On the one hand, obsolete cost bases, legacy processes and inertia will fail most legacy financial services companies. On the other hand, digital innovation in banking has never been easier than before, right? Modern tech stacks, banking-as-a-service providers, online distribution channels and methods to establish new ways of working are all easily available, which lowers the entry barrier in banking but also enables the incumbents to capitalise on these developments.
The truth is, however, successful digital innovation in banking is still difficult to pull off. While it is extremely easy to talk about all the right things that need to be done (“The next generation of banking is experience- and user-driven”), it takes a whole lot more to actually go into productive execution mode. Successful execution highly depends on long-term experience, which is not gained from a one-week design thinking boot camp. Hence, the innovation capabilities that are not restricted by organisational or technical debt still need years to be built up, which is the real challenge for banks at the moment. You actually need to go to your users, observe their behaviour, interview them about pains and gains, get a real understanding of their realities. You need to know how to extract the right insights. You need to show early prototypes of your new value proposition and understand if what you’re offering actually solves a real problem. You need real know-how in distributing new financial services in a digital environment. This bottom-up approach of developing financial services, which by the way should result in a completely new value proposition enabled by new tech, is the exact opposite of how banks have operated for decades.
A key principle in economics is that there’s no free lunch, i.e. no one can beat the market. The same applies to innovation capabilities – you just can’t cheat or buy your way into it.
Let’s get in touch if you’re interested in starting the journey.