How innovation and transformation are at the heart of banking

How innovation and transformation are at the heart of banking. Photo: Gajus,
Written by Chris Skinner

It takes good leadership to optimise innovation and achieve your digital dreams, says Chris Skinner.

Friday’s blog was all about bank innovation labs and structures. It’s a serious and committed undertaking this time around, with many experimentations and proofs of concept taking place, especially around blockchain. Great.

The thing is that, as I walk into these hallowed places of bank-sponsored creation, it feels like a very formal version of a fintech startup. The ‘innovation team’ is allowed to dress down every day, and wear jeans and sneakers. The innovation team is allowed to tweet and Facebook while their colleagues are all fire-walled out. The innovation team gets to hang with the hipsters to soak up their vibes and then bring those creative juices into the bank and share them.

I’m not criticising this – it’s pretty cool to be honest – but I do get a feeling a little like the Labs in MI5 in the Bond films. Bond deals with serious stuff such as killing people, but whenever he goes and sees Q, he finds this quirky space full of mad professors doing fun things that help you kill more effectively.

This is the challenge for any bank, as articulated well by our friend Kosta Peric who wrote The Castle and the Sandbox while running Innotribe at Swift. Banks love the idea of innovation, yet struggle with the link between the innovations and the operations. To get over the castle wall is hard, and this is where I see a shift that has to take place (and that I’ve blogged about many times).

Innovation and transformation

The ‘innovation wall’ is the block between the business and the future. The innovation wall is the bank’s antibodies desperately trying to obliterate the innovation virus. The innovation virus creates risk, and banks don’t want risk, hence why they follow rather than lead.

There’s nothing wrong with following, except that the open-sourcing of finance demands more change than a project. Banks that are delegating their fintech innovation to the digital team are going to fail. This is because the innovation team, with their sneakers and beards, are going to get pissed off fast. If all you ever do is come up with great ideas that never get implemented, it becomes disappointing. If all you ever do is show your boss the next-generation bank to receive an “Oh yes, very good, keep calm and innovated”, it becomes disillusioning. If all you ever do is generate discussion, it becomes desperate.

Innovation and transformation are at the heart of banking. Banks have to reimagine themselves, from proprietary controllers of the end-to-end structure of manufacturing, processing and delivery, to ones that are open sourced and able to integrate anywhere with anyone and at any time. The open-sourced bank offers all processing and product through APIs, apps and analytics and can adapt and be agile fast through cloud and blockchain. The open-sourced bank is the ValueWeb integrator, taking all pieces of product and processing, and integrating and aggregating to give the ultimate user experience.

These banks need leadership to adapt from offices and branches to software and servers. They need leadership to rebuild the bank from oppressing paper to processing data. This isn’t a project that can be delegated to a function, but a transformation that needs to be led from the top. This is why the innovation wall will stop many banks from achieving their digital dreams, because the leaders need to jump over the wall first to prove that there are no barriers to change. Most leaders are quite comfortable sitting behind the wall, hence they like the fact that they have their Lab with Q, sitting in the basement experimenting, but lo betide the experimentation team messing with core business operations. Let’s just keep this behind the wall, OK?

– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Photo: Gajus,

About the author

Chris Skinner

Chris Skinner is an independent commentator on the financial markets through the Finanser, and chair of the European networking forum the Financial Services Club, which he founded in 2004. He is an author of numerous books covering everything from European regulations in banking through to the credit crisis, to the future of banking.

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