Fear of Innovation is a Huge Risk

At a time when crisis management has been the primary focus, no other industry is better positioned for an innovation leader to emerge than is financial services. Most financial services companies have retrenched and allowed their product development and technology to wither on the vine. Customers have suffered from sharp declines in service quality as a result. The company (or companies) with the fortitude to make significant investments in innovation will capture significant market share and greater profits. Three areas of innovation have been hot topics at this week's 2010 Bank Administration Institute's Retail Banking Conference.

1) The mobile phone is the new branch. Twenty-five percent of consumers have ditched their wireline phone and gone completely wireless. This of course puts increased pressure on banks to invest in mobile banking and payments. Yet except for remote check capture via mobile phones from banks like USAA, real innovation remains elusive. Most of the industry innovations are being driven not by banks, but by specialist companies like mFoundry, ClariMail, Monitise, Mocapay, PayPal, Bling and Obopay.  This while bankers complain that their major tech suppliers, including First Data, Fidelity, Fiserv and Jack Henry, are just not moving fast enough to meet their needs.
2) Social Networking is a dangerous tool for customer interaction but necessary. Banks get that social networking are here to stay. And many believe it has the potential to be something other than a digital version of a call center. But social networking is not a controlled environment and that scares bankers. It should. Sites like Twitter and Facebook provide a podium for every whack job to speak his or her mind. The benefactors of the uncertainties that retail banks have about how to use and measure social media effectiveness are likely IBM, SAS, SAP and Microsoft and could provide a watershed year for a slew of nimble-footed specialist firms who are building business to consumer (B2C) enterprise grade measurement and engagement tools.
3) Cloud Computing: the outlook remains cloudy. Instinctively it would seem that cloud computing technology would be a critical weapon to break down the line of business silos that exist in retail banks. This seems especially true given consumer demands to have an experience they value, on their terms, on the bank interaction channel of choice — online, mobile, ATM or branch, irrespective of the type of business a consumer wants to transact with the bank. Consumers value convenience and they want to define what convenience looks like. But banks seem crippled to navigate the abyss of implementation schemes, cost sharing, regulatory compliance, security and customer ownership issues.

Fear of innovation is a very real risk that many companies face in today's uncertain environment. The value of innovation is at its maximum during times of complexity and chaos. Those companies that work to escape the fear and embrace innovation will be the ultimate winners, while those that do not will suffer a painful fate.