The 2013 Efma-Infosys study on Innovation in Retail Banking clearly establishes that banks are increasing investments in innovation, drawing up detailed strategies to make those investments work, and defining metrics to determine if outcomes are delivering business value.
But the study also reveals that there are some significant obstacles that stand between banks and their desire to innovate their way to growth and profitability. And current legacy IT systems seem to be the most significant of them all.
Depending on the size of the institution, there can be different barriers like the traditional silos in large banks or the financial constraints of the smaller ones that can hamper large-scale innovation efforts. Including current legacy IT systems, the study ranked six such factors – culture, organization silos, regulation, management priorities and financial constraints. But across the board, for large, medium and small banks, current legacy IT systems emerged as the number one barrier to innovation.
The study drilled further down to identify more IT-influenced business conditions impacting innovation capability. The top three constraints that emerged at this stage were the inability to crank up business process speed, agility & efficiency; challenges of creating true customer-centricity; and managing the cost & complexity of running disparate systems.
Omni-channel customer experience, multichannel integration and customer insight are also factors that banks emphasize as being critical to their innovation capabilities. Both issues at the top of this list are related to channels and this is an area that banks have typically funneled a significant proportion of their innovation dollars into. Customer insight is an obviously critical capability to drive customer-focused innovation and banks stressed the need for a single customer view across channels – a feature that only 35% of them currently possess – and to deliver product personalization, something that only 21% of banks are capable of offering today.
It is important to note here that all the factors mentioned above are either customer or channel related, if not both. Given that these are the two important focal points for banking innovation, it becomes imperative to address IT-related impediments that are hampering innovations in these areas as well as in other aspects of the business.
Month: October 2013
Taking innovation mainstream
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.
Need for a Unified Content Strategy in the Changing Banking Scenario
A pronounced shift in the banking scene, from brick and mortar edifices to virtual spaces, begs the remark, “Banks are dead, banking is alive.” Giant strides in technology have brought about a sea change in the way banks function today, with on-the-move, push-of-a-button transactions across geographies and time zones, customer service sans human interactions, and all of this available 24x7x365. Another positive offshoot of this trend is that banks today cater to the literacy-challenged unbanked masses with basic banking services and simultaneously attract high net worth individuals and corporate houses with privileged, elitist offerings, with equal ease.
However, this multi-channel, multi-location, ever present world of banking is not without challenges; information dissemination being one such. How can you ensure timely delivery of appropriate, relevant information to customers in their preferred language? Would you re-create content so as to fit the diverse customer profile, from an urbane smart phone user to a semi-literate rural customer?
The answer is an emphatic NO. What you need is the ability to create content once and reuse it to suit any channel, user, location or need. This is possible only if you plan, manage and strategize your content needs. While there are tools to help manage content, they will not work without adequate groundwork on your need to create, distribute, store, retrieve, archive and destroy content. It is also important to understand the cost of managing content and even more important to understand the cost of NOT doing so.
The need of the hour, therefore, is to have a unified content strategy that straddles multifarious banking scenarios. Each aspect of a unified content strategy will be covered in subsequent posts.