Bank Innovation’s State of Banking Innovation survey for the third quarter polled industry watchers on what innovation looked like in banking today, and what it might look like five years from now. A selection of responses are presented below.
Other results from the survey are discussed in this post.
Assess the overall State of Banking Innovation in the industry today.
There was little consensus here. Answers run the gamut from those saying there is no innovation in banking at all to those who say innovation is thriving and even overabundant, wasted. The most common response was that innovation is slow but growing in the sector.
“Poor. The people who understand the mega trends don’t have enough CEO support and budget. Banks are fooling themselves by claiming that regulatory changes are taking up all their capacity.”
“Banks are being passed up by their non-bank competitors. Without moving faster, bank’s customers will be dis-intermediated from their current revenue sources in the payments world.”
“The big banks are far ahead of the rest. Upgrades are out there, but community banks can’t afford them, and consumers aren’t willing to pay when big banks offer services for free.”
“Regulation/compliance sucks up too much time and sets up road blocks from allowing banks to deliver new innovative ideas that could really benefit consumers….”
“There are way too many ‘ideas in search of a market’ that are garnering a lot of attention without much critical thinking on the part of media, bloggers, analysts and pundits.”
“It’s slow to evolve. With so much focus on regulation and risk management, Exec Mgmt is not looking for someone to think too far out of the box. Therefore, even when the money is there to innovate, the risk tolerance is not.”
“My gut feeling is that the vast majority of FIs are at best playing catch-up and are refusing to see the dramatic changes that are already occurring. FIs are not thinking out of the box. I have an ancillary to that cliche. ‘We have to think outside the box … before they throw the dirt in the hole.'”
Describe what banking will be like in 2018.
Respondents largely agreed that banking will be better for the customer in 2018: more convenient, more personal, less effort. But a few simply saw current trends — consolidation, increasing regulation — continuing or even accelerating.
“Every person will keep their account number for the rest of their life. Customers can choose to have their account at one bank, but their advice from another bank. Banks are degraded to their mere infrastructure. Customers will interact with their banks and manage their overall financial lives mostly through single mobile applications (which may not even be run by banks themselves) and not visit a branch more than once a year. Those banks which have understood this will still be alive, the others will be dying.”
“More oriented towards their role in the value chain; business model that includes competition with accountants and counselors. Retail products (payments, small financing tickets, savings) are handled by the “new kids” like Google, PayPal; not the traditional banks.”
“Push for all electronic transactions. Many predict the disappearance of paper checks, I believe the bigger push will be for the disappearance of cash. Successful institutions will master high tech with high touch.”
“Mobile wallet will be mainstream. Community banks will be failing. We will have the giant banks and large credit unions.”
“Much the same as it is today. Heavily regulated with very high barriers to entry for legitimate banks, profitable for those banks that do the simple business well, growth for those that have been able to successfully match their products / services with customer wants / needs and disastrous for banks that do not take seriously the fact that their future success is largely dependent on the quality, reliability, flexibility and usability of their IT systems and infrastructure.”
“Open banking, API’s will drive innovation, services together with partners, customer in control of his data.”
“Fewer banks, more regs, move toward more online integrated services. Free for more profitable clients others will pay more. Marketing and risk will come to terms with one another….”
“Omni-Channel Strategy Automation will be key. Smaller more focused branches for sales and service resolution. Easy to use, self service options will be in abundance via all channels (mobile, online, ATM, Virtual Tellers, Web, etc.). The use of smart phones for all banking will meet expectations. Payments and virtual wallets will evolve further to integrate all personal finances.”