There is an undeniable friction between old legacy systems and the introduction of new innovative technologies. New customer demand means these systems need to updated at the back end to make the front end of banking inviting and intuitive – but the cost of this is seen as prohibitive to banks when compared to the cost of merely maintaining and ‘updating’ legacy deposit and transaction systems.
But the risk of switching, overnight, from a legacy system to a new system is dangerous – it risks sharing the details of thousands of customers, actively putting financial details into the wrong hands. Innovation then, is restricted or bound by existing technologies. No truly disruptive innovation is possible with these restrictions in place. Instead, you adapt – sometimes successfully, with PayPal and Apple Pay – sometimes, indulgently – the tie-in between Lyle and Scott and bPay (do we really need contactless cuffs?)
Resource and capital are tied up on the ‘old way of banking’ that customers expect to exist parallel to the innovations we have accepted. Cheques alongside transfers, contactless cards alongside informative cashiers. The brick and mortar banking system we are familiar with will not disappear – it will never be replaced by online, like for like. Banks have to figure out how to prioritise speed of access with the informative, trusted adviser role that will drive activity from their customers.
Do the answers sit in disruptive technologies and new ways to pay – or do they sit in traditional business values? Santander’s leading 123 current account is widely respected as the most ‘innovative’ current account available, yet its foundations lie on simple market conditions. Make your main product a loss leader and drive revenue from a position of weakness.
Resource needs to be redirected from the next big thing – into the next small, incremental innovation that improves existing legacy systems, stage-by-stage to the point of no recognition. Whilst we are on the subject of traditional market conditions, let’s not forget the one resource that has equal exposure to existing, restrictive legacy systems and new, disruptive technologies that fundamentally change how we think about transactions.
These mythical creatures? A bank’s front line staff. Engaging in meaningful discussion with the thousands of experts at your disposal should be step one. How you communicate the challenges your bank is facing is imperative: Banking needs to embrace an agile approach to innovation in which challenges are stripped down to smaller, more manageable, and (potentially) more incremental projects. When these ‘quick wins’ are delivered banking is innovating at a grassroots, fundamental and cultural level. Only from this platform can Innovation serve a business critical purpose.