Shaping the ICT/Banking Innovations for the Future

Priam Kasturiratna
ACI-Ops, CISM, CRISK, AIB(SL), MBA(Sri J) priam.kasturiratna@gmail.com

29th National Information Technology Conference

24th -25th August 2011, Colombo, Sri Lanka

What is Banking today?

An organisation that provides various financial services to people and businesses
(Source: Oxford Business English Dictionary,2008)

Deposit Taking A Regulated Industry Highly dependent on Public Confidence, Trust & Reputation Lending

Bank Branches ATM Voice Fixed & Mobile Phones SMS- Mobile & Fixed Phones

Trade Finance
Treasury Credit Cards

Travel Services
Wealth Management

Internet- Fixed & Mobile Devices

What is Innovation?
INNOVATION - Introduction or Development of new things; ideas or ways of doing
(source: Oxford Business English Dictionary,2008)

INNOVATION IS NOT INVENTION Changing the way we think, or act Vision, Thinking & Behaviour rather than Technology

Realities of Banking
ICT forms the backbone of Banking Banking Innovations are synonymous with ICT/Banking Innovations Apart from Strategy & Management, Innovation is a key driver of the future of Banks.

Approaches to Innovation

1. Build Innovation into the organization DNA

Fostering Innovation
1. Encourage Employees to use part of their time for Innovative thinking & planning

6. Use behavioural analytics to improve Innovation.

2. If an idea works, incorporate it into overall business.

5. Prototype the customer journey on paper. Sketch up web, mobile, or ATM screen flows to show how the interaction could be simplified and improved

3. Get delivery channel teams to brainstorm new customer journey or experience from time to time.

4. Look at new ways of engaging the customers.

Source: Bret King(2011)

What are Customer Inspiring Innovations?

Improves internal efficiency
Increased short term profits; may assure long term profits too

Innovation

Serve a customer need today, or in future (Inspire)

Attract new customers Generate loyalty among existing customers. More Futuristic and long lasting the Innovations will benefit the Bank longer

Customer Inspiring Innovations rich in both these aspects will eventually set new trends and benchmarks in the industry

Small Innovations Grow over time

If not practical to provide a full service, start a basic service. Expand Delivery through all stable and increasingly popular
channels technologies

devices

So customers will stay with you.

Have not the Banking industry Innovated?

Image Based Cheque Clearing Real Time Gross Settlement System (RTGS) Same day low cost Interbank Payments (SLIPS) Online access to Credit Information Bureau (CRIB) Regulations in line with developed financial centres Online- Regulatory Reporting Banking Ombudsman Defences against Money Laundering and Terrorist Financing Whistle Blowing Risk Management and Corporate Governance Almost all local banks became more profitable Opened 48 new branches and installed 91 ATMs in 2010

Have not the Banking Industry Innovated?

Virtual Banking Internet Payment Gateways Bill Payment Portals Bulk Payment Processing (Inter/Intra Bank) Investment options over Internet Inter-bank Payments and Credit Card Settlement Letters of Credit Opening/Amendments over Internet Cheque Image view over Internet Banking E-Statements Mobile Phone Top-up, and other integrations with Telcos to provide new services (SMS based etc) Electronic Remittances, Local/Foreign

Innovation Why?
For leadership, & to stay one step ahead in fulfilling customer requirements. To improve the overall customer experience ; Build customer Trust & Loyalty To embrace & prevent alienating from technology trends & gadgets. To survive from Competitors, & make it difficult for others to eat into the market share. To drive growth, reduce costs & ensure long term prosperity.

Then, Why Banks fall behind in Innovation?

Organizational inertia

Managing HR & Org. Culture

Internal Controls & Regulations

Product Positioning & Persistence

Strategic Blindness to Innovation

Leadership Style & Top Mgt Profile

Lack of customer focus

Organizational Inertia
Large organizations completing projects.

take

longer

time

for

Risk/Compliance Allocation of development resources Policy requirements Poorly performing staff Testing delays Other internal inefficiencies

Strategic Blindness to Innovation

Survey Result of senior managers from 89 Banks in 26 countries across Europe 75%think that Innovation is HIGH or VERY HIGH for growth and efficiency BUT Only 37% of the Banks had a clear Innovation strategy. Less than 15% had a department responsible for coordinating innovation.
(Source : European Financial Management & Marketing Association and Infosys Technologies Ltd, India)

Strategic Blindness to Innovation

Do Banks have R&D units, budget & targets? IF NOT - Its
A Corporate Governance issue A Strategic Risk

Success Today is not Success Tomorrow - must beware of Myopic situations

Leadership Style & Top Mgt. Profile

Top Leadership decides whether a Bank will
Innovate market existing products Innovatively to earn higher profits do nothing Innovative and perish

Survey of 199 US Banks indicate that more Innovative Banks are managed by
More educated top management teams Top Management possessing functional expertise in wider range of areas
(Source : Bantel & Jackson(1989) Top management and innovations in banking)

Lack of Customer Focus

Innovation process should have a holistic view of customer needs BECAUSE A Banking Innovation becomes a success only when
Customer needs are fulfilled Results in Visibly Significant Customer Inspiration

Product Positioning & Persistence

Innovations
Positioned to the correct customer segment Issues need to be Tracked and Addressed positively & promptly Have faith on the success

Managing HR & Organisational Culture

Who is going to Innovate for Banks?
Innovators may have their own egoistic needs to fulfil Innovators may not blend with the organizational culture They may get branded as mismatches because they are too good at Innovating

Challenges for HR & Top Management

Retaining IT/Banking Innovators & Inspiring them to Innovate Creating Innovation friendly culture Maintaining Cross functional harmony with Innovators and
Marketing

Banking operations Risk/Compliance Finance Legal, Audit etc

Challenges in Banking Innovation

Organizational inertia Managing HR & Org. Culture Internal Controls & Regulations

Product Positioning & Persistence

Strategic Blindness to Innovation

Leadership Style & Top Mgt Profile

Lack of customer focus

If a Bank can successfully manage these Challenges, path towards Innovation is clear.

Future - Keep an eye on

Smart Devices - iPhone and Android applications Internet Banking and IVR based Services New Card Products Near Field Communications Online Share, Bills/Bonds/FOREX Trading Improved Customer Service Standards Improved Online presence
Social Media and Online channels as an engagement platform Blogging, Facebook, Twitter for information distribution, marketing and recruitment

Future of Banking Innovations

Future of Banking depends on
Recognising the significance of ICT/Banking Innovations Fostering an Innovation conducive organisational culture and policies Identifying, Developing and offering Visibly Significant Customer Inspiring Innovations

The more the Bankers develop these, they will, Continue to Innovate & be closer to customer needs; Provide Visibly Significant Customer Inspiring Innovations Define the ICT/Banking Innovations of the Future.

The Reality- Conclusion

Innovations cannot replace the need for

Business Strategies Alignment with Customer needs

The Reality- Conclusion

What is Absurd today can be the Norm Tomorrow

Thank you