Financial Institutions: Motivation for Innovation

Bob Legters
Chief Product Officer, FIS Payments Division
Posted on April 10, 2014

When conversation turns toward the subject of industries noted for innovation, banking is not usually top-of-mind. The truth, however, is that now, more than ever, banking is pushing innovation at nearly every level. Even local community banks and credit unions, which sometimes find themselves with limited resources and budgets, are in on the innovation action.

Right now, the payments space is a hot bed of innovative thought and practice, especially when it comes to evolving the consumer’s experience in this space. Two key areas where financial institutions are focusing their innovation include customer-facing strategies and behind the scenes advancements.

When it comes to innovation, clients are demanding: Fast, easy, secure and flexible. Forward-thinking institutions and their managers should be looking at the consumer lifecycle and optimizing consumer engagement strategies and tools. This means moving towards the adoption of real-time, mobile-ready engagement offering full solutions.

Some of the popular topics that have been under discussion for some time including EMV, mobile wallets and payments. However, some of the most recent hot topics include Bluetooth LE technology, true virtual cards and new form factors like wearable payment methods. The challenge here is the time it takes to turn adoption into meaningful returns. If the adoption headwind can be reduced, these innovations and others like them will be popping up within a year.

Behind the scenes, innovative thought is focused on the availability of customer information. The two keys areas of concentration that remain constant for financial institutions are access and security. How can we make the customer’s access to his or her information fast, easy and flexible while protecting customer data at the same time? Another key concept involves reducing the integration challenges when it comes to connecting the customer’s information to the customer’s account.

The tricky part is that innovation can be a slippery thing, especially when it comes to measuring the effectiveness of past and even current ideas, concepts, strategies and tools. When an institution wants to know if they have been innovative enough, the key indicator is always growth in accounts and number of consumer transactions.

Measuring your customer-facing activities such as activation rates, monthly transactions and numbers of accounts in concert with your behind-the-scenes measurements such as acquisition cost per account, processing and internal overhead, will tell the real story. Begin with benchmarking these measurements, finding a willing and capable partner (preferably one with a bent toward innovation) and start moving towards a successful ROI.

Remember that today’s consumer naturally gravitates toward innovation, recognizing that it holds inherent value for him or her. Therefore, your growth indicates whether or not you’ve been doing the right things in the area of innovation. When the growth begins to slow, it’s time to start innovating again. In fact, keeping a mindset geared toward continual innovation is a good habit to cultivate.

While it can often seem that your innovation and your budget are in conflict, the reality is that there are ways to do one without sacrificing the other. One good idea is to limit the number of providers with whom you choose to do business. Doing this reduces the amount of integration you have to do to accommodate competing or conflicting technologies. However, expecting to be innovative without some type of reasonable expense or investment is, well, unreasonable. So make sure that your investments in innovative strategies and tools are also tied to growth objectives. One good way of doing this is to identify the money spent on initiatives that may not be working and siphon those funds into things that are. Also, consider optimizing your spending by shifting your marketing spend to help you cross-market your payment products with your other banking solutions that perform well.

Productive innovation always occurs when you focus your efforts on the customer and how you do business with the customer. Start with increasing customer efficiencies and enhancing your customer communications. Communication through digital channels while providing consumer-controlled engagement is a great example of innovation that ultimately can save money. Conversely, the most wasteful innovation comes when there are additional dependencies required for success. Innovation that makes your customers work harder or requires partnership with parties beyond the institution’s control or influence can be both costly and time consuming. Also, remember that innovation and regulation don’t mix. Regulation is mandatory and therefore, can be inflexible, making it a less than desirable partner for innovation.

When it comes to innovation, a financial institution is well-served by focusing on making its customers’ information accessible, functional, secure and relevant to them. If you can do that, then you will become invaluable to your customers. Now there’s a great idea!

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Bob Legters
Chief Product Officer, FIS Payments Division

For the past two decades, Bob has focused on products and services support for clients. He has spent 17 of those years in a leadership role with groups ranging from 5 to 200 employees. Bob’s unique experience allows him to efficiently operate at a level that exceeds the normal executive role of understanding and recognizing client and consumer needs in the payments space.