The Bold War

The Future Is There

‘The future is already here — it's just not very evenly distributed’, William Gibson.

Innovation is the buzz word to end all buzz words in financial services.  I would put a bet on the fact that innovation is the most mentioned term in banking today.  Walk around any office and you will hear it used readily.  Achieving ‘innovation’ has become some sort of mythical state of enlightenment that always appears just outside the reach of banking executives.  Streams of books are read about it; then shared, dissected and read again.  No matter how much analysis is done, it just always feels contrived, so why bother - the future isn’t here…it’s over there…

If delivering innovation in financial services was measured by thinking and reading about innovation, then the UK would be a world beater.  And this therein is where a lot of the problems lie.  Thinking and pondering instead of acting.  For an industry recently touted as ‘cowboy’ and ‘casino’ in its behaviour, when it comes to technology, it is wholly conservative.  It seems as if any semblance of innovation is being consumed in the products space through creative selling and inventive lending.  When it comes to technology the UK banking industry has adopted a ‘wait and see’ approach in a world of ‘test and learn’.

One of the fundamental keys to innovation that is often overlooked is strong decision making.  Forget the ‘give them space’, ‘skunk works’ and the ‘acceptance of failure’ theories.  Being innovative is intrinsically linked to being decisive.  That is why innovation is so hard.  Being decisive is difficult when you are entering unknown territory and the UK financial services industry has a real issue with this when it comes to technology.  There is a common joke amongst professionals in the industry that if the idea or business case for a new proposition doesn’t get support, just find some examples of another bank doing it overseas. 

Need evidence? Over the last 3 years every single UK ‘first’ in the financial services industry has actually been a copy; a replica of an idea from overseas.  If imitation is the sincerest form of flattery then UK banking is one big flirt.  One of the world’s great financial capitals needs to steal its ideas from abroad – but why?  It doesn’t have resource, capital or infrastructure constraints.  All the major technology innovation businesses have major European hubs in London, from Google to Facebook to eBay.  There is a hell of enough ‘ninja/guru’ consultants to go around.  The major constraint is the cultural safety blanket of wanting to wait for others.

When Barclays launched Pingit last year there was huge press attention.  Someone forgot to remind the UK media that Barclays replicated Pingit from Australian bank, ANZ.  ANZ launched the service in 2010 – almost 2 years earlier.  Halifax Homefinder was a copy of the CommBank Property Guide, launched in 2010 also.   The thing is, both ‘innovations’ were developed in conjunction with leading agencies and millions were spent.  It is becoming so obvious that you can almost predict the future.  If something is launched in Australia or New Zealand, just wait 12 - 24 months and you can guarantee at least one UK bank will follow suit.

Whilst some bankers may point to the fact that smaller customer bases equal less risk, in actual effect it is the opposite.  Investing millions in an unknown quantity for 1 million customers is intrinsically more risky than launching something to 5 million customers.  Smaller customer bases, means smaller banks, which also means less investment money to play around with.  If an Australian bank can afford to launch a service before seeing another bank do it, then why can’t the UK banks?

There are a lot of things UK banks need to work on to resolve their current predicament.  One thing for me sits at the top of the list – being decisive.  Being decisive will resolve the innovation, disintermediation and profit problems that banks are having and will continue to have.  They should no longer wait for others to gain first mover advantage.  I always shudder when I hear bankers say that there is no business case for what is clearly a compelling proposition.  Because I know what it really means.  We are not willing to make a decision. The future is here – let’s just distribute it more evenly.

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