Recently a major payments and cards organization’s CEO communicated its innovation strategy: “mobile is the future of financial services and our organization will continue innovating incrementally around our product.” These words on mobile mirror the anticipated rhetoric of traditional banking strategy predicted by authors of the latest Financial Technology (FinTech) report, FinTech and the Disruption of Banking. The report, produced by Tomorrow Today, explores traditional banks and predictions of future banking practices, while highlighting detrimental strategies. The CEO’s assertion of a future organically grown from the present presents an opportunity FinTech may disrupt. While this opinion aligns with Tomorrow Today’s illustration of the present-day banker, their respective predicted futures demonstrate polarizing strategies.
This particular organization’s innovative design is based on continued development of a mobile platform and engagement in a direct, efficient, and specialized customer experience. It propagates steady, organic innovation grounded in a company culture of helping people “achieve a brighter financial future.” It started based on a disruptive idea. Since then, it has demonstrated disciplined and steady growth. As needs of the consumer shifted, so did it’s customer experience. With the influx of technology, the consumer began expecting protection, advice, and technologically-mediated engagement from their financial institutions. Now, it engages with consumers in a personal, informal manner, like a peer more than a corporation. In doing so, they are successfully targeting its customers and redefining the relationship between financial institutions and consumers. If competitors or new market entrants embrace FinTech, will this challenge organizations with similar strategies?
According to the report, radical innovation will lead to steady erosion of the traditional financial market. The future of banking envisioned by FinTech is paperless, brand-less, centralized, customized, and “uberized”. The eminent erosion of the role of the middle man without an established dominant disruptor creates opportunities for innovation beyond what this leader discussed. Because the traditional banking industry sees FinTech as a security risk, decision-makers are investing in mobile. This focus on product innovation illustrates an inherent conflict in strategic approaches. While investment in product innovation has been successful in the past, will it remain a successful strategy? The report argues that current investments fail to explore ways of innovating around channel by focusing on branch services. Meaningful innovation is not generated, because, according to the authors, traditional financial institutions fail to support the culture of innovation necessary to embrace FinTech’s opportunities.
Both strategies assert the ability to create new growth platforms and protect against competition in their predicted futures, but which forecast will come to fruition? FinTech posits an entirely new future, while some support weaving of past and present into a recognizable future. If FinTech is the future of financial services, then there is presently a fleeting opportunity for financial institutions to embrace radical innovation and disrupt the market to their advantage. However, FinTech is not currently widely used – a fact that authors of the report attribute to unawareness. Regardless of future predictions, financial services is in the midst of a revolution that necessitates strategic diverse exploration of opportunities for innovation.
Interested in more on innovation?
Read our recent blog on “Robo-Advisors Have Arrived” or download our whitepaper “Strategic Innovation: Riding the Wave of Disruption”.