Innovation in Financial Services – Future Bank and the role of the ecosystem

I attended the 1st Inaugural Future Bank summit in Croke Park, Dublin on Thursday last. The view from the Hogan Stand mezzanine allowed me to see Sky Sports shooting promos of a Clare hurler and a Dublin footballer shooting at goal. GAA coverage in this country is going to get disrupted in a big way when Sky enters the fray, bringing their technical expertise and stunning visuals to our national games. Inside in the conference venue, the message was much the same. Banking (both internationally and locally) is set to be severely disrupted by new technologies and business models in the next decade, and incumbents will have to fight very hard to keep market share and, perhaps, even stay in business. The line-up of speakers was excellent throughout and I don’t have time to discuss all of the presentations I saw, but I would like to blog a little about some of the main points that I took home from the day. We are all aware of the impact that the credit crunch and the resulting financial crisis has had on the Irish banks. The papers are full of articles about the levels of arrears, loss-making tracker mortgages, banks trying to increase their net interest margin etc. etc. The banks, with the help of the Irish taxpayer, are emerging from the crisis and beginning to return to profitability. The crisis has left its scars, however.  AIB alone have 11,000 fewer staff and have closed 30% of their branches. The other banks have also trimmed their staffing levels significantly and have more cuts planned. Bank of Ireland is outsourcing some activities to Accenture. This focus on costs will help improve their balance sheets, but losing so many staff so rapidly means that human resources will be scarce, and a tremendous amount of knowledge is leaving their organisations. The message from Future Bank is that another tsunami of disruption is coming for the banks (and the broader financial services sector) and that they will need to innovate to survive. Liam Ó’ Móráin gave an excellent talk entitled ‘Breaking Open the Bank’. In it, he discussed how banking will face disruption from competitors like Tesco, Wonga, Stripe, Square and Currency Fair among others ‘eating away at the edges’ of important bank revenue streams. He also argued that banks could be disrupted by organisations that are not seen as competitors. There are opportunities for Apple or Facebook etc. to enter into the retail banking space and create ‘loveable’ services and products that are customer centric. Indeed, he pointed to the success of firms like Apple and Facebook and Salesforce, and said there is a lesson to be learned for the retail banks from their business models. All these exemplars have used the community to add value to their products and services by creating ecosystems around their platforms and allowing 3rd party to developers to create apps that sit on top of the platform. Liam argued that the banks should do the same, allow 3rd party developers to build services that customers could ‘love’ through exposing their data through APIs. This would be a brave move for the banks and not one that they may relish initially but it might be their only chance of survival. Marisol Menéndez Alvarez delivered an extremely interesting presentation on how the Spanish bank BBVA is using open innovation to create rich new customer experiences. Marisol is ‘Head of Open Innovation’ at BBVA and she described some of their initiatives in the areas of big data management, creating customer apps like their virtual assistant app or their banking game, radically new branch designs etc. came about through co-creation using an ecosystem of suppliers, customers, universities, 3rd party developers. Exposing APIs and using prize-based innovation contests have allowed them to really add value to the customer experience. In this blog, I hope to discuss ways in which financial services firms can innovate their business models. Over the course of the next few months, I will discuss Service Design, Innovation Management, Business Model Innovation, Open Innovation and Crowdsourcing among other topics. Comments are welcome. Interesting guest blogs more welcome again! Tell me what you think! Best, Jeremy

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