Why Banking Innovation? 

Innovation is a powerful weapon of differentiation for financial institutions. In recent years, banks have innovated on their products, processes and channel infrastructure to achieve multiple objectives such as raising operational efficiency, improving customer convenience and accelerating business growth.

Big-Bang or Small steps?

Any bank seeking to innovate is faced with two choices: launch a big-bang change or innovate in increments. The latter approach works well when the primary objective is to create a quick and visible impact on customer experience. 

Mostly when banks want to enhance experience, they are really seeking to resolve the biggest pain points of users and simplify the processes that they go through. However, it is crucial that customers recognize the efforts of their bank and actually perceive the improvement in experience. Speed is the key here – customer discontent can turn into delight only when banks take swift corrective action to alleviate a problem. Left to fester, small complaints can turn into major issues and in the worst scenario, drive customers away. Incremental innovation provides banks this much needed agility. Using this approach, they can take a series of small, yet effective steps to bring about continuous improvement, all along engaging with their customers and making them feel cared-for. 

Even as banks innovate to improve the banking experience of all users, they recognize that the benefits of their initiatives will mostly be enjoyed by their younger customers, who are willing to try new technologies, products and processes. In contrast, the older generation of customers will likely stay with familiar products and channels. 

The biggest advantage of incremental innovation is that it takes fewer resources, especially when launched over a modern core banking platform. At times, incremental innovation may not even be about changing a solution, but rather, presenting it in new ways. Since the changes are small, they can generally be implemented quickly, at low cost. More importantly, incremental innovation poses smaller risk of business disruption. Besides adding value to customers, incremental innovation can bring about improvement in banking productivity and business growth. Thus, incremental innovation focuses on building on banking growth.  

Seven Steps to Success 

So how do banks decide what and how much to innovate? The following list of incremental banking innovations propose some answers: 

Step 1 Direct banking 

The advent of Internet banking laid the foundation specific country to fulfill basic transactions and stay in touch with their relationship managers, direct banking comes into play at the account opening stage itself, allowing customers to complete signup formalities with a couple of clicks. Customers need neither meet with a bank representative nor call a contact centre to start an account! What’s more, direct banking knows no geographic boundaries, and banks are increasingly employing this channel to enter new markets quickly, without investing in physical infrastructure. The wonder of this innovation is that it can be implemented anywhere by leveraging the existing technical environment and data centre and exporting whatever is required online. 

Step 2: Online Interface with a Human Touch 

While most banks provide contact centre helpdesks, the customer service agents are often overloaded, forcing callers to wait minutes or try again later. This problem can be quickly resolved using “Push-To-Talk”, an easy to implement technology that enables customers to place an online request for a bank representative to call them back at a time of their choice. Alternatively, banks that have online channels can provide a web chat facility by pre-bundling the same with an application server that is exposed to the customer. Or they can go a step further by turning it into an audio-visual chat in which customers can see whom they’re talking to. Using unified communications technology, banks can extend this feature into a remote audio-visual advisory service, whereby they can share screens with callers and guide them through the discussion. Thus, a problem solving mechanism is elevated into an advisory solution through the effective combine of ‘tech’ and ‘touch’, delivered through incremental innovation. 

Step 3: Product Bundles 

This incremental innovation calls for creativity rather than effort or investment. Banks can derive additional sales from their existing product portfolio by proposing bundled offers that promise the right package to the right customer at the right time, through the right channel. For instance, a customer with a fresh home loan may be offered home insurance at a preferential tariff. An airline ticket booking through credit card might signal the need for traveler’s cheques and travel insurance. Making the right offer at the right time through the right channel goes a long way in simplifying the product acquisition process for customers. 

Step 4: Partner Portals 

What’s more, banks need not do it alone – by analyzing the primary needs and interests of their customers and accordingly tying up with a few well chosen partners such as hotels or retail stores, they can earn additional revenue through the sale of linked financial products each time these partners originate new business. This can be implemented by setting up a partner portal featuring information on all the offers from the banks and their partners. In this way, banks get to participate in banking as well as non-banking transactions and their portals become an indispensable part of their customers’ lives.

To be continued.

By Arunnima B S
Finacle - Product Strategy
Infosys Technologies Limited, India.