Banking Innovation 2011: What's Hot, What's Not
Except for mobile payments and commerce and Islamic banking in certain pockets, product innovation will stay where it is. So will social media, until someone figures out how to exploit and make money from a phenomenon that in the banking realm, has so far only taken our imagination by storm.
We think that once again, major U.S. banks will give core systems replacement a miss. No one wants to be the first to find out whether their concerns of risk, implementation difficulty and change management are unfounded or not.
It's a better outlook for the economy and consumer confidence. While no one's rushing to buy just yet, there is a slight uptrend in consumer spending. Will retailers and banks join together to create innovative offerings to spur buying? We hope so.
With the Dodd Frank Act kicking in, in the U.S., it's easy to predict that regulation is here to stay. A number of U.S. banks have indicated that they will direct their technology spends towards managing risk and compliance. This sentiment is echoed in other regions. However, don't expect technology to come up with a silver bullet for ensuring 100% compliance any time soon.
Internet banking is officially declared legacy as it is quickly upstaged by the mobile. While some innovation may happen spurred by technology or customer need, we must accept that Internet banking is going to be just one more channel.
Branch banking on the other hand, will prove that it is still the nerve centre of the business. We expect banks in underpenetrated markets to strengthen their branch networks, whereas those having too many branches in mature markets might rationalise the number to save costs.
Plans to put critical apps on the cloud will be up in the air until issues regarding security are sorted out. We foresee more enthusiasm than action.
Prepare to welcome more outsiders chancing their luck in banking on the basis of innovative, technology-intensive, low cost business models. While established players have nothing to fear just yet, they must remain on the lookout for disruptive market moves.
With Gen Y's influence growing stronger, banks have no choice but to factor in their needs in all their major decisions. Suffice it to say that Gen Y will drive the direction of most banking innovation in 2011 and beyond.
