HOT ON THE STREET
Big Banks ask staff to please innovate
This week, front page of the Financial Times, HSBC’s chairman spoke out about the bank's desperate need to re-ignite innovation throughout its ranks. In what the FT calls a ‘rare public airing by a senior banker of this highly charged issue’ Wall Street is finally speaking seriously about having to create an environment that fosters the creation of new products and services, or else. Having weathered the hailstorm of regulatory reform, the financial services industry may just be too tired, and too scared, to innovate. HSBC’s Flint talks about ‘a growing danger of risk aversion’ and JP Morgan asked in a company e-mail for employees to “raise your hand’ to flag new ‘business opportunities’.
With some regulators calling for seven year ’bonus claw back’ provisions, and having witnessed a fury of fines and legal issues, bankers are thinking twice about putting forward new ideas, resulting in what Flint calls a “growing fatigue within critical functions” of the organization. To hear a bank CEO say that he wanted to foster an environment in which “poor outcomes are OK” and that financial institutions ‘are in the risk business’ raised a lot of eyebrows on Wall Street, and started experts asking, ‘How do we re-encourage innovation in finance?’ Banks have not had a lot of time or assets to devote to thinking about evolving core offerings to meet customer needs, between insulating themselves from compliance risks and propping up slumped earnings. There is no question regulation is burying innovation, and yet it perhaps has never been more important for banks to give it breath.
It's risky business but somebody has to do it
Taking risks to uncover new opportunities, products and partnerships and re-introducing an innovative spirit on Wall Street is important for all aspects of banking, from capital markets trading to digital retail services. It’s time to tilt the concept of what a bank is. There are glimpses of what may be ahead for banks in the breaking ideas of emerging start-ups, and that is becoming more important for banks. Start-ups are gravitating to the financial services industry because of the untapped opportunities left by Wall Street’s recent strain on innovation. Creating new products that capture consumers’ increasingly digital concept of living, or assessing opportunities made possible by partnering with new technology entrants, is however, a capability area that most banks will have to build to make right decisions going forward.
At Capco, we are working with clients to assist them in embracing the type of entrepreneurship and innovative creation that Wall Street CEOs are calling for. With Capco’s new approach, Open Concept Banking, we are able to build a capability, in banks and with banks, that enables agile design, testing and implementation – quickly –which keeps banks in the running with global digital leaders and rapid product developers. Open Concept Banking allows traditional banks to safely re-introduce innovation, and offers opportunities for partnership models with successful start-ups that can catapult firms’ abilities to compete in a changing market. In a safe environment, Open Concept Banking allows clients to assess solutions and fail fast, which cuts expenses and optimizes success. At a time when good and valuable ideas are potentially being snuffed out in the constant march toward cost cutting and improving returns, Open Concept Banking is a breath of fresh air in an increasingly warm room. If you’re not speaking to someone at Capco, you should be.
Capco. Forming the Future of Finance.