a quarter of firms, and by 1%-10% in another third ...
so almost 60% of financial firms are spending more on being innovative
with customer satisfaction being the #1 reason, and revenue growth and
sales of new products coming a close second.

Funnily enough, the
most satisfied with the payback on these investments were the CEO,
Chairman, President and CIO (in that order), whilst the least satisfied
are the CFO and COO. 

This would be because the CEO made the
decision, the CIO spent the money, the Chairman and President know only
what the CEO tells them, whilst the COO got the crappy systems that he
couldn't make work and bitched about it to the CFO who thought it was a
waste of money in the first place.

There's a whole load of other
stuff in the report which spreads over 33 pages, but the most
innovative banks?  There are some!  The votes went to:

  1. Citigroup
  2. Goldman Sachs
  3. Bank of America
  4. ING
  5. Fidelity Investments

Well done you guys ... you just proved to me that maybe bank innovation isn't an oxymoron ... it's just good for business.

Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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