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Smarter Than A Ten Year Old?

Sorry, this is not a blog discussing the new TV series, but it hopefully will hold your attention at least as long as the programme makers hope their latest show will.

Much is being written and discussed about innovation in financial services with, it seems, organisations employing an increasing number of people with the remit to innovate.

Any of you who have kids, mine are 8 and 11 years old, will hopefully, like me, never cease to be amazed by their creativity.

Which makes me wonder… are we mixing up these two abilities and looking for the financial services industry to create, i.e. show an ability to transcend traditional ideas, rather than innovate, which is simply the act of introducing something new or different?

And, are we expecting too much? Have most adults lived too long and experienced too much to truly create? Are we only good for innovation?

Financial services organisations are continually battling to beat the inevitable decreasing spiral that means new products and services become an increasingly commoditised offering over time. As other market participants follow the introduction of a new product or service with their own competitive flavours, so price pressure increases and margins decrease.

Initiatives such as SEPA, in the payments area, potentially give a window of opportunity for innovation and therefore a period within which some may be able to reap the rewards of being early adopters or fastest to market.

But, these kinds of opportunity do provide only a finite window and one that in all likelihood will become shorter and shorter in the future as technology enables greater agility in product and service delivery…

Oh no..! It’s already too late, Credit Suisse announced on Monday this week that, from 28th January 28 (“SEPA Day”), corporate clients’ euro payments will be processed free of charge if they comply with SEPA standards.

So what’s my point… well, I think, it is that financial services needs to get creative, not just innovative.

Of course, there are risks to transcending traditional ideas and we have seen spectacular failures as well as successes by those who have tried in the past. But often those failures were not because the idea was flawed, but because the rest of the market reacted to what they felt was an unfair advantage, e.g. LTCM failed, but hedge funds are now prolific.

This reaction has to be managed carefully. Everyone, it seems, wants higher profit margins, but only a level playing field – companies are quick to complain to regulators, and the like, if another firm has managed to create a blue ocean strategy.

Ryanair, who took risks in pioneering their low cost model by using small unknown airports (and who, by-the-way, created new jobs and helped the local economy along the way), has often had to deal with regulators acting under pressure from their competition who didn’t take those risks and now don’t like the result. In the financial services world, we have seen that some may even take matters into their own hands and stimulate a “run” in the market.

On top of all this, it is a worry that our financial services industry occasionally shows us, as it is now with the current credit crunch crisis, that it struggles to manage the risks of innovation – so it doesn’t bode well for being creative…

But, given all the above, isn’t creativity the only way our financial services organizations are going to remain in a discrete industry in the future and avoid having their market gobbled up by a Google, or the like?

Maybe it’s a bit extreme an idea, but if the hypothesis is true that adults innovate and kids create, then maybe our industry should be tapping the market of 10 year olds, as is TV, to help define the shape and future of our industry..? After all, they are the next wave of corporate CXOs and retail customers…



Comments: (1)

A Finextra member
A Finextra member 07 February, 2008, 14:54Be the first to give this comment the thumbs up 0 likes

Whether banks can "create" or merely "innovate" is an interesting question.  What business are banks really in and has that business changed?

In the area of supply-chain-finance, too many banks still look at purchased receivables as loans.  Banks are in the lending business so (most) everything to them is a loan.  But what if a utility company looked at the time-to-pay and thought it looked like a civil-engineering problem?  Or what if a trader looked at it as short-term commercial paper and decided neither the buyer's or supplier's credit rating was a factor?  They may think a company is more likely to pay its electric bill or supplier than its bond holders.

With just-in-time-delivery being the current rule, a delayed payment to a supplier causing a missed shipment resulting in idled factories has a potential higher cost than being late on a loan payment.

On the technical issues, I don't think it matters how many of the standards they implement.  What's necessary is that they pick one easily accessible one (say, HTTP/S) and make their payable data available to authorized subscribers.  No deep integration is necessary.  This doesn't have to be a huge project.  The more standards and formats and protocols and integrations and applications that get mentioned only increase the risk of a project failing or not getting started in the first place. 

Start simple, stay simple.  Pick a close target and hit it.  Use that experience to aim at another target and hit it.  Time is a factor.  The sooner success can be realized--no matter its size--the more success it breeds.


Alan Goodrich

Alan Goodrich

Regional Sales Manager


Member since

12 May 2003



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