How to win at innovation

Efma feature

13 July 2017

Ahead of his presentation at the upcoming Efma Congress, Peter Redshaw, managing vice president of Gartner’s Banking & Investment Services Global Research department, tells us what sets apart the pioneers in innovation from the rest.

How important is innovation for retail banks today? 

It’s absolutely critical. When we talk to CEOs, they tell us repeatedly that growth is key to success today. This growth won’t be achieved from traditional products and services – we’re operating at a time when margins are thinner, overheads are bigger and regulations are increasingly demanding. Therefore, growth can only be achieved through innovation.

Innovation is also the only way to keep up with the pace of change. Banks need to transform not just by adopting new technologies, but by evolving their entire business model and value proposition to incorporate new products and services.

What are the biggest challenges facing banks in becoming innovative?

The biggest challenge is moving from piloting and experimenting with proof of concepts to actually rolling out new innovations, getting customer traction and making money. It’s a big jump. Scaling up is hard to do – it requires a whole new ecosystem and a move to sharing assets rather than owning them. This is a big cultural change, and banks don’t deal with this well. Many banks today end up building solutions to problems that doesn’t exist, and this is why many of today’s innovations fail.

How can they meet these challenges?

To succeed, banks need to understand where to invest. They need to develop new business models and better understand how to invest in fintech companies. Open APIs are important in making these connections and improving the ability to share. Overall they need to change the whole culture of the organisation and work in a different way. By rapidly forming partnerships with third parties they can scale up a successful solution quickly and efficiently.

One other thing that banks haven’t got right yet is the ability to rapidly withdraw a solution from the market if it’s failing. They need to do this without damaging the brand.

What is it that sets apart the pioneers in innovation?

The ability to monetise a new innovation is one key feature, as is a dynamic culture. But the most important feature of the transformed, digital bank is its ability to support multiple business models. In the past there was just one business model, with a variety of technologies used to support it. In the future the bank will act as a facilitator of many business models – they will offer their key strength – of having a strong trusted customer base – to fintechs and, for a fee, expose new solutions to millions of customers. It will be a case of ‘bring your business model to us and we’ll support it’.

Meet Peter Redshaw at the 45th Efma Congress: Banking Transformation in Rome on 26-27 October!

Keywords : Bank Products & Services , Innovation

Geography : International