Customer expectations are changing across the banking sector. In an evolving marketplace, innovation isn’t only about long-term success—it’s a matter of survival.
Until recently, customers would have to visit the bank in person if they needed financial services. But that all changed with the emergence of online banking and mobile money over the past two decades.
Today’s customers expect fast and efficient services that are accessible through a range of delivery mechanisms. It’s all about flexibility and convenience.
This has led banks to re-evaluate their operational models and invest in innovation.
“77% of traditional financial institutions plan to increase their focus on innovations to boost customer retention”
Fortunly
The Importance of Innovation in Banking
COVID-19 had a huge impact on the banking sector. The closure of regional branches and the resulting reduction in staff capacity made it difficult for people to access vital services—something that was felt acutely in emerging markets.
This also exposed the digital shortcomings and lack of innovation across the industry.
Innovation enables banks to:
- Meet changing customer expectations
- Streamline internal processes
- Maintain their market share
Meet Changing Customer Expectations
Customers are increasingly tech-savvy. Many prefer to manage their finances on their desktop computers or mobile devices, rather than heading to the nearest branch. Banks that innovate and capitalise on market trends by developing exciting new products can meet this demand for faster, more efficient financial services.
Streamline Internal Processes
Banks continue to rely on manual processes for everything from data storage to reporting. But increasingly, digital technology has exposed the inefficiencies in more traditional approaches. For example, many financial institutions have found they can save time and improve the accuracy of their prudential regulatory reports if they automate the process.
Maintain Your Market Share
Innovation isn't just about taking the industry by storm with an exciting new product. It’s just as important for maintaining your market share—whether that’s getting in on the ground floor of an emerging industry trend or refreshing your brand.
“Digital technology may have a large impact in terms of increasing competition and contestability of banking markets. Banking will move toward a customer-centric platform-based model, and incumbents will have to restructure.”
OECD
Why CFOs are Perfectly Placed to Drive Innovation
Innovation should be a shared vision—a collaborative process that involves everyone from the c-suite down to the people on the frontlines and supports your wider organisational goals. But to succeed, there must be someone at the top to drive that vision and guide it from concept to execution.
Historically, this would fall to the CIO. But thanks to the democratisation of technology, this is no longer the case and departments have greater autonomy in the way they use IT to overcome the challenges they face. Banks are becoming more transparent and breaking data out of traditional silos to make it more accessible. As such, the CFO is now the person best placed to spearhead innovation in the financial sector.
The modern CFO doesn't just control the purse strings and monitor financial performance.—in many ways, they act as the CEO's sparring partner.
They're expected to work closely with the leadership team to provide vital strategic input, help stakeholders understand the financial benefits of innovation, and drive the business forward.
This gives the CFO a holistic, top-down view of operations, which allows them to identify and prioritise issues, allocate resources, and implement the right processes and innovations to address them.
“The CFO is perfectly placed to bring together the financial, operational, and strategic plans that underpin innovation”
Connor Blake, BankBI
How Can CFOs Kickstart Change?
1. A Clear Vision
When you start to think about innovation, it’s important to consider what you need at the most basic level.
Ask yourself: “What are my institution’s biggest pain points? Do we have the right level of technological maturity to implement changes quickly? Do I know what data I need to measure and monitor performance”?
If you can’t answer these questions, any technology you do invest in won’t be aligned with your goals and is doomed to failure. Yet a surprising number of banks don’t have even this basic level of insight.
Establishing a clear vision provides the necessary framework to guide your efforts. Equally important, it allows you to track the long-term impact of your investments on key areas within your bank and measure success. This includes:
- Financial performance
- Product performance
- Strategic performance
Data and data analytics are central to these efforts.
We advocate centralising your data in a single, cloud-based platform to consolidate these insights and establish a single source of truth. This enhances data access and ensures everyone’s pulling in the same direction.
2. Innovation Roadmaps
There’s little point investing in AI to improve your analytical capabilities if the bulk of your business insights are locked away in a filing cabinet or tied up in Excel, manual processes, or end-user BI tools.
To make the right investments, CFOs must have access to innovation roadmaps. More than anything, it provides a vital reference point for your CFO, so they can see where you should be 1, 3, or 5 years down the line to achieve your goals.
3. Engagement
Innovation is about more than adopting new technology. It requires a fundamental shift in your institution’s cultural mindset and engagement across all levels of the business.
Consider this carefully before making any concrete plans. You don't want to spend hours creating your own vision only to discover the CEO has another focus.
Innovation is the Key to Growth
A lack of ambition inevitably leads to stagnation. And as fintechs and neobanks continue to disrupt the established order, the banking sector will feel this more acutely than ever.
CFOs are uniquely placed to guide more financial institutions through these challenging times. As a champion of innovation, you can ensure that your organisation remains competitive in an increasingly crowded marketplace.
