IBS Journal June 2015
Running to keep up
How can banks balance innovation with all of their other business requirements, including keeping the legacy systems running and meeting compliance needs? Is it a case of letting others do the innovation and then tapping into this or can it be nurtured internally?
‘Do we really want our banks to be inno- vative – the last time they did, the whole system blew up,’ said Swift’s CEO, Gottfried Leibbrandt, at his Society’s recent Lon- don Business Forum. Of course, there is the wrong type of innovation but no one can doubt that the banks have to move forwards otherwise they run the risk of becoming low-margin utilities. The word ‘innovation’ is popping up in
ever more banking executive titles, banks are putting on funky events like block- chain hackathons (DBS in Singapore), Swift has its Innotribe stream at Sibos, banks are
innovation funds (such as Santander’s $100 million InnoVentures fund), and so on.
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times seem like a veneer. ‘Often it is along the lines of, from noon to 3pm on a Tues- day you will be innovative, then go back to doing your day job,’ says Daniel Marovitz, European president at Earthport. Appoint-
that’s the innovation box ticked is arguably another symptom. ‘A faster aircraft carrier is still an aircraft carrier, it is not going to turn into a speed boat,’ he observes. He believes that large companies can seldom do R&D
any more, that this is now the preserve of small and medium sized companies that, as in other industries, are then often acquired. This is evident on the supplier side
of the market as well as within the buyer community. Few incumbent large suppli- ers have managed to build new systems, although many have tried. Whether in core banking, treasury and capital markets or payments, the innovation has tended to stem from start-ups, often formed by for- mer employees of the established suppli- ers.
One trait is recruiting senior peo-
ple from outside of banking and Usama a prime example, with a fascinating CV, Yahoo. He has been in his current position
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sider’s view. He doesn’t believe the threat is about the survival of banks per se, but about whether they will be high margin businesses or merely utility companies. He draws the comparison with the telco play- ers, that gave up most of the value despite having all of the connections and were rel- egated to providing the pipes. Fayyad believes banks are ten to 20
‘We can know more about the customer
than Google can ever dream about.’ Usama Fayyad, Barclays
years behind technology companies, at least in terms of service delivery. The banks need to look at new revenue models, oth- erwise they will be in for a grim future. One area of opportunity, he feels, is big data, with potential here for new products and services. The amount of information held by banks is an ‘amazing advantage over players at the periphery’. He adds: ‘We can know more about the customer than Google can ever dream about’. Payment streams and the information captured for Know Your Customer (KYC) are part of this.
36 © IBS Intelligence 2015
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innovation spotlight
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