Innovation at Banks May Be Fizzing Out, Data Indicates

In 2008, the approval rating for banks dropped. And it dropped again in 2009.

The approval rating for some banks dropped more than others during those dark recessionary days, Wells Fargo & Co. and Citigroup being the two most prominent examples.

All this negativity swirling around banks back then led to a wave of innovation. Banks realized that they could no longer just plod along printing profits, but rather had to invest in new products and services and generally revamp and invigorate their businesses.

That innovation energy may be waning.

New data from our State of Banking Innovation Survey for Winter 2014 suggests that banks are less optimistic about their own innovation. For example, we asked members of the banking industry (most, but not all are bankers) to rate their company’s brand for its level of innovation. For the fourth consecutive time, the weighted average rating for brand innovation has dropped.

According to our most recent data, banking industry participants rate their company’s innovation a 3.27, where 1 is “poor” and 5 is “excellent.” That compares to a weighted average rating of 3.34 last summer and 3.73 in early 2012.

Admittedly, it is hard to pinpoint why bankers are considering their company’s brands less innovative today than in the recent past. While it could be that standards for whether a company is or is not innovative have increased, I tend to consider the data on its face value. We are asking how innovative is the company’s brand and the answer we are getting is, “less innovative.”

It should be noted that according to our data, the percentage of financial institutions that participated in our survey (there were 50 this year) with “dedicated innovation teams” has declined to around 48% from 55% last summer. Now, our readers tend to be innovators — why else would they read Bank Innovation? — and that percentage change is within the plus/minus of the survey data, but, as an indicator, still seems to imply that innovation is not necessarily progressing.

What to make of all this? As the credit crisis increasingly becomes a distant memory, those 69% approval ratings for Wells and Citi become distant memories, too, and attention turns to the P&L. That P&L, I am sad to say, can become a blinding light indeed.

Learn more about what’s next in banking at Bank Innovation 2014 on March 3-4 in Seattle. Request an invitation here.