Founder’s Edition, by Joseph Neu
Working to reverse the notion that banks are no longer a source for innovative solutions.
One of the trends we’ve seen in interacting with NeuGroup members recently is their concern that banks are no longer the source for innovation or solutions that tap the most innovative technology and digital thinking.
And banks seem to be hearing this message, prompting them to respond to counter that perception. Unfortunately, some banks find it easier to respond with platitudes about how they are adopting new digital mindsets, embracing open APIs and investing in digital innovation centers, rather than to actually rolling out game-changing new digital solutions to corporate clients.
In addition, we see banks:
- Talking about the impact of digital disruption. Some banks are seeking to go a bit further and speak to examples of how digitalization is disrupting their business. For instance, electronic trading platforms that reduce bid-ask spreads, direct listings of equity and debt issuance migrating to electronic platforms, which in turn encroaches on underwriting fees; and digital wallets displacing retail and, increasingly, commercial payments. Identifying these areas of disruption and how they are responding helps buy time.
- Helping foster digital thinking. Another tact is for banks to present the work they are doing to spark digital thinking and innovation in their own businesses and use this as a path to follow for corporate finance functions to foster digital thinking and innovation within their own organizations. This may be useful, but not nearly as useful as implementing the results from this new thinking to help customers.
- Creating their own digital/challenger banks. Banks of all sizes have launched or are in the process of launching digital challenger banks to compete with and to an extent disrupt their own legacy business. Often these digital banks are given resources to invest in their own greenfield platforms, utilizing newer digital technology and/or partnering with financial technology companies who have promising tech but lack bank trust, KYC and other regulatory compliance capabilities (or a license to operate in a desired financial market).
Let’s not forget, though, that it can be very difficult for a bank, or any organization, to disrupt itself. According to Salim Ismail, author of “Exponential Organizations,” a best-selling book that identifies how companies succeed by embracing the disruptive forces of digital technology and grow exponentially, the reason is that every organization has a natural immune system that not only stands in the way of change but actively seeks to destroy the initiatives driving it. Banks are no exception.
For 2020, NeuGroup would like to work with banks who want to restore corporate customers’ confidence in them as a source for innovative solutions, beyond innovative thinking. One way to start the process is to ask each of our bank partners:
- What is the most innovative solution that you have introduced in the last 12 months or plan to introduce in the next 12 months?
- What corporate client problem does it solve? Why do you think it is innovative?
- How did the solution come about, including what clients helped develop and test it?
We encourage our members to ask the partner banks the same.