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Shaping the future of finance

From innovation theatre to real innovation

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I was listening to a great discussion about innovation (again) amongst a group of innovative bankers. As the conversation progressed, it made me reflect on a few things. In particular, how the conversation about innovation has changed over the past decade.

Just before the financial crisis hit, innovation was big on the banks’ agendas. In 2007, I remember a statistic that the mention of ‘innovation’ in the annual reports of the world’s top 100 banks had risen from an average 1.3 mentions in 2000 to 6.2 in 2006. Yep, innovation was big on the banks’ agendas but they weren’t really innovating at all.

Most innovation was in a laboratory, separated from the business. If the person running the lab got frustrated because the bank wouldn’t let them play in the big boys’ room, then they were told to leave. I think most Chief Innovation Officers I knew back then had an average lifespan of 18 months. And my comment would usually be that innovation was like some virus that had entered the organisation and challenged it. Like any virus, the white blood cells soon gather to squeeze it out.

Then the global financial crisis hit, and most banks moved into survival mode. During this period, innovation was of no interest at all. Living was the focus.

During that period, a whole raft of new start-ups began to pop out of the woodwork and the FinTech world began to evolve. With most banks hated and unable to innovate, the innovation focus moved outside the banks and into the private equity and venture capital world. That was the springboard for so much of what we see today as innovation.

When the banks got through the worst of the crisis, they then noticed that everyone was trying to disrupt and destroy them. The reaction to that was first to scoff and laugh, then to sit and watch and finally to invest and focus.

It was therefore around five or six years ago that banks started their innovation theatre. Let’s run hackathons and innovation days, and invite these upstarts to come and show us what they’ve got. Let’s have some pitch battles and demo discussions and offer prizes. Let’s do some stage work to make it look like we’re hip and cool … when we’re really not.

Those innovation days and roadshows lasted a year or two until finally a few banks started to say: Silicon Valley is going to eat our lunch! Let’s do something about it.

When $10, $15, $20 or even $25 billion a year was being invested in FinTech start-ups, the banks could see things were actually changing. Not just innovation or theatre, but real change. It was therefore around the mid-2010s that the biggest banks began to get serious about innovation.

They started to look at partnering, investing and working with start-ups, and they started to take a long hard look at their own business, and its ability to change. At this point a bridge was built. The bridge joined the sandbox to the bank.

Before, during those innovation talks and theatre days, the sandbox was there to play in. Like the old innovation laboratories, it didn’t have any bridge into the bank and if the innovation guys got fed up because nothing ever went mainstream then tough. Leave the bank.

Now, the innovation dialogue has moved up a notch from being a play area, a sandbox, a lab, into a testing ground to prototype and try new ideas and then build and grow. That is why most banks today are talking co-creation and collaboration. They finally get it. Innovation is not about messing around and tyre-kicking, but really about learning to fly and not crashing.

Thank goodness we are living in a real innovation time, and not just theatre or hot air talking. It only took a couple of decades of discussion to get here.

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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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