The absurdity of innovation: Reimagining banking today

In business we are encouraged to challenge the status quo, think outside the box, and disrupt or be disrupted. We are exhorted to fail fast while we think big, start small and scale fast. And while there might be some dispute about whether Peter Drucker actually said, “innovate or die”, there is no argument that he had a profound belief in the criticality of innovation in business. So much so that he identified seven sources for innovative opportunities both inside and outside the organization. But, we are told, innovation is hard. Innovation is about groundbreaking, market shaking, industry-creating new ideas. 

Knowing when to act 

In the ever-evolving landscape of banking, the most outlandish ideas often hold the key to revolutionary change. As we stand on the brink of a new era, it’s time to embrace the absurdity of innovation and reimagine what banking can be. The future of retail banking lies in pushing the boundaries of what’s possible, adopting a holistic approach that integrates advanced data capabilities, cutting-edge technology, and agile operating models.  

For business leaders, the critical question is: how can you discern which trends and technologies warrant significant investment, and which are fleeting fads? In a world of sophisticated marketing how can you separate the wheat from the chaff? Frameworks and mental models help. Trends should be evaluated using a combination of market analysis, customer feedback and competitive benchmarking. Active listening is key to understanding broader market dynamics and seeing patterns and emerging shifts – before they become obvious to everyone.  

Embracing the outlandish 

Imagine a world where your bank knows you so well that it can anticipate your needs before you even realize them. Picture this: It’s 2030, and you step into an autonomous taxi that knows exactly where you’re going. Your smartphone chirps, offering you tailored financing options for the apartment you’ve been eyeing. This isn’t science fiction; it’s a glimpse into the near future. 

Autonomous taxis are already being tested in cities like Zagreb and Los Angeles, and intelligent personal assistants powered by generative AI are becoming increasingly sophisticated. The rapid advancement of these technologies means that consumers will soon have immense capabilities at their fingertips. The question is, how will banks adapt? 

The need for speed and agility 

To enable such a seamless experience, banks must transform their operations to react swiftly to customer needs. This requires a shift towards operating at the speed and scale of e-commerce giants. Banks need to process mortgage applications in real-time, balancing speed with risk management. Too much focus on risk can slow down processes, while prioritizing speed can lead to unsustainable delinquency rates. This transformation involves adopting core banking solutions that support real-time processing and decision-making. 

In a dynamic market, the need for speed will only increase. Just as Amazon found that a one-second delay in page loading could cost billions in lost sales, banks must recognize that delays in processing can result in lost opportunities and revenue. 

Customization and ecosystem integration 

Beyond speed, banks must also offer tailored products that meet the unique needs of each customer. This requires advanced data analytics and AI capabilities to create personalized financial solutions. For instance, a mortgage product that integrates airline miles for frequent travelers, or an account that assesses the account holder’s carbon footprint, provides budgeting and saving advice while keeping customers informed about community-building initiatives and the work of non-profits. 

Seamless integration with partners in the fintech ecosystem is crucial. When a customer’s AI assistant negotiates a mortgage, the bank’s systems must support instant product creation and customization. This involves orchestrating a complex network of partners, including real estate agents, lawyers, and regulators, to ensure a smooth transaction from start to finish. Utilizing end-to-end banking platforms and core banking platforms can facilitate this integration. 

Cultivating the right mindset 

Innovation isn’t just about technology; it’s about mindset. Banks must cultivate a culture that embraces change and encourages creative thinking. Not only must leaders be committed and willing to embrace change but they need to be seen to be doing it. It involves investing in talent, fostering collaboration, and choosing the right technology partners who share a vision for the future. 

While human dynamics are vital here, the importance of technology cannot be overstated. When cross-functional teams, using agile methodologies and design thinking strategies, invent the future, technology must enable rapid deployment and facilitate telemetry-based testing. Feedback loops, iterative design and rapid evolution are crucial to reinforcing the mindset. 

Future-proofing business models