Current legacy IT systems have emerged as the most significant barrier for innovation, across banks of all sizes, according to the Efma-Infosys Innovation in Retail Banking Study 2013. Well, not all banks; IT systems ranked either 5th or 6th as problem areas at around 20% of large and medium sized banks that participated in the study. Nonetheless, they are still the exceptions - either because they have up-to-date systems or are focused on non-IT dependent innovation - that prove the rule.

The traditional approach of silo-based IT deployment, say by product or channel, is one of the main problems. Not only does this complicate integration, but also adversely impacts the time to market, cost and functionality of innovation. The study reveals that these parallel systems are especially problematic for larger banks, where, for example, time to market is stretched to 12 months as compared to just 6 months for small banks.   

The study also identifies that IT systems at banks that are in 'change' situations, like legacy replacement or M&A, are severely hampering the ability to prioritize innovation. There's an example from a developed market where one of the large players had emerged from a legacy replacement program to launch a series of innovations in products and services. A competing player in the same market, in the middle of the throes of replacement, was meanwhile struggling to even prioritize innovation programs. 

There are two possible solutions to deal with the issues thrown up by silo systems and change programs - implementing enterprise-wide systems and the componentized deployment of new ones. The participants in the study are overwhelmingly in favor of both these solutions to address the problem of stalled or stymied innovation efforts. 

Beyond IT systems, another factor that also emerges in the context of prioritizing innovation involves the role of the CIO. According to the study, CIOs with the required business experience and a grasp of business needs could help focus and prioritize innovation projects. The alternative, of course, is to create an environment that fosters perfect business-IT alignment to optimize communication and cooperation between the two functions