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Innovation seems fun—until your future depends on it

Reality of bank reinvention at the "speed of blur"

Innovation seems fun—until your future depends on it

About this time each year, financial technology soothsayers are prone to expound on the fabulous future just on the horizon, enabled by what’s loosely termed as “innovation.”

This year is no different. For example, TeleTech Holdings Inc., in its recent quarterly journal, starts off with the statement: “Today businesses and consumers are operating at the speed of ʻblur.’ New technologies, access to information, and the ability to use data to understand what is happening around us in real time is creating a new kind of connectedness. In order to deliver on customer expectations, brands must leverage technology to provide experiences that are both simple and personal.”

Make no mistake—all this is true, and is particularly true for the banking industry. The so-called ʻspeed of blur’ can refer to the pace of technology innovation and how the business of banking is changing, with the addition of multiple new digital delivery channels, big data analytics, back-office automation, and customer relationship management. (CRM used to mean tellers talking to customers and vice versa, but that’s another story.)

What is missing in such observations often is just how hard innovation really is, when it’s viewed from the C-level world of long-range strategy, budgets, corporate buy-in, implementation, and, ultimately, turning a profit. It’s a long journey from coming up with a genuinely new idea to embedding it in the strategic plan.

Ryan Anderson, vice president of The Members Group, starts to get at this point. Writing in a recent white paper, he says, “While the onus for innovation is an enhanced consumer experience leading to long-term loyalty and growth, today there’s a winding path to get there. Not only that, your chosen path will be flanked with competitors, shifting attitudes, and other risks.”

It’s noteworthy that this kind of statement comes from a self-proclaimed proponent of innovation in the financial services industry. He goes on, of course, to highlight areas of technology likely to have staying power. More on that later.

Speaking of a winding path, Gartner Inc., that indomitable analyzer of business technology trends, annually attempts to place emerging, or innovative, technologies on a semiscientific chart called the “Hype Cycle.” It tracks numerous technologies over time based on expectations that begin with “innovation trigger” and run through “peak of inflated expectations,” “trough of disillusionment,” “slope of enlightenment,” to “plateau of productivity.” It also provides an estimate of when each individual technology is likely to reach the coveted “plateau of productivity,” or, presumably, can reach general use and acceptance.

Briefly, here’s a rundown of various bank-related technologies and where they stand on the chart:

• Speech recognition is already on the plateau.

• In-memory analytics is sloping up and will reach the plateau in less than two years.

• NFC now is at the bottom of the trough, but could trend up in two to five years.

• The same with cloud computing.

• Cryptocurrencies are peaking out now and poised for a long slide into the trough, not coming back up for five to ten years.

• The same with wearable user interfaces.

In a general statement on this latest hype cycle chart, Hung LeHong, vice president and Gartner fellow, says: “Understanding where your enterprise is on this journey and where you need to go will not only determine the amount of change expected for your enterprise, but also map out which combination of technologies support your progression.”

With that point made, however, it’s not really fun to be all gloomy and doomy about the future’s prospects. Various organizations put a lot of effort into highlighting startup innovators that may help shape the future.

For example, Accenture and the Partnership Fund for New York City named entrepreneurs from the New York City area to participate in their FinTech Innovation Lab, in which various companies provide sponsorship and mentorship. Among the selectees are: Enigma, which provides access to data sources that lenders can use to evaluate credit; Kasisto, which provides a conversational user interface for financial transactions; and RevolutionCredit, a B2B credit data and decisioning platform. Read the link below for other participants.

“New technologies have made it possible for small ventures to research and develop powerful solutions for industry pain points and create growth opportunities. By opening their doors to these ideas, banks can accelerate their own innovation agendas and drive growth and efficiency,” says Bob Gach, global industry managing director for Accenture.

Also along these lines, it’s interesting to run down the “best of show” participants in the most recent Finovate conference:

• Eyeverify, for eyeprint verification technology.

• Loop, for a smart mobile wallet system.

• Motif Investing, for an advisor platform.

• Ondot, for card control technology.

• PrivatBank, for contactless smartphone technology.

• SaveUp, for millennial-oriented personal finance management.

• Stockpile, for a system that helps investors.

Looking ahead, Accenture along with Efma, a global association for large retail banks, now seek entrants from around the world in an effort to identify and distinguish banks for the most innovative projects and ideas in bank distribution and marketing.

“Digital technology has made it possible for banks to innovate faster than ever before,” says Juan Pedro Moreno, a global managing director at Accenture. “As banks master these technologies, they have an opportunity to redefine customer relationships, bolster efficiencies, and drive growth.”

So what can bank decision-makers make of all this? Here are two best guesses:

Gartner generally sees its hype cycle leading to something called “digital business,” which gloms together people, business, and things. Relative to financial services, it calls out such technologies as digital security, smart workspaces, internet of things, cryptocurrencies, wearable user interfaces, and machine-to-machine communication services.

Mercator Advisory Group generally touts electronic commerce enabled by mobile technology. “E-commerce is one of the fastest growing segments as well as one of the largest potential opportunities in the payments industry. Competition among gateway providers has intensified and will continue to increase as firms strive to capture their share of the global e-commerce pie,” says Michael Misasi, senior analyst at Mercator.

TMG’s Anderson advocates mobile banking and mobile commerce, along with value-added services and social tools which, he says, “are key components to those technologies and the most successful with consumers to date.”

So, go figure. And good luck.

Sources used for this article include:

Applications Open for Second Annual Global Retail Banking Innovation Awards by Efma and Accenture

Six Entrepreneurs Showcase Cutting-Edge Financial Services Solutions at 2014 FinTech Innovation Lab Demo Day in New York

Best of Show Winners from FinovateSpring 2014

Gartner's 2014 Hype Cycle for Emerging Technologies Maps the Journey to Digital Business

E-commerce Boom Fuels Online Payments Innovation

Technology's Future: Consumers Reward Companies That Provide Experiences That Are Simple and Personal

White Paper Reports on Disruptive Consumer Trends Impacting Payments and the Resulting Need for Innovation

John Ginovsky

John Ginovsky is a contributing editor of Banking Exchange and editor of the publication’s Tech Exchange e-newsletter. For more than two decades he’s written about the commercial banking industry, specializing in its technological side and how it relates to the actual business of banking. In addition to his weekly blogs—"Making Sense of It All"—he contributes fresh, original stories to each Tech Exchange issue based on personal interviews or exclusive contributed pieces. He previously was senior editor for Community Banker magazine (which merged into ABA Banking Journal) and for ABA Banking Journal and was managing editor and staff reporter for ABA’s Bankers News. Email him at [email protected].

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