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Bank innovation: this time there’s commitment

It was intriguing to see the rise of innovation in banking during
the 2000s.

Every bank had an innovation programme, a Chief Innovation
Officer, an innovation mantra in their annual reports and an innovation organisation
in the bank.

What is particularly noteworthy is that when the crisis hit
in 2008, nearly every Chief Innovation Officer and their teams disappeared.

Innovation was off the agenda.

Now it’s back again, but this time it’s different.

This time it’s quieter, more serious and more committed.

You may say I’m wrong, but it’s an impression you get from
talking to the banks and looking around the markets.

For example, the Branch of the Future was a regular feature
of the innovation programs of the 2000s.

But often this Branch of the Future project was just the bank
showing off.

Trying to gain kudos by appearing to be a thought leader on
the leading edge.

In fact, on reflection, I think most of the innovation programs
of the 2000s were like this: kudos projects to get recognition of being a bit
edgy, delivering leadership.

There was no real commitment in these projects to changing
the bank, changing the market or really turning things upside down.


Because it was just show boating.

Showing the world you were cool.

That is why, when the crisis hit, it was a no-brainer for
most CEOs to look for cost savings and shut down these show boating projects
and teams.

They all disappeared.


Now that we’re five years into the crisis and moving into
post-crisis mode, I’ve seen more and more innovation leaders coming out of the
closet of banks.

They’re back, but they’re different.

They’re not bragging or show boating, but they’re just getting
on with internal developments and change.

In other words, they’re working on creating an innovation
culture within the bank, rather than creating an innovation brand outside.

And there’s another change I’ve noted: overcoming the fear
of failure.

During the 2000s, most of the innovation folks I talked to
were frustrated with their bank leadership.

They wanted to provide innovation, but the bank’s leadership
wanted a business case for investment.

If there was a business case for investment, then it wouldn’t
be innovation as it’s been done before, the innovation guys cried.

They wanted to provide innovation, but the bank’s leadership
was worried about looking foolish if they failed.

If you don’t allow for failure then you cannot innovate, the
innovation guys cried.

They wanted to provide innovation, but the bank’s leadership
was concerned about disrupting the existing business.

If you don’t allow for cannibalisation of the existing
business then you aren’t truly committed to innovation, the innovation guys

Now the really hard bit is that commitment.

Are banks truly committed to innovate?

Will they invest without a business case?

Will they allow failure?

Will they let the innovation cannibalise the existing
business model?

The answer to all these questions this time around appears to
be ‘yes’.

The reason?

Things are changing so fast this time around, this decade,
this perfect storm http://thefinanser.co.uk/fsclub/2012/12/2012-technologies-create-the-perfect-storm.html
of technology and society, that bank leadership sees they have to innovate and
change fast and with dynamics in order to keep up.

And it’s not just about keeping up with the competition, but
keeping up with the customer’s needs.

That’s why innovation in banks is real this time around, not
just show boating.

I may be wrong, but it is an impression.


About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, 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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  • But why should the perfect storm include traditional banking ?
    Feels a bit like cheerleading at a home for the elderly… http://tinyurl.com/p78dsd2

  • Chris Skinner

    What an ageist comment Paul 😉

  • Well, i couldn’t find one with propeller beanies.. but since starting my own business some 8 years ago my experience as a victim, uh client, customer, consumer or user of first Italian banks and recently a Swiss cantonal bank, i cannot escape the impression that the overall tendency is towards caving in and turning into a savingsbank. The Swiss bank first charged 2000 bucks to scare away small business and two days later they just notified they had a change of policy and the account would be cancelled by the end of the month. Obviously their preference has shifted towards more traditional forms of moneylaundry via holding companies around local real estate, a proven cantonal expertise.
    Maybe my exptations have been screwed, coming from Holland where banks have entered the modern age, but the only time these other banks have not been a total pain is when they are absent.. But it is clear Switzerland’s growth is shrinking, the current senior management is aging, and so do their policies.. and as you very well know, Chris, money is power laws over networks, and self-applied isolation will result in autocannibalisation and will push out the outliers, the weakest but also the strongest, as they reside on the outside of the network until the local economy has been hollowed out and collapses as its structural integrity gives up.