As the financial crisis dramatically unfolded back in 2008, banking institutions focused their full energy and resources on executing their crisis management measures: mortgages needed to be refurbished, business loans needed to be re-negotiated, and regulations needed to be executed and complied with.
Little time was left, helas, for evaluating new technologies and improving customers’ experiences. “After all, these are all unnecessary expenses and secondary concerns”...But are they?
In fact, as banks put a break on innovation, and cut down its budget, the world was not standing still: Mobile computing became pervasive, new advances in deep learning were revolutionizing areas such as natural language processing and computer vision, and SMEs were moving their workloads to the cloud.
As these technology advances became more mainstream within other industries such as education, health, gaming, and even e-governmental services, the traditional financial sector was lagging behind. In turn, customers did not understand why they could not use their phone to pay, why it took them several days/weeks to open an account or get a loan approved, and why international bank transfers were that slow and that expensive.
In fact, customers’ expectations regarding their banking experiences had dramatically shifted, and banks were not there to meet them. End of story……..Not :)
This critical gap created by an ever-more closed-up financial sector, was quickly seized by a new generation of financial services delivery institutions, which were agile, tech-savvy, listening to customers' needs, and then quickly delivering it to them. These institutions is what would come to be known as FinTech companies.
By the time incumbent traditional banks were done with their crisis management measures, they’ve finally regained control of their sensory activities, and started finally feeling the revenue carpet being pulled from under their feet...by FinTech. Some felt it sooner than others, and started accelerating their digital transformation strategies and improving their customers’ experience. (While other still think that carpet is just playing a little game, and will soon settle into its natural habitat: underneath their feet :)
“But surely, traditional financial institutions have learnt the lesson that innovation in time of crisis is not an expense, but a golden opportunity to build a more solid future… Right? Right?RIGHT?”
Fast forward 10 years into the future: we are in 2020, and the world has come to a halt because of a Corona virus named SARS2-Covid19, that is threatening millions of lives around the globe. It is also causing unprecedented economical losses, that are threatening even the most solid economies with collapse.
In these times, I am unfortunately seeing and hearing the same old feedback from several banks: Innovation projects are being put on hold, as “Crisis management is taking up all the resources”.
If that is how banks are to respond to the crisis at hand, then history is also bound to repeat itself... only with more vengeance this time around.
Therefore, I would like to argue that NOW is the right time to push innovation projects. Is it risky? Of course it is. But doing otherwise can be lethal.
I would like to further argue that the way this particular crisis in unfolding is a golden opportunity for digital innovation, as it is different from everything we have seen in history in one fundamental way: as people are confined to the walls of their homes, they are turning towards their digital devices and generating an unprecedented wealth of data, both quantitatively and qualitatively.
In fact, crisis amplifies people’s traits and behavior: The good gives way to the best, the slightly unreasonable gives rise to the crazy, and the bad might turn into the worst...So what? you might ask.
In fact, this unique insight into people’s behavior can allow us to build better credit scoring models, more accurate fraud detection tools, and and overall better and safer banking experience.
Finally, I would like to conclude this post by emphasizing that I am not oblivious to the stress that crisis management puts on financial institutions, and that it can understandably leave them pressed for resources and mental bandwidth to be innovative. That was the bad news.
The good news is that banks don’t have to go through this alone: banks should instead embrace open innovation, and collaborate efficiently with the wide ecosystem of people for whom innovation and research is what every day looks like. In fact, this is the right time for banks to reach out to their ecosystem of academic researchers and startups. Norway is lucky to have such vibrant ecosystems, and I hope that the Norwegian financial sector can leverage such a dynamic wisely.
If you want to learn more details about how this time of crisis can be leveraged to speed up innovation, I invite you to stay tuned for my next post which will be published soon, where I will share my thoughts about projects that can drive more growth for financial institutions, leveraging data and macro-dynamics which are arising from the crisis we are all undergoing. It will also be an open invitation for financial institutions within my network to take part in them.
Somebody needs to keep the growth and innovation wheel turning. It is in everybody's interest if that "somebody", is all of us...Together