The word “innovation” gets thrown around a lot nowadays. As every industry becomes increasingly digitized (which is happening increasingly quickly), companies looking to distinguish themselves must be prepared to employ the latest tech, strategies and solutions. If they don’t, they may be left far behind by their more nimble competition. In other words, innovation is salvation.
Nowhere is this more true than at the big banks. For more than a century they’ve had a pretty tight grip on all things financial, and that grip was maintained by a steady hand on the tiller and an even keel. By its very nature, innovation is designed to rock the boat, something banks have traditionally been averse to — and for good reason. People tend to respond poorly to any change that might affect their financial stability.
But in an era where Reuters is reporting “Internet giants pose existential threat to banks” innovation is being taken a lot more seriously. This is definitely a case where it’s easier said than done, however. It simply isn’t possible to flip a switch at your bank and become as nimble and dynamic as a tech company, especially when they face a fraction of the regulation and oversight that banks are subject to.
To accomplish this essential paradigm shift, your bank needs to establish a foundation and framework for innovation and positive change. It starts at the cultural roots of your institution and needs buy in from every level of the bank. Here’s what you need to consider:
Don’t Fall Prey to Empty Innovation Gestures
One pitfall some institutions experience when pursuing innovation is adopting the trappings of startup tech culture without facilitating meaningful action. As discussed in this Financial Brand article looking at innovation at banks, hackathons and innovation labs are frequently being used to placate investors and higher ups at the company, but are sometimes ineffective at creating lasting innovation.
As Jim Marous said in his article:
“While such efforts are well received by investment analysts, and are great fodder for senior-level strategic planning meetings and competitive chest thumping, the one thing lacking from many of these efforts is a supportive culture for actually implementing new ideas that are generated.”
In essence, it’s easy enough to make your bank seem innovative, on a surface level. This can have nice short-term rewards as you appease onlookers who know innovation is good, without forcing through any changes that might actually change the way things are currently being done.
But as I said above, innovation is salvation. If traditional financial institutions want to go toe-to-toe with their ascendant tech competitors and the rise of challenger banks, meaningful innovation must occur — not just the appearance of it.
Innovation is Predicated on a Cultural Change
The average age of a bank employee is getting lower as Millennials surge into the workforce. And with them, they bring new insights into what their generation (an increasingly lucrative market) want from financial institutions. They can be champions of change, and positively steer your organization towards a profitable future. But to do so, they need an open ear (and mind) from senior management.
Corporate culture is evolving across most industries. While banks have traditionally been slower to adopt trends than other institutions, with the pressure being cranked up, there has never been a better time to embrace this shift. Encouraging champions of change with meaningful hackathons and innovation labs is a great place to start. But from there, these ideas and proposals need to be picked up by senior members of the banks so that implementation can actually occur.
If you are one of these higher-ranked bank employees, it’s your prerogative to watch, listen and learn about the new expectations and innovations being tracked in your industry, and develop strategies to make them work for your bank. If you’re newer in your banking career, becoming a champion of change is an excellent way to distinguish yourself and lay an excellent professional foundation. Helping your bank remain profitable while appealing to diverse customer segments can only be considered positively.
Innovating in the Right Direction
It’s easy enough to say “We need to innovate!” It’s a bit trickier to know how that will manifest, especially when managing the day-to-day complexities of banking that can’t simply wait around for cultural paradigm shifts at financial institutions.
One way banks are managing both is through partnerships with FinTech companies. While traditional financial companies juggle banking responsibilities, FinTechs have been developing innovative technology to propel banks into the future with minimal risks. Discovering strategic gaps and areas of improvement comes from within the bank, but fixing them can often occur cost effectively with the right partnership.
Not every FinTech is created equal, however. Finding a trustworthy, sustainable solution is another case of “easier said than done.” At Zafin, we’re proud of our nearly two decades of helping banks innovate successfully. Our track record of helping banks build deeper relationships with customers, increase deposit growth and reduce operational expenses speaks for itself.
Are you ready to foster innovation at your bank? Get in touch with us today and find out how we can help.
Zafin (@zafin) is a leading financial technology provider that enables banks to form richer, more personalized client relationships. Built from the ground up for financial services, its platform empowers banks to enhance revenue and operational efficiency. Founded in 2002, Zafin sits among North America’s top FinTech companies, and is trusted by retail and corporate units at some of the largest banks worldwide. Headquartered in Toronto with global offices, Zafin has a proven track record with a 100 percent client retention rate as validation.
Cam is the Digital Communications and Marketing Coordinator at Zafin. With a background in journalism and a passion for blogging, Cam strives to tell compelling digital stories. At Zafin he will share the latest trends and news in the FinTech world, and share the Zafin role as leader in the industry. Follow him on Twitter @CamSmoth