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Jon Rutter


Jon Rutter - Payment Processor

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Is the HIPPO crushing innovation?

05 August 2015  |  3362 views  |  2

There is a lot spoken about the need for all industries to be able to innovate in order to prosper. This is no different for the banking industry but are the incumbents doomed because they cannot innovate fast enough?

Being incapable of adapting quick enough seems perplexing for an industry with large well-funded businesses replete with large stable customer bases who demonstrate an unwillingness to switch institutions even in face of good reason.

So does this render the industry immune from the modern world of rapid destabilisation of established businesses? In the technology world similarities can be drawn with the likes of Nokia, Blackberry & Microsoft all of whom have found this decade much more challenging than the last.

To unpick the problem further let’s consider the ways banks have traditionally innovated (I exclude regulatory based change as this is non-discretionary)

SME led – relying on experts who build robust roadmaps of future delivery based on their expertise. The problem is that this model has broken recently with expensive failures based on delivering solutions to problems that didn’t really exist

Me-too – keeping track of what is happening in the industry and doing the same. This fits with the conservative approach in the industry, most obviously borne out with ever extending Balance Transfer offers. The challenge here is speed of response where some banks can be delayed by 12 months or more whilst they make necessary system changes.

HIPPO led – allowing the ‘most senior’ employee to decide. For career prospects in banks not rocking the boat can be seen as the safe option and so this approach has been allowed to prosper. The trouble is that it is incredibly destructive in an organisation by removing empowerment & allowing decisions to be made by individuals who are out of touch.

So what can banks do instead?

Following the lead from others industries there are 2 key issues which need to be introduced.

Firstly allow ideas to be sourced from the entire organisation and more importantly its customers. Improving customer satisfaction can often be seen as independent from improved business performance but in a world where switching is easy and customers do not have the emotional tie to an institution built from visiting their local branch it becomes the most important driver of future success.

Secondly, fostering a culture where innovation is not tied to unrealistic financial goals, this allows a test, learn & improve culture to flourish. The ability to quickly deliver on an idea, take the learning and move on to the next thing is essential to successfully innovating. This is often described as ‘fail fast’ but if your objective is finding out what to do next to be more successful than this time – customer led innovation is successful at achieving this

Banks have a unique position in our lives but do they have the ability to reform their culture to retain this or do they need to do something else? I firmly believe that the skill and talent exists if it is given the freedom to execute.

*For anyone wondering - HIPPO = HIghest Paid Person's Opinion


Comments: (3)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 06 August, 2015, 12:00

ARM, CDO, CDO2, CDS, MBS, Credit card, ATM, compelling mobile wallets - these are few bank-led innovations I can readily think of. Maybe they are not positioned as disruptors of the status quo or whatever but, IMO, going by their track record of generating greater revenues and profits, they are the most superior form of innovation. 

In which category - SME, Me2, HiPPO - would you place these innovations? Or, does it really matter?

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Jon Rutter
Jon Rutter - Payment Processor - London | 06 August, 2015, 19:13

Thanks for taking the time to comment, i really appreciate it. I would agree with some of your examples (although to be fair some are outside of my field of knowledge). I would disagree with putting mobile wallet in this category - in fact for me so far it is exactly an example of SME led innovation gone wrong with banks (and others) buiding a solution looking for a problem. My commentary was more about what do banks need to do in the future when i would argue they will not have the time to innovate as they are used too and with increasing consumer power will need to deliver compelling solutions to consumer problems.

thanks again,


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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 07 August, 2015, 11:38


TY for your response. In general, I agree that mobile wallet is a problem looking for a solution and have said exactly that in Mobile Wallets: Fix What's Broken - And It Ain't Payments. Which is why, in my comment, mobile wallet was prefixed with the qualification "compelling". I was referring specifically to PayZapp, a mobile wallet from a bank. For reasons highlighted in HDFC Bank's PayZapp Ends My Bill Payment Woes, it's truly innovative and provides compelling value unmatched by any mobile wallet I've tried from neobanks or TELCOs.

While banks won't be the first out of the gate with any new offering, their past track record makes me believe that, even in the future they'll come up with the real innovations that not only solve real problems but drive revenues and profits, which I consider the recipe for the best form of innovation.

Apple took its time to get iPod, iPhone and Apple Pay right and was rewarded with sustained leadership in each product category. So was Google with web search and Facebook with social networking. So why won't banks get the time? Historically, this whole early mover advantage business has been proven to be a bit overrated.

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Identifying consumer need and how it can be met in the Financial Services industry to enable new solutions for our FS clients

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