The financial services sector is perhaps witnessing the maximum impact of digital and technological innovations. But bankers still differ in their definition and approach towards innovation, change and threats to the sector. The proportion of banks with a defined innovation strategy has gone up to 49% in 2018 from 43% in 2017, according to 10th Annual Study of Innovation in Retail Banking by Infosys Finacle, part of EdgeVerve Systems, a product subsidiary of Infosys, and Efma, a global not-for-profit organisation. In 2009, only 37% had an innovation strategy. Over 300 banks participated in the survey.
One of the key things that stood out in the report was that for almost 50% of the organisations we surveyed, their primary area and terms of innovation in the next four years is delivery channels, said Rajashekhara V Maiya, vice president and head, Business Consulting and Strategy, Infosys Finacle. On the technology that will spearhead the innovation in delivery channels, availability of APIs stood supreme. In fact, Maiya said, Open Banking APIs will be the primary driver for innovation in banking in the coming years.
The study also asked bankers which product lines of banking will be most important to organisations in 2022. The study showed payments, mobile wallets and lending were the top three mentioned services. This should be a red flag for organisations who also rank fintech and big-tech firms as the most formidable competition since these are the three areas where non-traditional financial institutions already excel or could overtake traditional banks from a customer experience perspective, it said. After existing digital channels (mobile and online), digital assistants, social media and third party channels are expected to be the primary channels for banking by 2022, the report said.
Organisations are also taking a strategic perspective on the need for return on investment (RoI) in innovation. In 2017, 31% of firms had an innovation RoI perspective of one year, against 17% this year. In addition, 63% looked for an RoI in one to three years as opposed to 54% in 2017.