Incremental Innovation:7 Small but Sure Steps to Success Part II

Published on 15th December 2009

Step 5: Personal Financial Management Tools


Certain banks offer financial management tools as an add-on service. By punching in various data pertaining to their financial transactions, customers can use these tools to draw up budgets, plan investments, and compare different retirement schemes and so on. Instead, banks can innovate by making these tools a regular part of their Internet banking offering, so that customers are spared the effort of manual data entry because the system does it on their behalf. The tools can be further enhanced with basic graphical and advisory capability.


Step 6: Digital Marketing


Rather than carpet-bombing customers indiscriminately with marketing messaging, banks can rely on digital marketing techniques to improve effectiveness as well as reduce costs. Analytics can help banks better segment their customers and predict future behavior on the basis of past trends.This insight can direct marketing and communications strategies at the right targets. For instance, a customer who trades often on his demat account would be delighted to receive stock alerts via SMS or a microblog.


Now, banks have a new and powerful tool in the form of Web 2.0 technology. They must create an adequate presence in social media whereby they can engage with interested parties, gather feedback, resolve queries and seek new ideas.Establishing an online community or a ratings mechanism on the banks’ portal are some examples of incremental innovation in the digital space. Extending this concept, banks can test market new products and services to a limited number of loyal customers and ask them to provide their feedback or issue testimonials in online communities. Going forward, this type of innovation could spur co-creation. For instance, they can seek their customers’ viewpoint about a proposed product bundle. Should they find that customers react positively only to a part of the offering, they can quickly re-design the bundle. By acting in this manner, banks can demonstrate that they value their customers’ opinion, which will go a long way in cementing relationships.


Step 7: Unified Relationship Statement


Today, customers juggle with as many statements as banking accounts, receiving one for loans, another for savings and a third for credit cards! Apart from being inconvenient to manage, separate statements do not provide customers with a bird’s eye view of their financial position at any given time. If banks can innovate to produce a single monthly statement that reflects a banking relationship in entirety, it would provide much value to the recipient. With a consolidated statement, banks can present a picture of the net worth of each customer and suggest ways to improve that number. This type of advice would be particularly appreciated by average, small-ticket customers who are ordinarily not eligible for privileged banking and hence have a genuine need for guidance while taking financial decisions.


Besides benefiting customers, these incremental innovations can positively impact cost efficiency, productivity, growth and customer retention at banks. The cost of servicing customers comes down significantly in unassisted channels; if online channels can be personalized with a human touch, by introducing a remote advisory service for instance, they will attract more customers and drive down costs in the bargain. Likewise, better customization of product offers through “right bundling” can improve cross-sales. Collaboration with customers can not only throw up new ideas but also prevent banks from going wrong with a new strategy.


Technology has been the single largest enabler of banking innovation in recent years. On the flip side, legacy systems and outmoded processes can pose the biggest hurdle. If an innovation cannot be implemented quickly, it will likely lose impact; worse, it allows the more fleet-footed competitors to get ahead. Modern core banking platforms empower banks with the flexibility to introduce frequent changes and launch them with agility. Moreover, since the cost involved is low, banks can earn a return on their investment right from the start.


By Arunnima B S

Finacle - Product Strategy

Infosys Technologies Limited, India

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