The intent is definitely there and so are the strategies and investments to realize it. The metrics are in place to assess performance and over three-quarters of the respondents indicate that they are getting better at it. That, in short, is the current status of banking innovation according to the 5th edition of the annual Efma-Infosys Innovation in Retail Banking Study.
Innovation was never ever completely off the table – even in the first study conducted at the height of the crisis in 2009, 37% of respondent banks had a comprehensive innovation strategy in place. This year that figure has shot up to 60%, but more importantly, strategies are being backed by adequate investments with 77% of banks planning to increase investments in innovation.
Channel innovation, a perennial banking favorite, continues to account for a lion’s share (26%) of all planned IT investments in innovation, with products (21%), processes (18%), customer service & experience (16%), sales & marketing (12%) and others (7%) constituting the rest of the mix. Justifying their choice as investment focal points, channels and products also continue to deliver the maximum performance. In contrast, process innovation, in spite of being the third most important innovation priority for banks posted the highest negative performance variance in banks’ ratings.
Customer satisfaction and revenue, followed by market share, productivity, and profitability, are the most widely used metrics for measuring innovation ROI, though most banks seem to be using a combination of all those factors to assess innovation performance.
In spite of rising investments in innovation, less than half the banks that participated in the study had any form of formal structure or team for prioritizing innovations and investments. It is critical that they streamline their innovation models around defined structures that can help align strategic enterprise objectives with investments and sustain the process of innovation into the long term.