The Innovation Factor: Are Banks Ready to Innovate?

By Patrick J. Moore

As promising signs of economic recovery emerge and businesses shed their bunker mentality, it is time to look ahead. A key question for the banking industry is, how will it prepare for the future? Are we ready to embrace innovation, take risks, and reach beyond our comfort zone? Or will we continue business as usual and run the risk of going the way of the dinosaur?As little as five years ago, banks were trying to figure out how to avoid being marginalized by fast moving technology and software companies entering the payments business. Today, some of these technology companies have succeeded and introduced advanced solutions that compete in our space. In response, we are seeing the emergence of transformative solutions from banks that are taking business to the next level, moving outside the payment arena and further into the financial supply chain, integrating more deeply with a client's working capital management process.

In order to meet the future needs of clients, banks must continue to develop innovative solutions. Critical to achieving these goals is the creation of an environment that nurtures innovative thinking. According to Lisa Bodell, founder and CEO of futurethink, a leading research and training firm, "Successful innovation is about taking different approaches to ideation, putting the right processes in place to move ideas forward, executing flawlessly in the marketplace, and fostering a climate that stimulates and supports smart risk-taking."

Bodell explains that innovation need not be groundbreaking to be important. As long it is new, useful and adds value, it can have a positive impact on business. Institutionally, banks need to operationalize innovative thinking in their day-to-day behavior. Ideation must be top of mind. Otherwise we fall back into daily routines, and get bogged down on the transactional instead of focusing on the big picture. We also need to be willing to take risks and accept that failure is part of the process. In this respect, we should emulate consumer goods companies that have think-tanks or "idea greenhouses" that constantly churn, evaluate and test new ideas.

To foster innovative thinking, it is also important to look holistically at what is happening with technology, to identify the next big trend. And we need to look at these technologies from the perspective of our clients. For example, demand for mobile access to financial applications is rapidly growing. Technology has already made it possible to achieve payment initiation, transaction verification and access to balance information on mobile devices. We need to understand how our clients want to use these capabilities. Staying in tune with current trends gives us insight into what customers are investing in today and how they are using emerging technologies.

As new technology-driven solutions emerge, banks must serve as solutions integrators bringing various components together to provide a seamless experience for customers. By focusing on the client experience and combining a consolidated data management view with end-to-end client servicing, we will continue to reinforce our relevance to our clients. In the current economic environment, we must leverage treasury management innovation to help clients drive efficiency, optimize performance, and maximize working capital.

As solutions become increasingly driven by technology, the value of our relationship to our clients keeps changing. Banks risk finding themselves in an environment where relationships have evolved, yet we risk adapting too slowly. Technology solutions will never replace the need for relationship management or the human touch, but may in fact reinforce the need for deeper client engagement. Technology will undoubtedly play a larger and larger role behind the scenes, which means banks must continue to focus on maintaining human interaction with customers. Innovation can ultimately prove to be a powerful means for deepening these critical relationships.

Patrick Moore is senior vice president and director, Treasury Product Management, at Fifth Third Bank.