#Alon #Zadka of #Lloyds Banking Group will participate in a fireside chat at #Bank #Innovation #Israel. Zadka is Senior Innovation Lead, at Lloyds, where he is responsible and accountable for end-to-end delivery of proof of concepts and pilots across the group’s different operations, brands and customer segments.
Bank Innovation
This is the second post on financials and #funding for #Innovation in large corporations (in the #Financial Services industry).
In the previous post we talked about how one can think about the amount to be invested in Innovation by comparing the investment to the premium of a call option.
This post is about how to deploy capital, possibly in a cleverer way.
Let’s start with describing the status quo in most Financial Services companiesbriefly:
In the context of Corporate Innovation these four points make fast progress of initiatives almost impossible.
To address these issues we propose a capital deployment model for Innovation efforts in Financial Services firms that follows the StartUP / Venture Capital model with multiple funding rounds:
The key to keep in mind here is the iterative deployment of capital. Similar to a startup that gets funding in smaller and growing chunks as risk decreases we believe this to be the right model to be applied inside financial services firms as well.
In order to facilitate a quick decision making process and avoid long waiting periods we recommend to have a VC partner like group that can deploy capital at each stage. Ideally they are empowered to take decisions within 48 hours for their portfolio. The Project Owner (like a Startup CEO) in turn gets the freedom to spend the funding he has “raised” until the next milestones is (or is not) hit. Alignment of interest andempowerment are therewith given.
It is important to realize that as with startup funding there is always an option to abandon. For more information with regards to (real) optionality please refer to this good MIT deck.
Of course the devil is in the detail and all of the above is easier said than done; especially Financial Services companies with existing and often stiff processes. But there is hope. If you want to talk more about this please get in touch – at Lightbulb Capital we’d be happy to work with you on this tricky challenge.
[linkedinbadge URL=”https://www.linkedin.com/in/dan-liebau-b136923″ connections=”off” mode=”icon” liname=”Dan Liebau”] is Founder of Innovation Research & Advisory firm – Lightbulb Capital
Janice Diner is not your typical startup founder. She hasn’t sought venture capital funding; she doesn&8217;t do beta and she isn&8217;t pitching to millennials, the demographic du décennie. On going forward without backers, the CEO of #Horizn says: “We never do anything for free. We get paid for what we do.”Read More
Bank Innovation
What is the #state of #banking #innovation today? Each year, we poll the industry to find out. #Fintech funding has grown tougher to raise though total volume, because of a few monster deals, may exceed the previous year. Finovate this year pursued many themes that would have been familiar inRead More
Bank Innovation
It is always doubly upsetting to see vulgar business behavior from a seemingly platinum-plated brand. We have certainly been among those that have lauded #Wells #Fargo & Co. in the past, praising its lab and #innovation practices, its mobile banking growth, had its executives speaking at our events, and even namedRead More
Bank Innovation
Toronto-based D+H, which provides financial #technology to many of the world’s largest #banks, has joined #Bank #Innovation #Israel as a #sponsor. D+H’s history in the financial services industry spans nearly 150 years, and the company generates more than $ 1.5 billion in annual revenue.
Bank Innovation
A large majority of #customers want #innovation #from their banking suppliers, according to a survey produced by #technology firm Sopra Banking Software. The report was compiled using data from a survey of 5000 customers in six European Countries (France, UK, Germany, Spain, Belgium and the Netherlands).
While 69% say it is important to have an innovative bank only 12% of consumers surveyed fully agreed that their bank is innovative. Additionally, out of the respondents Interested in new technology 33% of customers are ready to switch #banks for the latest technologies.
Consumers are willing to share more data such as their personal information in exchange for clearly identified benefits. Interestingly, the results showed the generation gap might not be as large as we would expect. Remarkably, the openness to sharing more data holds across generations, i.e. in the whole 18-75 age range. According to Forrester, the typical company only tags 3% of their data and only analyses 0.5%. Most companies are throwing away 99.5% of their leverage with the customer.
“This highlights a lack of engagement on the customer side as well as a lack of added value on the bank’s side,” said Dr David Andrieux from Sopra Banking. “From the findings, customers are happy to switch if they find better offerings demonstrating that playing it safe is the riskiest strategy of all.”
Despite the 2008 financial crisis, trust and customer satisfaction levels are remarkably high at 82% and 85% respectively and 90% of consumers have no immediate intention to move banks.
However, they are also open to change, willing to share more data and interested in new technology. Only 12% of customers agree that their bank is different from other banks while 33% ‘somewhat agree’.
This figure varies between countries and although Spanish banks are amongst the most innovative banks in Europe, Spanish customers are more demanding and less satisfied with their banks.
78% of respondents consider it to be important to have an innovative bank and 58% are ready to switch to a bank providing the latest technologies. “Perhaps, once people get a taste of the possibilities enabled by modern thinking and technologies, they can’t get enough,” explained Dr David Andrieux from Sopra Banking. Interestingly, it was evident from the findings that technology and innovation is important not just for the younger generation (18-24), but also for the whole 18-44 age range.
Traditional banks are losing their appeal. Customers are looking for something more or something different with 54% of banking customers open to choosing a ‘non-traditional’ bank such as Pure Online Banks, Ethical Banks, Community Banks and a New Twist on the traditional bank.
The interest of customers in peer-to-peer (P2P) lending and crowdfunding is significant, with 21% and 27% respectively proving of interest.
Alternative finance now constitutes a sizeable market, especially in the UK, but increasingly so in other EU countries. Despite remaining questions regarding its profitability, the European alternative finance market as a whole grew by 144% – from €1,211m in 2013 to €2,957m in 2014.
To Summarise
– ‘Traditiona banks are losing their appeal’
&8211; ‘There is a lack of engagement on the customer side as well as a lack of added value on the bank’s side’
&8211; ‘Consumers across countries and age ranges are open to personal data sharing’
&8211; ‘The Spanish and young customers have higher expectations regarding banking technologies’
Banks must innovate and create value for their customers through exciting nonconventional products and initiatives that use a platform designed for the digital age. For example, offering a digital wallet management platform, in which banks can integrate services from third-parties.
The whitepaper can be downloaded here
The post 69% of Customers Demand Innovation From Banks appeared first on Fintech Schweiz Digital Finance News – FintechNewsCH.
The discussion around digital transformation in #banking has long revolved around the nexus of technologies that are globally driving this change. Technologies such as mobile, social, big data and cloud computing are surely impacting significantly all industries, but for financial services there are other silent technological revolutions taking place that, at the very least, can massively accelerate the technological disruption occurring in the sector.
If mobile, social, big data and cloud computing are the core technologies of digital transformation, for financial services the emerging underlying substrate are APIs (Application Programming Interface). Now, APIs have been around ever since someone wrote a piece of computer code that was meant to be reused by someone else and are common parlance in IT. However, the threat of fintechs and regulations such as the revised Payment Services Directive (PSD2) are elevating the IT lexicon to board-level discussions. Bank boards, in many cases for the first time, are being exposed to IT concepts and jargon that, not only they cannot afford to dismiss, but in effect they need to deeply understand as it becomes a key part of the future of competitive advantage in a digitally transformed industry.
Why should #banks care about APIs?
APIs expose banks’ products and processes for use by third-parties. Since banking products are inherently digital and processes already are or can largely be automated, the development of an #API strategy drives three key advantages for banks:
I. Vertical disintegration of banks and ecosystem integration
The various impacts of globalization and #technology in the financial services industry led to the emergence of niche providers, specializing in key activities of the banking value-chain. Most traditional banks tend to be vertically integrated organizations with relatively fixed cost structures and, as transaction costs decline, some of the key activities in the banking value-chain suddenly become cheaper to procure externally than to execute internally. As a result, we see a move to vertically disintegrate these activities and outsource them.
With the threat of fintechs and neo-banks looming, an API strategy enables banks to streamline their internal value-chain, becoming at once leaner and more focused, while at the same time, transparently integrate themselves into a broader ecosystem exploring new revenue streams and business partnerships. For instance, consider the ability of a car dealership to provide an immediate loan for a customer at the point-of-sale. In this scenario, the cost of sales would be handled by the car dealership. From the dealership standpoint, they would be able to close a sale on the spot providing great value and a great experience to the customer. Also, consider the fact that this is a contextual sale, where additional products, such as auto insurance with multiple coverages, can (and should) be recommended with increased probability of acquisition by the customer. Now, I’m not naïve to the point of disregarding the many existing hurdles of this or other similar scenarios, such as compliance and legal issues. However, even compliance and legal are prone to disruption by APIs and automation as well as by self-regulating technologies such as distributed ledgers and smart contracts (but that’s a topic for another post).
II. Healthy coopetition with fintechs and neo-banks
There’s no longer any question about the threat that fintechs, neo-banks and non-banks pose for the future of traditional banks. After the boom of late 2014, the #fintech “movement” came of age during 2015 and is now competitive across all categories – lending, personal finance, payments, retail investments, institutional investments, equity financing, remittances, consumer banking and more. CB Insights reports that global fintech investment is rising and that Q4 of 2014 was the busiest of the last 5 years with a total of $3.1 billion invested across 214 deals – that’s an average of $14.5 Million dollars per deal. There’s also increased acquisition activity, mostly by established fintechs rather than by traditional banks.
Additionally, regulations such as PSD2 will inevitably push traditional banks into the playground of fintechs and neo-banks. Strategically, it’s a dangerous place to be in for traditional banks, since most of them are not yet ready to compete with these new enterprises in their own ground. However, with the right invesments, such as APIs and open banking, banks are starting to develop the resources that’ll be a key part of the answer to long-term prosperity in an evolving and growing eco-system. Here are four key areas of cooperation and competition with fintechs and neo-banks that banks can explore in the course of their API/open banking strategy:
III. Looking within for innovation
It’s true that when talking about APIs and open banking, we usually address it from the standpoint of an outward-facing competitive advantage that can enable incumbents to compete and/or partner more effectively with fintechs. However, looking within traditional banks, we can also find areas where APIs and an open platform can help drive increased performance and efficiency.
To be fair, through the years banks have made significant investments in IT and in services platforms, primarily driven by interoperability and modernization rationales. The problem with these approaches is that they have mostly been IT-led and for a long time there wasn’t really a great business justification for them so they weren’t typically discussed from the business standpoint as a key strategic investment. Where these investments occurred, banks are now taking a new look at their IT assets and resources and realizing that they are better off than they actually thought. Some of those past IT investments have become key in this new digital economy, particularly when it comes to simplifying business processes and products.
Internal APIs are also key to driving innovation from within. They can work as a sandbox for internal development of ideas before external exposure to partners and others. In this area we see several banks hosting internal Hackathon events, pairing business and IT people in the development of new digital products and in the automation and simplification of internal processes. Internal innovation is key as the rate of change accelerates in the industry. Simpler processes, new innovative products, and a leaner organization will drive growth and efficiency for traditional banks. I believe that in the short term, we’ll see an increased focus in using APIs to build resilience into the banking business model, whether through innovative products and services, or through the ability to replace internal processes and services with external providers.
[linkedinbadge URL=”https://www.linkedin.com/in/josealmeida” connections=”off” mode=”icon” liname=”José Almeidaos”] is digital advisor at Microsoft and this article was originally published on linkedin.
I have visited quite a few #innovation centres at #banks, accelerators, labs and #FinTech startup offices: from the highest floors of mighty skyscrapers in Manhattan, to the folksiest office spaces in suburban warehouses. Everywhere I met enthusiasm, imagination, desire, hard work and openness to discuss global trends and detect:
There are two major yet antithetic drivers that turn new FinTech ventures into successful businesses (hopefully unicorns): PERSONALISATION and COMMODITISATION.
Yet, as I sat down today at my own kitchen table to write this post, I serendipitously spotted a share by Richard Joye which appeared on The Verge: “How Silicon Valley helps spread the same sterile aesthetic across the world“. Indeed I faltered and thought how true it is!
So do not expect many more insights about innovation, disruption and digital trends in the remaining of this article. We are going to talk a bit about casa, moda and buona tavola in the world of startups! Notwithstanding so much travel, speaking at more than 30 banking and FinTech conferences a year … and living in Germany … I remain Italian, born in Milan … and I have a weak for dolce vita stereotypes: design, fashion and food.
Here three summer recommendations to all my Fintech friends:
1. IDEAS DO NOT COME OUT OF THE FRIDGE
I happened to visit innovation labs at established banking institutions, and walk through rigorously decorated corridors just to feel amazed like Alice in the wonderland by crossing the last door, and find myself in front of super designed kitchens, see people playing table tennis, hear the latest lyrics of Taylor Swift (I know, Millennials account for almost 70% of Spotify clients).
True say, Bill Gates made his first Microsoft steps in a garage, Zuckerberg and fellow roommates in their dormitory kitchen at Hayward University. I also do most of my work as #book author in unusual places, like airplanes, my kitchen, the corner table of the Turkish bar which recently opened at the end of the street where I live. However, watch out! The FinTech world can be self-referential in many regards, and you risk to get trapped into a mechanism of emulation instead of autonomous innovation.
Here is the first recommendation: while it is convenient to work in the kitchen, ideas don’t come out of the IKEA fridge. So be DIFFERENT as much as possible. I don’t mean different from banks (that already comes by working in the kitchen …), I mean different from mainstream FinTech and its social media loudspeakers.
2. DON’T MAKE CLOTHES, DRESS WOMEN.
I find it fascinating to speak at FinTech conferences. The parterre is usually made of 80% FinTech entrepreneurs (wearing some sort of shabby cloths) and 20% bankers (in suits but without ties). While FinTech guys tell their audiences “HEY, I AM THE NEW MILLENNIALS-MINDED BANK“, bankers try to scream loud “HEY, I AM A TECHNOLOGY COMPANY NOW“.
Truth might lay in the middle, but one thing is certain: banks are still troubled banks, and FinTech companies are still fabulous software firms trying to use new technologies to service innovative business models. Since B2C businesses and revolutions are easier dreamt than won, most FinTechs’ future might feature their institutionalisation, as banks’ partners or service providers.
Here is the second recommendation: while it is cool to wear sneakers, a good woman’s wardrobe always features a Chanel. Fashion designer Valentino famously said “I don’t make clothes, I dress women”. So do the same: do not just build a Fintech, conceive a business which comes with genuine products, good pipelines, sound business plans and key partnerships.
If cloths don’t make the Monk,
FinTech attire doesn’t make the Unicorn!
3. DON’T EAT SOCIAL MEDIA JUNK FOOD.
The digital economy makes it truly possible to scale new businesses faster than ever across international borders, however “one man’s meat is another man’s poison“. I am fascinated during my travels and business conversations to learn what can work globally, and what instead makes sense only locally.
Here my third recommendation: copy and paste Silicon valley might not be a good innovation strategy that works everywhere. Luckily enough, you can eat a decent pizza almost everywhere. However, although Starbucks is a fabulous brand, it might work in the US but has not yet successfully landed in Italy. US might be an easier B2C market for #Robo-Advisors than continental Europe, because regulation, banking infrastructure and investors behaviour are not equal across the pond.
Copy and past Silicon Valley might not always
be a good innovation strategy
Elevator’s pitch to executive search companies: should you ask what is the role of a global FinTech though leader, here is what I do …
I sell the finest FinTech Furniture, FinTech Fashion and FinTech Food!
Read more about the topic? Check on Amazon my new book “FinTech Innovation: from Robo-Advisors to Goal Based Investing and Gamification“.
[linkedinbadge URL=”https://www.linkedin.com/in/paolosironipso” connections=”off” mode=”icon” liname=”Paolo Sironi”] is IBM Thought Leader – Wealth Management FinTech Analytics
The wealth management industry is behind the digital curve compared to other parts of financial services. There aren’t any noteworthy innovations in financial assets subsequent to the subprime crisis, which tainted structured products. ETFs are most certainly the only one item that has scaled and gained broad acceptance, especially inRead More
Bank Innovation
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