Innovation is the engine that propels business forward. It’s the key to competitive differentiation. It separates winners from losers in the marketplace. It’s the subject of all kinds of conferences and articles and blog posts and strategic initiatives. Everyone wants to accelerate innovation and be the catalyst for innovation and out-innovate everyone else.
So, being a long-time member of the financial services industry, I was curious about recent innovations in B2B banking. And since I’m a 21st century citizen of the global village, I recently Googled “banking innovation” to see what kind of head-wrecking, jaw-dropping innovations are now underway in the banking community.
Here’s what I discovered. Seven out of the first 10 hits were actually about innovation in banking IT. Now, that’s not terribly surprising or disappointing. After all, banking runs on IT, and IT is a key enabler of banking services. However, digging a little deeper, virtually all of the underlying stories hidden behind the search terms also led back to banking IT, not any fundamental innovation in banking itself.
Consider a few examples. When bankers want to engage with a specific group of consumers, they have the web app developers in the IT department design a social media app. And typically, the new app is selling the same old product from the same old bank. Or the IT department finds a novel way to eliminate some of the paper needed to service customers who inquire about an existing product from an existing bank. Or IT migrates a service supporting investment decisions to new mobile devices—but it’s still the same investment vehicle for the same people, using the same methods that started with the PC in the late 1990s.
In short, we find that IT innovation is simply applied to banking processes—like financing, investments, and B2B payments and financial transactions—and wrapped in the cloak of “banking innovation.” Does anyone else out there think this is odd?
Let me be clear: there’s nothing wrong with any of this innovation. I have been in this business long enough to have seen the challenges and complexities banks deal with just keep their core banking systems up and running. I value the achievement of running millions of payments every day. And I do acknowledge the impact of Basel III on operations, and on the risk/return profile of innovative investments.
But still, corporate customers served by banks also have complex challenges. And they tend to address their challenges with innovations that address the underlying issue. They don’t simply use technology to tweak around the edges—they innovate to bring true transformation to everything from the business plan to the tactics by which it is implemented. I think it’s time for the banking industry to see innovation in this light. Not as a tool for incrementalism, but as the instrument of true business transformation.